A TREATISE 
 
 'POLITICAL ECONOMY-; 
 
 PRODUCTION, DISTRIBUTION, AND CONSUMPTION 
 
 or 
 
 WEALTH. 
 
 BY JEAN-BAPTISTE SAY. 
 
 TRANSLATED PROM THJ8 FOURTH EDITION OF THE FRENCH, 
 
 BY C. R. PRINSEP, M. A. 
 
 WITH NOTES BY THE TRANSLATOR. 
 
 NEW AMERICAN EDITION. 
 
 OOMTAINING A TRANSLATION OF THE INTRODUCTION, AND 
 
 BY CLEMENT C. BIDDLE, LL.D 
 
 MEMBER OF THK AMERICAN PHILOSOPHICAL SOCIETY. 
 
 PHILADELPHIA: 
 J. B. LIPPINCOTT & CO. 
 
 1857. 
 

 Entered according to the act of Congress, in the year 1832, by JOHN GKIOO, 
 in the office of the clerk of the district court of the eastern district of Penn- 
 sylvania. " 
 
ADVERTISEMENT 
 
 BY 
 
 THE AMERICAN EDITOR, 
 
 TO THE SIXTH EDITION. 
 
 A NEW edition of this translation of the popular treatise of M. Say having 
 called for, the five previous American editions being entirely out of 
 print, the editor has endeavoured to render the work more deserving of 
 the favour it has received, by subjecting every part of it to a careful re- 
 vision. As the translation of Mr. Prinsep was made in the year 1821, 
 from an earlier edition of the original treatise, namely, the fourth, which 
 had not received the last corrections and improvements of the author, 
 wherever an essential principle had been involved in obscurity, or an 
 error had crept in, which had been subsequently cleared up and removed, 
 the American editor has, in this impression, reconciled the language of the 
 text and notes to the fifth improved edition, published in 1826, the last which 
 M. Say lived to give to the world. It has not, however, been deemed 
 necessary to extend these alterations in the translation any further than 
 to the correction of such discrepancies and errors as are here alluded to ; 
 and the editor has not ventured to recast the translation, as given by Mr. 
 Prinsep, merely with a view to accommodate its phraseology, in point 
 of neatness of expression or diction, to the last touches of the author. 
 The translation of Mr. Prinsep, the editor must again be permitted to 
 observe, has been executed with sufficient fidelity, and with considerah 
 spirit and elegance; and in his opinion it could not be much improved by 
 even remoulding it after the last edition. The translation of the introduc- 
 tion, given by the present editor, has received various verbal correct 
 and such alterations and additions as were introduced by the auth< 
 his fifth edition, will now be found translated. 
 
 It is, moreover, proper to state, that at the suggestion of the American 
 proprietors and publishers of this edition of the work, the French moneys, 
 weights and measures, throughout the text and notes, have beer i conv 
 ed into the current coins, weights and measures of the Umted 
 wnen the context t^ywrt**** 1 ^" 
 merely assumed as a politico-arithmetical illustration, 
 
 nation to a nearly equivalent quantity of our own coins, ** 
 
IV ADVERTISEMENT TO THE SIXTH EDITION. 
 
 measures. This has been done to render the work as extensively useful 
 as possible, and will, no doubt, make the author's general principles and 
 reasonings more easily comprehended, as well as more readily remem- 
 bered, by the American student of political economy. 
 
 Many new notes, it will be seen, have been added by the American 
 editor, in further illustration or correction of those portions of the text 
 which still required elucidation. The statistical data now incorporated 
 in these notes, have been brought down to the most recent period, both 
 in this country and in Europe. No pains have been spared in getting 
 access to authentic channels of information, and the American editor 
 trusts that the present edition will be found much improved throughout. 
 
 The death of M. Say took place, in Paris, during the third week of No- 
 vember, 1832, on which occasion, according to the statements in the French 
 journals, such funeral honours were paid to his memory as are due to 
 eminent personages, and Odilon-Barrot, de Sacy, de Laborde, Blanqui, 
 and Charles Dupin, his distinguished countrymen and admirers, pro- 
 nounced discourses at the interment in the cemetery of Pere Lachaise. 
 
 The account of his decease, here subjoined, is taken from the London 
 Political Examiner of the 25th of November, 1832, and is from the pen 
 of its able editor, Mr. Fonblanque, one of the most powerful political 
 writers in England. Mr. Fonblanque, it appears, was the personal friend, 
 as well as the warm admirer, of the genius and writings of M. Say, and 
 was well qualified to appreciate his high intellectual endowments, his 
 profound knowledge and political wisdom, his manly independence, hte 
 mild yet dignified consistency of character, and above all, his rare and 
 shining private virtues. There hardly could be a more interesting and 
 instructive task assigned to the philosophical biographer, than a faithful 
 portraiture of the life and labours of this illustrious man, which were so 
 ardently and efficiently devoted to the advancement of the happiness arid 
 prosperity of his fellow-men. Perhaps the writings of no authors, how- 
 ever great their celebrity may be, are exerting a more powerful and en- 
 during influence on the well-being of the people of Europe and America, 
 than those of Adam Smith, and John Baptiste Say. 
 
 " France has this week lost another of her most distinguished writers 
 and citizens, the celebrated political economist, M. Say. The invaluable 
 branch of knowledge to which the greatest of his intellectual exertions 
 were devoted, is indebted to him, amongst others, for those great and 
 all-pervading truths which have elevated it to the rank of a science; and 
 '..o him, far more than to any others, for its popularization and diffusion. 
 Nor was M. Say a mere political economist ; else had he been necessarily 
 a bad one. He knew that a subject so immersed in matter,' (to use the 
 line expression of Lord Bacon,) as a nation's prosperity, must be looked 
 at on many sides, in order to be seen rightly even on one. M. Say was 
 one of the most accomplished minds of his age and country. Though he 
 Mad given his chief attention to one particular aspect of human affairs, 
 ail their aspects were interesting to him; not one was excluded from his 
 
ADVERTISEMENT TO THE SIXTH EDITION. v 
 
 survey. His private life was a model of the domestic virtues. From the 
 time when, with Chamfort and Ginguene, he founded the Decade Philo- 
 sophique, the first work which attempted to revive literary and scientific 
 pursuits during the storms of the French Revolution alike when courted 
 by Napoleon, and when persecuted by him (he was expelled from the 
 Tribunal for presuming to have an independent opinion); unchanged 
 equally during the sixteen years of the Bourbons, and the two of Louis 
 Philippe he passed unsullied through all the trials and temptations which 
 have left a stain on every man of feeble virtue among his conspicuous 
 contemporaries. He kept aloof from public life, but was the friend and 
 trusted adviser of some of its brightest ornaments ; and few have contri- 
 buted more, though in a private station, to keep alive in the hearts and in 
 the contemplation of men, a lofty standard of public virtue. If this feeble 
 testimony, from one not wholly unknown to him, should meet the eye 
 of any one wholoved him, may it, in so far as such things can, afford mat 
 comfort under the loss, which can be derived from the knowledge that 
 others know and feel all its irreparableness !" 
 
 C. C. D. 
 
 PHILADELPHIA, December, 1834. 
 
ADVERTISEMENT 
 
 BY 
 
 THE AMERICAN EDITOR 
 
 TO THK FIFTH EDITION. 
 
 No work upon political economy, since the publication of Dr. Adam 
 Smith's profound and original Inquiry into the Nature and Causes of the 
 Wealth of Nations, has attracted such general attention, and received 
 such distinguished marks of approbation from competent judges, as the 
 " Traite D'Economie Politique," of M. Say. It was first printed in Paris 
 in the year 1803; and, subsequently, has passed through five large 
 editions, that have received various corrections and improvements from 
 the author. Translations' of the work have been made into the German, 
 Spanish, Italian, and other languages ; and it has been adopted as a text- 
 book in all the universities of the continent of Europe, in which this new 
 but essential branch of liberal education is now taught. The four 
 former American editions of this translation have also been introduced 
 into many of the most respectable of our own seminaries of learning. 
 
 It is unquestionably the most methodical, comprehensive and best 
 digested treatise on the elements of political economy, that has yet been 
 presented to the world. It exhibits a clear and systematical view of all 
 the solid and important doctrines of this very extensive and difficult 
 science, unfolded in their proper order and connexion. In the establish- 
 ment of his principles, the author's reasonings, with but few exceptions, 
 are logical and accurate, delivered with distinctness and perspicuity, and 
 generally supported by the fullest and most satisfactory illustrations. A 
 rigid adherence to the inductive method of investigation, in the prosecu- 
 tion of almost every part of his inquiry, has enabled M. Say to effect a 
 nearly complete analysis of the numerous and complicated phenomena 
 of wealth, and to enunciate and establish, with all the evidence of de- 
 monstration, the simple and general laws on which its production, dis- 
 tribution, and consumption depend. The few slight and inconsiderable 
 errors into which the author has fallen, do not affect the general sound- 
 ness and consistency of his text, although, it is true, they are blemishes 
 that thus far darken and disfigure it. I&t these are of rare occurrence, 
 and the false conclusions involved ii&'fbem may be easily detected and 
 refuted by recurrence to the fundamental principles of the work, with 
 they manifestly are at variance, and contradict. 
 
ADVERTISEMENT TO THE FIFTH EDITION. v 'ii 
 
 The foundation of the science of political economy was firmly laid, 
 and the only successful method of conducting our inquiries in it pointed 
 out and exemplified by the illustrious author of the Wealth of Nations ; 
 a number of its leading doctrines were also developed and explained by 
 other eminent writers on the continent of Europe, who, about the same 
 time, were engaged in investigating the nature and causes of social 
 riches. But neither the scientific genius and penetrating sagacity of the 
 former, nor the profound acuteness and extensive research of many of 
 the latter, enabled them to obtain a complete discovery of all the actual 
 phenomena of wealth, and thus to effect an entire solution of the most 
 abstruse and difficult problems in political economy; those, namely, 
 which demonstrate the true theory of value, and unfold the real sources 
 of production. Aided, however, by the valuable materials collected and 
 arranged by the labours of his distinguished predecessors, here referred 
 to, and proceeding in the same path, our author, with the closeness and 
 minutenes of attention due to this important study, has succeeded in 
 examining under all their aspects, the general facts which the ground- 
 work of the science presents, and by rejecting and excluding the acci- 
 dental circumstances connected with them, has thus established its ulti- 
 mate laws or principles. 
 
 Accordingly, by pursuing the inductive method of investigation, M. 
 Say, in the most strict and philosophical manner, has deduced the true 
 nature of value, traced up its origin, and presented a clear and accurate 
 explanation of its theory. His definition of wealth, therefore, is more 
 precise and correct than that of any of his predecessors in this inquiry. 
 The agency of human industry, which Dr. Adam Smith, not with the 
 strictest propriety, denominated labour, the important operation of natu- 
 ral powers, especially land, and the functions of capital, as well as the 
 relative services of these three instruments, and the modes in which they 
 all concur in the business of production, were first distinctly and fully 
 pointed out and illustrated by our author. In this way he successfully 
 unfolded the manner in which production is carried on, and imparts value 
 to the products of agriculture, manufactures, and commerce. By, also, 
 distinguishing reproductive from unproductive consumption, M. Say has 
 'exhibited the exact nature of ca P ital > and its consequent important 
 a^ ..,.t^. ' Jl production, and thus has shown why economy is a source of 
 national wealth. Such are this author's peculiar and original specula- 
 tions, the fruits of deep and patient meditation on the phenomena ob- 
 served. The elementary principles derived from them, with others pre- 
 viously ascertained, he has combined into one harmonious, consistent, 
 and beautiful system. 
 
 But a few of these solid and well-established positions have been criti 
 dsed and objected to as inconclusive and inadmissible, by Mr. Ricardo 
 and by Mr. Malthus, two of the^atyest and most distinguished political 
 economists among our author's contemporaries. Other doctrines in rela- 
 tion to the nature and origin of value have been advanced by them, and 
 
vi[i ADVERTISEMENT TO THE FIFTH EDITION. 
 
 with so much plausibility too, that some of the most acute reasoners of 
 the present day have not been sufficiently on their guard against the 
 fallacies involved in them. The mathematical cast given to their reason- 
 ings by these writers, has captivated and led astray the understandings 
 of intelligent and sagacious readers, and induced them to adopt, as 
 scientific truths, what, when properly investigated and analyzed, are 
 found to be merely specious hypotheses. Hence it is that a theory of 
 value, purely gratuitous, has been extolled in one of the principal literary 
 journals of Great Britain, as being "no less logical and conclusive than 
 it was profound and important." Our author, accordingly, deemed it 
 necessary to examine the arguments brought forward in support of these 
 views of his opponents, in order to test their soundness and accuracy, 
 and to submit his own principles to a further review, that he might be- 
 come satisfied that the conclusions he had deduced from them had not 
 been in any manner invalidated. 
 
 In the notes appended by M. Say to the French translation of Mr. 
 Ricardo's Principles of Political Economy and Taxation, the reader will 
 find what the editor deems a masterly and conclusive; refutation of the 
 theoretical errors of this author. M. Say's strictures upon the twentieth 
 chapter of the work, entitled, " Value and Riches, their Distinctive Pro- 
 perties," are in his opinion decisiveand unanswerable. The fallacies con- 
 tained in Mr. Ricardo's theory of value, which, the editor thinks, may 
 be traced to an anxiety to give consistency to the loose and inaccurate 
 proposition of Dr. Adam Smith, that exchangeable value is entirely de- 
 rived from human labour, are there fully exposed, and his whole train 
 of reasoning, in connection with it, shown to rest upon an unwarrantable 
 assumption. It must, however, be conceded that Mr. Ricardo was an 
 intrepid and uncompromising reasoner, who always proceeded in the 
 most direct and fearless manner from his premises to the conclusion. But 
 not uniting with the strongest powers of reasoning, a capacity for ana- 
 lytical subtilty, he sometimes did not perceive verbal ambiguities in the 
 formation of his premises, and transitions in the signification of his 
 terms in the conduct of his argument, which, in these instances, vitiated 
 his conclusions. The fundamental errors into which he has fallen, accord- 
 ingly, do not arise from any want of strictness in his dedr ^ 
 from undue generalizations and perversions of language. ^ SuSa> U 8 
 Letters to Mr. Malthus, which have been translated by Mr. Richter, the 
 points at issue between these two eminent political economists are dis- 
 cussed in the most luminous, impartial, and satisfactory manner ;. and by 
 ail candid and unprejudiced critics must be considered as bringing the 
 controversy to a close. 
 
 It is not his intention, nor would it be proper on this occasion, for the 
 editor to enter further into the merits of the controversial writings of our 
 author. Any dispassionate inquirer, who will take the pains carefully to 
 inview the whole ground in dispute, will, he thinks, find that the disqui- 
 sitions referred to contain a triumphant vindication of such of the author's 
 
ADVERTISEMENT TO THE FIFTH EDITION. 1X 
 
 general principles as had been assailed by his ingenious opponents. 
 Whenever the study of the science of political economy shall be more 
 generally cultivated as an essential branch of early education, most of 
 the abstruse questions involved in the controversies which now divide 
 the writers on this subject will be brought to a conclusion ; the accession 
 of useful knowledge it will occasion will more effectually eradicate the 
 prejudices which have given birth to these disputes and misconceptions, 
 than any direct argumentative refutation. 
 
 The great merits of this treatise on political economy are now begin- 
 ning to be well known and properly estimated by that class of readers 
 who take a deep interest in the progress of a science, which " aims at 
 the improvement of society," as DUGALD STEWART so truly remarks, " not 
 by delineating plans of new constitutions, but by enlightening the policy 
 of actual legislators;" a science, therefore, with the right understanding 
 of whose principles, the welfare and happiness of mankind are intimately 
 connected. 
 
 In alluding to this admirable work of M. Say, Mr. Ricardo remarks, 
 " that its author not only was the first, or among the first, of continental 
 writers, who justly appreciated and applied the principles of Smith, and 
 who has done more than all other continental writers taken together, to 
 recommend the principles of that enlightened and beneficial system to 
 the nations of Europe ; but who has succeeded in placing the science in 
 a more logical, and more instructive order ; and has enriched it by seve- 
 ral discussions, original, accurate, and profound." 
 
 The English public has for some time been in possession of the present 
 excellent translation of this treatise by Mr. Prinsep; the first edition of 
 which was published in London in the spring of 1821. It is executed 
 with spirit, elegance, and general fidelity, and is a performance, in every 
 respect, worthy of the original. It is here given to the American reader 
 without any material alteration. 
 
 In various notes which the English translator has thought proper to 
 subjoin to his edition of the text, he has wasted much ingenuity in en- 
 deavouring to overthrow some of the author's leading principles, which, 
 notwithstanding these attacks, are as fixed and immutable as the truths 
 which co- Iftute their basis. Had Mr. Prinsep more thoroughly studied 
 M. Say's profound theoretical views on the subject of value, and had he, 
 also, made himself acquainted, which it nowhere appears that he has 
 done, with the powerful and victorious defence of these doctrines, con- 
 tained in the notes on Mr. Ricardo's work, and in the letters to Mr. 
 Malthus, already referred to, he perhaps might have discovered, that they 
 are the ultimate generalizations of facts, which, agreeably to the most 
 legitimate rules of philosophizing, the author was entitled to lay down 
 as general laws or principles. At all events, Mr. Prinsep should not have 
 ventured upon an attack on these first principles of the science of politi- 
 cal fcconomy, without this previous examination. 
 
 Such, therefore, of these notes of the English translator as are in oppo- 
 sition to the well-established elements of the science, and have no ottei 
 
x ADVERTISEMENT TO THE FIFTH EDITION. 
 
 support than the hypothesis of Mr. Ricardo and Mr. Malthus, have been 
 ntirely omitted ; the American editor not deeming himself under any 
 obligation to give currency to errors, which would perpetually interrupt 
 and distract the attention of the reader in a most abstruse and difficult 
 inquiry. Other notes of the translator, which contain interesting and 
 valuable illustrations of other general principles of the work, drawn 
 from the actual state of Great Britain and her colonies, have been retain- 
 ed in this edition, as appropriate and useful. The translator's remarks 
 on the pernicious character and tendency of the restrictive and prohibi- 
 tive policy, are particularly worthy of regard, confirming as they most 
 fully do, on this subject, all the important conclusions of the author. The 
 lolly of attempting, either by extraordinary encouragements, to attract 
 towards some branches of production a larger share of capital and in* 
 dustry than would be naturally employed in them, or by uncommon 
 restraints forcibly to divert from others a portion of the capital and in- 
 Justry that would otherwise be invested in them, is at last beginning to 
 be understood. 
 
 The restrictive system, or that which by means of legislative enact 
 ments endeavours to give a particular direction to national capital and 
 industry, derived its whole support from the assumption of positions 
 now generally admitted to be gratuitous and unfounded, namely, that in 
 trade whatever is gained by one nation must necessarily be lost by 
 another, that wealth consists exclusively of the precious metals, and con- 
 sequently, that in all sales of commodities, the great object should be to 
 obtain returns in gold and silver. In Europe these erroneous opinions 
 have now, for some time, been relinquished by political economists of all 
 the various schools, some of whom yet differ and dispute respecting a 
 few of the more recondite and ultimate elements of the science. In the 
 whole range of inquiry in political economy, perhaps there is not a single 
 proposition better established, or one that has obtained a more universal 
 sanction from its enlightened cultivators in every country, than the Jibe* 
 ral doctrine, that the most active, general, and profitable employments 
 are given to the industry and capital of every people, by allowing to 
 their direction and application the most perfect freedom, compatible with 
 the security of property. This fundamental position of political economy, 
 and the various principles that flow from it as corollaries, were first sys- 
 tematically developed, explained, and taught by the great father of the 
 science, Dr. Adam Smith ; although glimpses of the same important truth 
 had previously, and about the same time, reached the minds of a few 
 (minent individuals in other parts of the world. " The most effectual 
 jdan for advancing a people to greatness," says Dr. Smith, " is to main- 
 lain that order of things which nature pointed out; by allowing every 
 man, as long as he observes the rules of justice, to pursue his own inter- 
 ost in his own way, and to bring both his industry and his capital into 
 the freest competition with those of his fellow-citizens." Animated by rt 
 like desire to promote the improvement and happiness of mankind, with 
 that which actuated the author of the Wealth of Nations, V* *nost pro- 
 
ADVERTISEMENT TO THE FIFfH EDITION. x i 
 
 twmd inquiries among his successors embraced his enlarged and benevo- 
 lent views, as the only certain means of increasing the general prosperity, 
 and eloquently maintained and enforced them. The doctrines of the 
 freedom of trade and the rights of industry, were vindicated and taught 
 by all the distinguished British political economists ; namely, by Dugald 
 Stewart, Ricardo, Malthus, Torrens, Horner, Huskisson, Lauderdale, 
 Bentham, Mills, Craig, Lowe, Tooke, Senior, Bowring, M'Culloch, and 
 Whatley ; and, on the continent of Europe, by authors as celebrated, 
 by Say, Droz, Sismondi, Storch, Gamier, Destutt-Tracy, Ganilh, Jovella- 
 nos, Sartorius, Queypo, Leider, Von Schlozer, Kraus, Weber, Muller, 
 Scarbeck, Pechio, and Gioja. 
 
 " Under a system of perfectly free commerce," says Mr. Ricardo, 
 * each country naturally devotes its capital and labour to such employ- 
 ments as are most beneficial to each. This pursuit of individual advan- 
 tage is admirably connected with the universal good of the whole. By 
 stimulating industry, by rewarding ingenuity, and by using most effica- 
 ciously the powers bestowed by nature, it distributes labour most effec- 
 tively and most economically : while by increasing the general mass of 
 productions, it diffuses general benefit, and binds together by one com- 
 mon tie of interest and intercourse, the universal society of nations 
 throughout the civilized world. It is this principle which determines that 
 wine shall be made in France and Portugal, that corn shall be grown in 
 America and Poland, and that hardware and other goods shall be manu- 
 factured in England." 
 
 Our own celebrated countryman, Franklin, too, with a sagacity and 
 force which always characterized his intellect, maintained and exempli- 
 fied in his " Essay on the Principles of Trade," what he therein repeat- 
 edly called " th.e great principle of freedom in trade." Even before the 
 appearance of the Wealth of Nations, he had with almost intuition anti- 
 cipated some of the most profound conclusions of the science of political 
 economy, which other inquirers had arrived at only after a patient arid 
 laborious analysis of its phenomena. The new and generous commer- 
 cial policy is not more beholden for support and currency to the argu- 
 ments and illustrations of any of its early expositors, than to the clear 
 and vigorous pen of the highly gifted American philosopher. " The ex- 
 pressions, Laissez nous faire, and pas trop gouverner" which, to use 
 the language of DUGALD STEWART, the highest of all authorities, " com- 
 prise in a few words two of the most important lessons of political wis- 
 dom, are indebted chiefly for their extensive circulation, to the short and 
 luminous comments of Franklin, which had so extraordinary an influence 
 on public opinion, both in the Old and New World.'' Nevertheless, 
 strange as it may seem, by a perversion or misconception of a few of 
 his incidental opinions, the name of the first of practical statesmen has 
 been invoked, and its authority employed among us, in aid of a system 
 of restraints and prohibitions on commerce, which it was the chief aim 
 of his politico-economical writings to refute and condemn, as afike repug- 
 nant to sound theory and destructive to national prosperity. Whenever 
 American statesmen and legislators shall have as clear and steady per 
 
xii ADVERTISEMENT TO THE FIFTH EDITION. 
 
 ceptions as Franklin of the truth and wisdom of the doctrine of commc, 
 cial freedom, we may expect that our national and state codes will no 
 longer exhibit so many traces of that empirical spirit of tampering regu- 
 lation which, instead of invigorating and quickening the development of 
 national wealth, only cramps and retards its natural growth. " Where 
 should we expect," says M. Say, in a letter to the editor, " sound doc- 
 trine to be better received than amongst a nation that supports and illus- 
 trates the value of free principles, by the most striking examples. The 
 old states of Europe are cankered with prejudices and bad habits ; it is 
 America who will teach them the height of prosperity which may be 
 reached when governments follow the counsels of reason, and do not 
 cost too much." 
 
 The preliminary discourse has been translated by the American editor, 
 and in his editions of the work restored to its place. The editor must 
 confess that he is at a loss to account for the omission by the English 
 translator of so material a part of the author's treatise as this introduc- 
 tion to his whole inquiry. In itself it is a performance of uncommon 
 merit, has immediate reference to, and sheds much light over, the gene- 
 ral views unfolded in the body of the work. The nature and object of 
 the science of political economy, the only certain method of conducting 
 any of our inquiries in it with success, and the causes which have hither- 
 to so much retarded its advancement, are all considered and pointed out 
 with great clearness and ability. The author has also connected with-it 
 a highly interesting and instructive historical sketch of the progress of 
 this science during the last and present century, interspersed with nu- 
 merous judicious and acute criticisms upon the writings and opinions 
 of his predecessors. Moreover, this discourse, throughout every part, 
 Is deeply philosophical, and well calculated to prepare the reader for the 
 study on which he is about to enter. The editor has, therefore, he trusts, 
 performed an acceptable service in putting the American student in pos 
 session of so important a part of the original work.* 
 
 Notes have also been subjoined by the American editor, for the pur 
 pose of marking a lew inconsiderable errors and inconsistencies into, 
 which the author has inadvertently fallen, and of supplying an occasional 
 illustration, drawn from other authors, of such passages of the texi 
 as seemed to require further elucidation or correction. 
 
 C. C. B. 
 
 PHILADELPHIA, April, 1832. 
 
 * The following extract of a letter from M. Say, to the American editor, it may not 
 be improper to subjoin, as it contains the author's opinion of the value he attaches to 
 the preliminary discourse. 
 
 u Your translation and restoration of the preliminary discourse adds, in my eyes, a 
 new value to your edition. It could only have been from a narrow calculation of the 
 English publisher, that it was omitted in Mr. Prinsep's translation. Ought that portion 
 of the work to be deemed umiscful, whose aim is to unfold the real object of the science, 
 to present a rapid sketch of its history, and to point out the only true method of inves- 
 tigating it with success? Mr. George Pryme, professor of political economy in the 
 iniversity of Cambridge, in England, makes this very discourse the principal topic of 
 <wveral of his first lectures." 
 
CONTENTS. 
 
 BOOK I. 
 OF THE PRODUCTION OF WEALTH. 
 
 ADVERTISEMENT by the American Editor, to the Sixth Edition Page iii 
 
 Advertisement by the American Editor, to the Fifth Edition vi 
 
 Introduction n 
 
 CiiAP.U. Of what ii to be understood by the term production 61 
 
 II. Of the different kinds of industry, and the mode in which they concur in pro- 
 duction 61 
 
 - III. Of the nature of capital, and the mode in which it concurs in the business cf 
 
 production 71 
 
 IV. Of natural agents, that assist in the production of wealth, and specially of land . 74 
 
 V. On the mode in which industry, capital, and natural agents unite in production. 77 
 
 / VI. Of operations alike common to all branches of industry 79 
 
 VII. Of the labour of mankind, of nature, and of machinery respectively^..^-. 8& 
 
 VIII. Of the advantages and disadvantages resulting from division of labour; and of 
 
 the extent to which it may be carried 90 
 
 IX. Of the different methods of employing commercial industry, and the mode hi 
 
 which they concur in production 99 
 
 * X. Of the transformations undergone by capital, in the progress of production .... 106 
 XI. Of the formation and multiplication of capital 10.) 
 
 , XII. Of unproductive capital lib 
 
 XIII. Of immaterial products, or values consumed at the moment of production 110 
 
 , XIV. Of the right of property '. . 12? 
 
 X*V. Of the demand or market for products 132 
 
 XVI. Of the benefits resulting from the quick circulation of money and commodities. 140 
 
 XVII. Of the effect of governments, intended to influence production 143 
 
 Sect. 1. Effect of regulations prescribing the nature of products 143 
 
 Digression Upon what is called the balance of trade , 148 
 
 2. Of the effect of regulations, fixing the manner of production 175 
 
 3. Of privileged trading companies 183 
 
 4. Of regulations affecting the corn trade 189 
 
 XVIII. Of the effect upon national wealth, resulting from the productive efforts of pub- 
 
 lic authority 199 
 
 XIX. Of colonies and their products 203 
 
 XX. Of temporary and permanent emigration, considered in reference to national 
 
 wealth 213 
 
 XXI. Of the nature and uses of money : 
 
 Sect 1. General remarks 217 
 
 2. Of the material of money 220 
 
 3. Of the accession of value a commodity receives, by being vested with 
 
 the character of money 224 
 
 4. Of the utility of coinage; and of the charge of its execution 2! 
 
 5. Of alterations of the standard-money 234 
 
 6. Of the reason why money is neither a sign nor a measure 240 
 
 7. Of a peculiarity, that should be attended to, in estimating the sum* 
 
 mentioned in history 246 
 
 8. Of the absence of any fixed ratio of value between one metal and 
 
 another 254 
 
 9. Of money as it ought to be 
 
 10. Of a copper and brass metal coinage 261 
 
 11. Of the preferable form of coined money Jj 
 
 12. Of the party on whom the loss of coin by wear should properly fall.. . 263 
 
 XXII. Of signs or representatives of money : 
 
 Sect. I. Of bills of exchange and letters of credit 
 
 2. Of banks of deposite 268 
 
 a Of banks of circulation or discount, and of bank notes, or convertible 
 
 paper 270 
 
 4. Of paper-money " 
 
 13 
 
CONTENTS. 
 
 BOOK II. 
 
 OF THE DISTRIBUTION OF WEALTH. 
 
 ^1. Of the basis of value, and of supply and demand 284 
 
 * II. Of the sources of revenue 292 
 
 III. Of real and relative variation of price 297 
 
 IV. Of nominal variation of price, and of the peculiar value of bullion and of com 306 
 ^ V. Of the manner in which revenue is distributed amongst society 314 
 
 VI. Of what branches of production yield the most liberal recompense to productive 
 
 agency 
 
 321 
 
 4 VII Of the revenue of industry : 
 
 Sect 1. Of the profits of industry in general 3! 
 
 , 2. Of the profits of the man of science 228 
 
 * 3. Of the profits of the master-agent or adventurer in industry 229 
 
 4. Of the profits of the operative labourer 332 
 
 5. Of the independence accruing to the moderns from the advancement 
 
 of industry 340 
 
 VIII. Of the revenue of capital : 
 
 SectA Of loans at interest 343 
 
 2. Of the profit of capital 354 
 
 3. Of the employments of capital most beneficial to society 357 
 
 IX. Of the revenue of land : 
 
 Sect. 1. Of the profit of landed property 359 
 
 2. Of rent 365 
 
 X. Of the effect of revenue derived by one nation from another 368 
 
 XJ Of the mode in which the quantity of the product affects population : 
 
 Sect 1. Of population, as connected with political economy 371 
 
 2. Of the influence of the quality of a national product upon the local dis- 
 tribution of the population 381 
 
 BOOK III. 
 
 OF THE CONSUMPTION OF WEALTH. 
 
 I. Ol ine different kinds of consumption 387 
 
 II. Of the effect of consumption in general 391 
 
 III. Of the effect of productive consumption 393 
 
 IV. Of the effect of unproductive consumption in general 396 
 
 V. Of individual consumption, its motives and its effects 401 
 
 VI. On public consumption : 
 
 Sect 1. Of the nature and general effect of public consumption 412 
 
 Of the principal objects of national expenditure 421 
 
 Of the charge of civil and judicious administration 425 
 
 Of charges, military and naval 429 
 
 Of the charges of public instruction 432 
 
 Of the charges of public benevolent institutions 438 
 
 Of the charges of public edifices and works 441 
 
 VII. Of the actual contributors to public consumption 444 
 
 VIII. Of taxation : 
 
 Sect 1. Of the effect of all kinds of taxation in general 446 
 
 2. Of the different modes of assessment, and the classes they press upon 
 
 respectively 468 
 
 3. Of taxation in kind 473 
 
 4. Of the territorial or land-tax of England 476 
 
 JX Of national debt: 
 
 Sect 1. Of the contracting debt by national authority, and of its general effect. 477 
 2. Of public credit, its basis, and the circumstances that endanger its 
 
 J solidity. 48 2 
 
 Appendix .. 488 
 
INTRODUCTION. 
 
 A SCIENCE only advances with certainty, when the plan 
 of inquiry aad the object of our researches have been 
 clearly defined; otherwise a small number of truths are 
 loosely laid hold of, without their connexion being per- 
 ceived, and numerous errors, without being enabled to de- 
 tect their fallacy. 
 
 For a long time the science of politics, in strictness lim- 
 ited to the investigation of the principles which lay the 
 foundation of the social order, was confounded with political 
 economy, which unfolds the manner in which wealth is pro- 
 duced, distributed, and consumed. Wealth, nevertheless* 
 is essentially independent of political organization. Undetf 
 every form of government, a state, whose affairs are well 
 administered, may prosper. Nations have risen to opu- 
 lence under absolute monarchs, and have been ruined by 
 popular councils. If political liberty is more favourable to 
 he development of wealth, it is indirectly, in the same 
 manner that it is more favourable to general education. 
 
 In confounding in the same researches the essential ele- 
 ments of good government with the principles on which tho 
 growth of wealth, either public or private, depends, it is by 
 no means surprising that authors should have involved 
 these subjects in obscurity, instead of elucidating them. 
 Stewart, who has entitled his first chapter "Of the Govern- 
 ment of Mankind," is liable to this reproach : the sect of 
 " Economists" of the last century, throughout all theii 
 writings, and J. J. Rousseau, in the article " Political Eco 
 nomy" in the Encyclopcdie, lie under the same imputation 
 
 Since the time of Adam Smith, it appears to me, these 
 two very distinct inquiries have been uniformly separated , 
 the term political economy* being now confined to the sci- 
 ence which treats of wealth, and that of politics, to desig 
 
 *From OIKOS a house, and vo^o? a law ; economy, the law which regulates the household 
 Household, according to the Greeks, comprehending all the goods in possession of the 
 family ; and political, from *-<5A<?, civitas, extending its application to society or the na 
 tion at large. 
 
 Political economy is the best expression that can be used to designate the science rtk*. 
 cussed in the following treatise, which is not the investigation of natural wealth, or thai 
 which nature supplies us with gratuitously and without limitation, but of social wtiltl 
 exclusively, which is founded on exchange and the recognition of the right of propcrtv 
 both social regulations. 
 
xvi INTRODUCTION. 
 
 nate the relations existing between a government and its 
 people, and the relations of different states to each other. 
 
 The wide range taken into the field of pure politics, 
 whilst investigating the subject of political economy, seem- 
 ed to furnish a much stronger reason for including in the 
 same inquiry agriculture, commerce and the arts, the true 
 sources of wealth, and upon which laws have but an acci- 
 dental and indirect influence. Thence what interminable 
 digressions ! If, for example, commerce constitutes a 
 branch of political economy, all the various kinds of com- 
 merce form a part; and as a consequence, maritime com- 
 merce, navigation, geography where shall we stop? All 
 human knowledge is connected. Accordingly, it is neces- 
 sary to ascertain the points of contact, or the articulations 
 by which the different branches are united ; by this means, 
 a more exact knowledge will be obtained of whatever is 
 peculiar to each, and where they run into one another. 
 
 In the science of political economy, agriculture, com- 
 merce and manufactures are considered only in relation to 
 the increase or diminution of wealth, and not in reference 
 to their processes of execution. This science indicates the 
 ;:ases in which commerce is truly productive, where what- 
 ever is gained by one is lost by another, and where it is 
 profitable to all ; it also teaches us to appreciate its several 
 processes, but simply in their results, at which it stops. 
 Besides this knowledge, the merchant must also understand 
 the processes of his art. He must be acquainted with the 
 commodities in which he deals, their qualities and defects, 
 the countries from which they are derived, their markets, 
 the means of their transportation, the values to be given for 
 them in exchange, and the method of keeping accounts. 
 
 The same remark is applicable to the agriculturist, to 
 the manufacturer, and to the practical man of business ; 
 to acquire a thorough knowledge of the causes and conse- 
 quences of each phenomenon, the study of political econo- 
 my is essentially necessary to them all ; and to become ex- 
 pert in his particular pursuit, each one must add thereto a 
 knowledge of its processes. These different subjects of in- 
 vestigation were not, however, confounded by Dr. Smith ; 
 but neither he, nor the writeis who succeeded him, have 
 guarded themselves against another source of confusion, 
 liore important to be noticed, inasmuch as the develop- 
 
INTRODUCE 3N. xvrjj 
 
 ments resulting from it, may not be altogether unuseful in 
 the progress of knowledge in general, as well as in the 
 prosecution of our own particular inquiry. 
 . In political economy, as in natural philosophy, and in 
 I every other study, systems have been formed before facts 
 ;! have been established; the place of the latter being sup- 
 plied by purely gratuitous assertions. More recently, the 
 inductive method of philosophizing, which, since the time 
 of Bacon, has so much contributed to the advancement of 
 every other science, has been applied to the conduct of 
 our researches in this. The excellence of this method 
 consists in only admitting facts carefully observed, and the 
 consequences rigorously deduced from them ; thereby effec- 
 tually excluding those prejudices and authorities which, in 
 every department of literature and science, have so often 
 been interposed between man and truth. But, is the whole 
 extent of the meaning of the term, facts, so often made 
 use of, perfectly understood ? 
 
 It appears to me, that this word at once designates ob- 
 jects that exist, and events that take place ; thus presenting 
 two classes of facts : it is, for example, one fact, that such 
 an object exists ; another fact, that such an event takes 
 place in such a manner. Objects that exist, in order to 
 serve as the basis of certain reasoning, must be seen ex- 
 actly as they are, under every point of view, with all their 
 qualities. Otherwise, whilst supposing ourselves to be 
 reasoning respecting the same thing, we may, under the 
 same name, be treating of two different things. 
 
 The second class of 'facts, namely, events that take place, 
 consists of the phenomena exhibited, when we observe 
 the manner in which things take place. It is, for instance, 
 u fact, that metals, when exposed to a certain degree of 
 heat, become fluid. 
 
 The manner in wh.^h things exist and take place, con- 
 stitutes what is called the nature of things ; and a careful 
 observation of the nature of things is the sole foundation 
 of all truth. 
 
 Hence, a twofold classification of sciences ; namely, 
 those which may be styled descriptive, which arrange and 
 accurately designate the properties of certain objects, as 
 botany and natural history ; and those which may be styled 
 experimental, which unfold the reciprocal action of sub 
 2* C 
 
INTRODUCTION. 
 
 stances on each other, or in other words, the connexion 
 between cause and effect, as chemistry and natural philo- 
 sophy. Both departments are founded on facts, and con- 
 stitute an equally solid and useful portion of knowledge. 
 Political economy belongs to the latter ; in showing the 
 manner in which events take place in relation to wealth, 
 it forms a part of experimental science.* 
 
 But facts that take place may be considered in two points 
 of view ; either as general or constant, or as particular or 
 variable. General facts are the results of the nature of 
 things in all analogous cases; particular facts as truly re- 
 sult from the nature of things, but they are the result of 
 several operations modified by each other in a particular 
 case. The former are not less incontrovertible than the 
 latter, even when apparently they contradict each other. 
 In natural philosophy, it is a general fact, that heavy bo- 
 dies fall to the earth ; the water in a fountain, neverthe- 
 less, rises above it. The particular fact of the fountain is 
 a result wherein the laws of equilibrium are combined with 
 those of gravity, but without destroying them. 
 
 In our present inquiry, the knowledge of these two 
 classes of facts, namely, of objects that exist and of events 
 that take place, embraces two distinct sciences, political 
 economy and statistics. 
 
 Political economy, from facts always carefully observed, 
 | makes known to us the nature of wealth ; from the know- 
 ' ledge of its nature deduces the means of its creation, un- 
 | folds the order of its distribution, and the phenomena at 
 tending its destruction. It is, in other words, an exposi- 
 tion of the general facts observed in relation to this sub- 
 ject. With respect to wealth, it is a knowledge of effects 
 and of their causes. It shows what facts are constantly 
 conjoined with ; so that one is always the sequence of the 
 other. But it does not resort for any further explanations 
 to hypothesis : from the nature of particular events their 
 concatenations must be perceived; the science must con- 
 duct us from one link to another, so that every intelligent 
 
 * Experimental science, in order to establish why events take place in a certain man- 
 iicr, or to be able to assign a particular cause for a particular effect, to a certain extent 
 nust bo descriptive. Astronomy, in order to explain the eclipses of the sun, must de- 
 monstrate the opacity of the moon. Political economy, in like manner, in order to 
 show that money is a means of the production of wealth, but not the end, must exhibit 
 t rue nature 
 
INTRODUCTION. X1X 
 
 understanding may clearly comprehend in what manner 
 the chain is united. It is this which constitutes the excel- 
 lence of the modern method of philosophizing. 
 
 Statistics exhibit the amount of production and of con 
 sumption of a particular country, at a designated period ; 
 its population, military force, wealth, and whatever else is 
 susceptible of valuation. It is a description in detail. 
 
 Between political economy and statistics there is the 
 same difference as between the science of politics and 
 history. 
 
 The study of statistics may gratify curiosity, but it can 
 never be productive of advantage when it does not indi- 
 cate the origin and consequences of the facts it has collect- 
 ed; and by indicating their origin and consequences, it at 
 once becomes the science of political economy This 
 doubtless is the reason why these two distinct sciences 
 have hitherto been confounded. The celebrated work of 
 Dr. Adam Smith can only be considered as animmethodical 
 assemblage of the soundest principles of political econo- 
 my, supported by luminous illustrations ; of highly inge- 
 nious researches in statistics, blended with instructive re- 
 flections ; it is not, however, a complete treatise of either 
 science, but an irregular mass of curious and original 
 speculations, and of know r n demonstrated truths. 
 
 A perfect knowledge of the principles of political econo- 
 my may be obtained, inasmuch as all the general facts 
 which compose this science may be discovered. In statis- 
 tics this never can be the case ; this latter science, like 
 history, being a recital of facts, more or less uncertain, 
 and necessarily incomplete. Of the statistics of former 
 periods and distant countries, only detached and very im- 
 perfect accounts can be furnished. With respect to the 
 present time, there are, few persons who unite the qualifi- 
 cations of good observers with a situation favourable for 
 accurate observation. The inaccuracy of the statements 
 we are compelled to have recourse to, the restless suspi- 
 cions of particular governments, and even of individuals, 
 their ill-will and indifference, present obstacles often in 
 surmountable, notwithstanding the toil and care of in- 
 quirers to collect minute details with exactness; and which, 
 after all, when in their possession, are only true for an in- 
 stant. Dr. Smith accordingly avows, that he puts no 
 
XXf INTRODUCTION 
 
 Igreat faith in political arithmetic ; which is nothing more 
 than the arrangement of numerous statistical data. 
 N Political economy, on the other hand, whenever the 
 } principles which constitute its basis are the rigorous de- 
 ' ductions of undeniable general facts, rests upon an im- 
 moveable foundation. General facts undoubtedly are found- 
 ed upon the observation of particular facts ; but upon 
 such particular facts as have been selected from those 
 most carefully observed, best established, and witnessed 
 by ourselves. When the results of these facts have uni- 
 formly been the same, the cause of their having been so 
 satisfactorily demonstrated, and the exceptions to them 
 even confirming other principles equally well established, 
 we are authorised to give them as ultimate general facts, 
 and to submit them with confidence to the examination 
 of all competent inquirers, who may be again desirous of 
 subjecting them to experiment. A new particular fact, 
 when insulated, and the connexion between its antecedents 
 and consequents not established by reasoning, is not suffi- 
 cient to shake our confidence in a general fact ; for who 
 can say that some unknown circumstance has not produced 
 the difference noticed in their several results? Alight 
 feather is seen to mount in the air, and sometimes remain 
 there for a long time before it falls back to the ground. 
 Would it not, nevertheless, be erroneous to conclude that 
 this feather is not affected by the universal law of gravi- 
 tation ? In political economy it is a general fact, that the 
 interest of money rises in proportion to the risk run by 
 the lender of not being repaid. Shall it be inferred that 
 this principle is false, from having seen money lent at a 
 low rate of interest upon hazardous occasions ? The lend- 
 er may have been ignorant of the risk, gratitude or fear 
 may have induced sacrifices, and the general law, disturbed 
 in this particular case, will resume its entire force the mo- 
 ment the causes of its interruption have ceased to operate. 
 Finally, how small a number of particular facts are com- 
 pletely examined, and how few among them are observed 
 under all their aspects? And in supposing them well ex- 
 amined, well observed, and well described, how many of 
 them eithei prove nothing, or directly the reverse of what 
 .P intended to be established by them. 
 
 Hence, there is not an absurd theory, or an extravagant 
 

 
 INTRODUCTION. XX1 ' 
 
 opinion that has not been supported by an appeal to facts;* 
 and it is by facts also that public authorities have been so 
 often misled. But a knowledge of facts, without a know- 
 ledge of their mutual relations, without being able to show 
 why the one is a cause, and the other a consequence, is 
 really no better than the crude information of an office- 
 clerk, of whom the most intelligent seldom becomes ac- 
 quainted with more than one particular series, which only 
 enables him to examine a question in a single point of view. 
 
 Nothing can be more idle than the opposition of theory 
 to practice ! What is theory, if it be not a knowledge of 
 the law's which connect effects with their causes, or facts 
 with facts? And who can be better acquainted with facts 
 than the theorist who surveys them under all their aspects, 
 and comprehends their relation to each other? And what 
 is practicet without theory, but the employment of means 
 .without knowing how or why they act? In any investi- 
 gation, to treat dissimilar cases as if they were analogous, 
 is but a dangerous kind of empiricism, leading to conclu- 
 sions never foreseen. 
 
 Hence it is, that after having seen the exclusive or re- 
 strictive system of commerce, a system founded on the 
 opinion that one nation can only gain what another loses, 
 almost universally adopted throughout Europe after the 
 revival of arts and letters ; after having seen taxation 
 without intermission perpetually increasing, and in some 
 countries extending itself to a most enormous amount; 
 and after having seen these same countries become more 
 opulent, more populous, and more powerful, than at the 
 time they carried on an unrestricted trade, and were almost 
 entirely exempt from public burdens, the generality of man- 
 kind have concluded that national wealth and power were 
 attributable to the restraints imposed on the application 
 of industry, and to the taxes levied from the incomes of 
 individuals. Shallow thinkers have even pretended that 
 this opinion was founded on facts, and that every different 
 one w r as the offspring of a wild and disordered imagination. 
 
 * In France, the minister of the interior, in his expose of 1813, a most disastrous pe- 
 riod, when foreign commerce was destroyed, and the national resources of every descrip- 
 tion rapidly declining, boasted of having proved by indubitable calculations, that the 
 country was in a higher state of prosperity than it ever before had been. 
 
 t By the term practice, is not here meant the manual skill which enables the artificer 
 or clerk to execute with greater celerity and precision whatever he performs daily, and 
 which constitutes his peculiar talent ; but the method pursued in superintending- arid 
 administering public or private affairs. 
 
INTRODUCTION. 
 
 It is, however, on the contrary, evident that the support- 
 ers of the opposite opinion embraced a wider circle of 
 facts, and understood them much better than their oppo- 
 nents. The very remarkable impulse given, during the 
 middle ages, to the industry of the free states of Italy and 
 of the Hanse towns of the north of Europe, the spectacle 
 of riches it exhibited in both, the shock of opinions occa- 
 sioned by the crusades, the progress of the arts and 
 sciences, the improvement of navigation and consequent 
 discovery of the route to India, and of the continent of 
 America, as well as a succession of other less important 
 events, were all known to them as the true causes of the 
 increased opulence of the most ingenious nations on the 
 globe. And although they were aware that this activity 
 had received successive checks, they at the same time knew 
 that it had been freed from more oppressive obstacles. In 
 consequence of the authority of the feudal lords and barons 
 declining, the intercourse between the different provinces 
 and states could no longer be interrupted ; roads became 
 improved, travelling more secure, and laws less arbitrary ; 
 the enfranchised towns, becoming immediately dependent 
 upon the crown, found the sovereign interested in their 
 advancement; and this enfranchisement, which the natural 
 course of things and the progress of civilization had ex- 
 tended to the country, secured to every class of producers 
 the fruits of their industry. In every part of Europe per- 
 sonal freedom became more generally respected ; if not 
 from a more improved organization of political society, 
 at least from the influence of public sentiment. Certain 
 prejudices, such as branding with the odious name of 
 usury all loans upon interest, and attaching the importance 
 of nobility to idleness, had begun to decline. Nor is this 
 all. Enlightened individuals have not only remarked the 
 influence of these, but of many other analogous facts ; it 
 has been perceived by them, that the decline of prejudices 
 has been favourable to the advancement of science, or to 
 a more exact knowledge of the immutable laws of nature ; 
 (hat this improvement in the cultivation of science has 
 itself been favourable to the progress of industry, and in- 
 dustry to national opulence. From such an induction of 
 facts they have been enabled to conclude, with much 
 greater certainty than the unthinking multitude, that 
 
INTRODUCTION. xx j:j 
 
 although many modern states in the mid^t of taxation and 
 restrictions have risen to opulence arid power, it is not 
 owing to these restraints on the natural course of human 
 affairs, but in spite of such powerful causes of discourage- 
 ment. The prosperity of the same countries would have 
 been much greater, had they been governed by a more 
 liberal and enlightened policy.* 
 
 , v To obtain a knowledge of the truth, it is not then so ne- 
 'cessary to be acquainted with a great number of facts, as 
 with such as are essential, arid have a direct and immediate 
 .influence ; and, above all, to examine them under all their 
 aspects, to be enabled to deduce from them just conclu- 
 sions, and be assured that the consequences ascribed to 
 them do not in reality proceed from other causes. Every 
 other knowledge of facts, like the erudition of an almanac, 
 is a mere compilation from which nothing results. And it 
 may be remarked, that this sort of information is peculiar 
 to men of clear memories and clouded judgments; men who 
 declaim against the best established doctrines, the fruits 
 of the most enlarged experience and profoundest reason- 
 ing ; and whilst inveighing against system, whenever their 
 own routine is departed from, are precisely those most 
 under its influence, and who defend it with stubborn folly, 
 fearful rather of being convinced, than desirous of arriving 
 at crrtainty. 
 
 Thus, if from all the phenomena of production, as well 
 as from the experience of the most extensive commerce, 
 you demonstrate that a free intercourse between nations 
 is reciprocally advantageous, and that the mode found to 
 be most beneficial to individuals transacting business with 
 foreigners, must be equally so to nations, men of contracted 
 views and high presumption will accuse you of system. 
 Ask them for their reasons, and they will immediately talk 
 to you of the balance of trade ; will tell you, it is cleai 
 that a nation must be ruined by exchanging its money for 
 
 * Hence it is that nations seldom derive any benefit from the lessons of experience. 
 To profit by them, the community at large must be enabled to seize the connexion be- 
 tween causes and their consequences; which at once supposes a very high degree of 
 intelligence and a rare capacity for reflection. Whenever mankind shall be in a situa- 
 tion to profit by experience, they will no longer require her lessons ; plain sound sens*. 1 
 will then be sufficient. This is one reason of our being subject to the necessity of con. 
 stant control. All that a people can desire is that laws conducive to the general interest 
 of society should be enacted and carried into effect ; a problem which different political 
 constitutions more or less imperfectly solve. 
 
xx iv INTRODUCTION. 
 
 merchandise in itself a system. Some will assert that 
 circulation enriches a state, and that a sum of money, by 
 passing through twenty different hands, is equivalent to 
 twenty times its own value ; others, that luxury is favour- 
 able to industry, and economy ruinous to every branch of 
 commerce both mere systems; and all will appeal to 
 (acts in support of these opinions, like the shepherd, who. 
 upon the faith of his eyes, affirmed that the sun, which he 
 saw rise in the morning and set in the evening, during the 
 day traversed the whole extent of the heavens, treating as 
 an idle dream the laws of the planetary world. 
 
 Persons, moreover, distinguished by their attainments 
 in other branches of knowledge, but ignorant of the prin- 
 ciples of this, are too apt to suppose that absolute truth is 
 confined to the mathematics and to the results of careful 
 observation and experiment in the physical sciences ; ima- 
 gining that the moral and political sciences contain no in- 
 variable facts or indisputable truths, and therefore cannot 
 be considered as genuine sciences, but merely hypothetical 
 systems, more or less ingenious, but purely arbitrary. The 
 opinion of this class of philosophers is founded upon the 
 want of agreement among the writers who have investi- 
 gated these subjects, and from the wild absurdities taught 
 by some of them. But what science has been free from 
 extravagant hypotheses ? How many years have elapsed 
 since those most advanced have been altogether disen- 
 gaged from system ? On the contrary, do we not still see 
 men of perverted understandings attacking the best estab- 
 lished positions? Forty years have not elapsed since 
 water, so essential to our very existence, and the atmo- 
 sphere in which we perpetually breathe, have been accu- 
 rately analyzed. The experiments and demonstrations, 
 nevertheless, upon which this doctrine is founded, are con- 
 tinually assailed ; although repeated a thousand times in. 
 different countries by the most acute and cautious experi- 
 menters. A want of agreement exists in relation to a de- 
 scription of facts much more simple and obvious than the 
 most part of those in moral and political science. Are 
 not natural philosophy, chemistry, botany, mineralogy, and 
 physiology, still fields of controversy, in which opinions 
 are combated with as much violence and asperity as in 
 political economy? The same facts are, indeed, observed 
 
INTRODUCTION. 
 
 by both parties, but are classed and explained differently 
 by each ; and it is worthy of remark, that in these contests 
 genuine philosophers are not arrayed against pretenders. 
 Leibnitz and Newton, Linnaeus and Jussieu, Priestley and 
 Lavoisier, Desaussure and Dolomieu, were all men of un- 
 common genius, who, however, did not agree in their phi- 
 losophical systems. But have not the sciences they taught 
 an existence, notwithstanding these disagreements ?* 
 
 In like manner, the general facts constituting the 
 sciences of politics and morals, exist independently of all 
 controversy. Hence the advantage enjoyed by every one 
 who, from distinct and accurate observation, can establish 
 the existence of these general facts, demonstrate their con- 
 nexion, and deduce their consequences. They as certainly 
 proceed from the nature of things as the laws of the ma- 
 terial world. We do not imagine them ; they are results 
 disclosed to us by judicious observation and analysis. 
 Sovereigns, as well as their subjects, must bow to their 
 authority, and never can violate them with impunity. 
 
 General facts, or, if you please, the general laws which 
 facts follow, are styled principles, whenever it relates to 
 their application ; that is to say, the moment we avail our- 
 selves of them in order to ascertain the rule of action of 
 
 * " The controversies," says Col. Torrens, in his ' Essay on the Production of Wealth,' 
 published in 1821, "which at present exist among-st the most celebrated masters of po 
 litical economy, have been brought forward by a lively and ingenious author as an ob 
 jection against the study of the science. A similar objection might have been urged, 
 in a certain stage of its progress, against every branch of human knowledge. A few 
 years ago, when the brilliant discoveries in chemistry began to supersede the ancient 
 doctrine of phlogiston, controversies, analogous to those which now exist amongst polit- 
 ical economists, divided the professors of natural knowledge; and Dr. Priestley, like Mr. 
 Malt 1 1 us, appeared as the pertinacious champion of the theories which the facts estab- 
 lished by himself had so largely contributed to overthrow. In the progress of the human 
 mind, a period of controversy amongst the cultivators of any branch of science must, 
 necessarily precede the period of their unanimity. But this, instead of furnishing a 
 reason for abandoning the pursuits of science, while its first principles remain in uncer- 
 tainty, should stimulate us to prosecute our studies with more ardour and perseverance 
 until upon every question within the compass of the human faculties, doubt is removed 
 and certainty attained. With respect to political economy, the period of controversy is 
 passing away, and that of unanimity rapidly approaching. Twenty years hence there 
 will scarcely exist a doubt respecting any of its fundamental principles " 
 
 And in the preface of the third edition of his ' Essay on the External Corn Trade,' 
 published in 1826, Col. Torrens makes these further remarks : " On a former occasion, 
 the author ventured to predict, that at no distant period, controversy amongst the pro- 
 fessors of political economy would cease, and unanimity prevail, respecting the funda- 
 mental principles of the science. He thinks he can already perceive the unequivocal 
 sijrns of the approaching fulfilment of this prediction. Since it was hazarded, twn 
 works have appeared, each of which, in its own peculiar line, is eminently calculated to 
 correct the errors which previously prevailed. These publications are, 4 A Critical Dis- 
 sertation on the Nature, Causes, and Measures of Value, by an anonymous author;' au<? 
 1 Thoughts and Details on Hiarh and Low Prices, by Mr. Tooke.' " AMERICAN EDITOR 
 ;> i) 
 
XXVI INTRODUCTION. 
 
 any combination of circumstances presented to us. A 
 knowledge of principles furnishes the only certain means 
 of uniformly conducting any inquiry with success. 
 
 Political economy, in the same manner as the exact 
 sciences, is composed of a few fundamental principles, and 
 of a great number of corollaries or conclusions, drawn 
 from these principles. It is essential, therefore, for the 
 advancement of this science that these principles should 
 be strictly deduced from observation; the number of con- 
 clusions to be drawn from them may afterwards be either 
 multiplied or diminished at the discretion of the inquirer, 
 according to the object he proposes. To enumerate all 
 their consequences, and give their proper explanations, 
 would be a work of stupendous magnitude, and necessarily 
 incomplete. Besides, the more this science shall become 
 improved, and its influence extended, the less occasion will 
 there be to deduce consequences from its principles, as 
 these will spontaneously present themselves to every eye ; 
 and being within the reach of all, their application will be 
 readily made. A treatise on political economy will then 
 be confined to the enunciation of a few general principles, 
 not requiring even the support of proofs or illustrations ; 
 because these will be but the expression of what every one 
 will know, arranged in a form convenient for comprehend- 
 ing them, as well in their whole scope as in their relation 
 to each other. 
 
 It would, however, be idle to imagine that greater pre- 
 cision, or a more steady direction could be given to this 
 study, by the application of mathematics to the solution 
 of its problems. The values with which political economy 
 is concerned, admitting of the application to them of the 
 terms plus and minus, are indeed within the range of ma- 
 thematical inquiry; but being at the same time subject to 
 the influence of the faculties, the wants and the desires of 
 mankind, they are not susceptible of any rigorous ap- 
 preciation, and cannot, therefore, furnish any data for ab- 
 solute calculations. In political as well as in physical 
 science, all that is essential is a knowledge of the cormex 
 ion between causes and their consequences. Neither the 
 phenomena of the moral or material world are subject to 
 strict arithmetical computation.* 
 
 We may, for example, know that for any given year the prico of wine will infallibly 
 
INTRODUCTION. 
 
 These considerations respecting the nature and object 
 of political economy, and the best method of obtaining a 
 
 depend upon the quantity to be sold, compared with the extent of the demand. But if 
 we are desirous of submitting these two data to mathematical calculation, their ultimate 
 elements must be decomposed before we can become thoroughly acquainted witli them, 
 or can, with any degree of precision, distinguish the separate influence of each. Hence, 
 it is not only necessary to determine what will be the product of the succeeding vintage, 
 while yet exposed to the vicissitudes of the weather, but the quality it will possess, the 
 quantity remaining on hand of the preceding vintage, the amount of capital that will 
 no at the disposal of the dealers, and require them, more or less expcditiously, to get 
 oack their advances. We must also ascertain the opinion that may be entertained as to 
 the possibility of exporting the article, which will altogether depend upon our impressions 
 us to the stability of the laws and government, that vary from day to day, and respect- 
 ing which no two individuals exactly agree. All these data, and probably many others 
 besides, must be accurately appreciated, solely to determine the quantity to be put in 
 circulation ; itself but one of the elements of price. To determine the quantity to be 
 demanded, the price at which the commodity can be sold must already be known, as 
 the demand for it will increase in proportion to its cheapness ; we must also know the 
 former stock on hand, and the tastes and means of the consumers, as various as their 
 jHjrsons. Their ability to purchase will vary according to the more or less prosperous 
 condition of industry in general, and of their own in particular; their wants will vary 
 also in the ratio of the additional means at their command of substituting one liquor 
 ibr another, such as beer, cider, &c. I suppress an infinite number of less important 
 considerations, more or less affecting the solution of the problem ; for I question 
 whether any individual, really accustomed to the application of mathematical analysis, 
 would even venture to attempt this, not only on account of the numerous data, but in 
 consequence of the difficulty of characterizing them with any thing like precision, and 
 of combining their separate influences. Such persons as have pretended to do it, have 
 not been able to enunciate these questions into analytical language, without divesting 
 them of their natural complication, by means of simplifications, and arbitrary suppres- 
 sions, of which the consequences, not properly estimated, always essentially change the 
 condition of the problem, and pervert all its results ; so that no other inference can be 
 deduced from such calculations than from formula arbitrarily assumed. Thus, instead 
 of recognizing in their conclusions that harmonious agreement which constitutes the 
 peculiar character of rigorous geometrical investigation, by whatever method they may 
 liave been obtained, we only perceive vague and uncertain inferences, whose differences 
 are often equal to the quantities sought to be determined. What course is then to be 
 pursued by a judicious inquirer in the elucidation of a subject so much involved ? The 
 same which would be pursued by him, under circumstances equally difficult, which de- 
 cide the greater part of the actions of his life. He will examine the immediate elements 
 of the proposed problem, and after having ascertained them with certainty, (which in 
 political economy can be effected,) will approximately value their mutual influences with 
 the intuitive quickness of an enlightened understanding, itself only an instrument by 
 means of which the mean result of a crowd of probabilities can be estimated, but never 
 calculated with exactness. 
 
 Cabanis, in describing the revolutions in the science of medicine, makes a remark 
 perfectly analogous to this. 'The vital phenomena,' says he, 'depend upon so many 
 unknown springs, held together under such various circumstances, which observation 
 vainly attempts to appreciate, that these problems, from not being stated with all their 
 conditions, absolutely defy calculation. Hence whenever writers on mechanics have 
 endeavoured to subject the laws of life to their method, they have furnished the scientific 
 world with a remarkable spectacle, well entitled to our most serious consideration. The 
 terms they employed were correct, the process of reasoning strictly logical, and, never- 
 theless, all the results were erroneous. Further, although the language and the method 
 of employing it were the same among all the calculators, each of them obtained dis- 
 tinct and different results ; and it is by the application of this method of investigation 
 to subjects to which it is altogether inapplicable, that systems the most whimsical, fal 
 lacious, and contradictory, have been maintained.' 
 
 D'Alembert, in his treatise on Hydrodynamics, acknowledges that the velocity oftne 
 blood in its passage through the vessels entirely resists every kind of calculation. Sen. 
 bier mnde a similar observation in his Essai sur V Art d'observer, (vol. 1, page 81 p 
 
 Whatever has been said by able teachers and judicious philosophers, in relation to 
 our conclusions in natural science, is much more applicable to moral ; and points or.t 
 
xxv jii INTRODUCTION. 
 
 thorough knowledge of its principles, will supply us with 
 the means of appreciating the efforts hitherto made to- 
 wards the advancement of this science. 
 
 The literature of the ancients, their legislation, their 
 public treaties, and their administration of the conquered 
 provinces, all proclaim their utter ignorance of the nature 
 and origin of wealth, of the manner in which it is distri- 
 buted, and of the effects of its consumption. They knew, 
 what has always been known wherever the right of pro- 
 perty has been sanctioned by laws, that riches are in- 
 creased by economy, and diminished by extravagance. 
 Xenophon extols order, activity, and intelligence, as cer- 
 tain means of obtaining prosperity ; but without deducing 
 these maxims from any general law, or without being able 
 to show the connexion between causes and their conse- 
 quences. He advises the Athenians to protect commerce, 
 and to receive strangers with kindness ; yet so little was 
 he aware to what extent this advice would be proper, that, 
 upon another occasion, he expresses doubts whether com- 
 merce be really profitable to the republic. 
 
 Plato and Aristotle, it is true, notice some invariable 
 relations between the different modes of production, and 
 the results obtained from them. Plato sketches with tol- 
 erable fidelity,* the effects of the separation of social em- 
 ployments ; but it is simply with a view to illustrate man's 
 social character and the necessity he is in, from his multi- 
 farious wants, of uniting in extensive societies in which 
 each individual may be exclusively occupied with one spe- 
 cies of production. His view is entirely a political one ; 
 and he has deduced from it no other conclusion. 
 
 In his treatise on Politics, Aristotle goes farther. He 
 distinguishes natural from artificial production. He styles 
 natural, whatever creates those objects of consumption 
 required by a family, or, at most, whatever is obtained by 
 exchanges in kind. No other advantage, according to 
 him, is derived from real production ; artificial gain he 
 condemns. Besides, he does not support these opinions 
 by any reasoning founded upon accurate observation. 
 
 the cause of our always being- misled in political economy, whenever we have subjected 
 >ts phenomena to mathematical calculation. In such case it becomes the most 
 jus of all abstractions. 
 
 Republic, Book II. 
 
From the manner in which he expresses himself in relation 
 to the effect of savings and loans on interest, it is evident 
 that, he knew nothing of the nature and employment of 
 capital. 
 
 What can we expect from nations still less advanced in 
 civilization than the Greeks ? We may recollect that a 
 law of Egypt obliged the son to adopt the profession of 
 his father. This, in certain cases, was to require the crea- 
 tion of a greater quantity of products than the particular 
 state of society called for; to oblige an individual, in or- 
 der to obey the law, to ruin himself, and to continue the 
 exercise of his productive functions, whether in possession 
 of capital or not; which is altogether absurd.* The Ro- 
 mans, in treating every branch of industry, except agri- 
 culture (and we know not why,) with contempt, betray 
 the same ignorance. Their pecuniary transactions must 
 be numbered amongst their most unskilful operations. 
 
 The moderns, even after having freed themselves from 
 the barbarism of the middle ages, have not for a very long 
 time been more advanced. We shall have occasion to 
 notice the stupidity of a multitude of laws relating to the 
 Jews, to the interest of money, and to money itself. Henry 
 IV. granted to his favourites and mistresses, as favours 
 which cost him nothing, the permission to practise a thou- 
 sand petty extortions, and to collect for their own benefit, 
 from various branches of commerce, as many petty taxes. 
 He authorized the count of Soissons to levy a duty of fif- 
 teen sous upon every bale of merchandise which should 
 be exported from the kingdom.t 
 
 In every branch of knowledge, example has preceded 
 precept. The fortunate enterprises of the Portuguese 
 and Spaniards during the fifteenth century, the active in- 
 dustry of Venice, Genoa, Florence, Pisa, the provinces 
 of Flanders, and the free cities of Germany at this same 
 epoch, gradually directed the attention of some philoso- 
 phers to the theory of wealth. 
 
 These inquiries, like almost every other in the arts and 
 sciences, after the revival of letters, originated in Italy 
 
 * When we find almost every historian, from Herodotus to Bossuet, boasting of thi* 
 and other similar laws, it will be seen how important it is that all who undertake tn 
 write history should have some knowledge of the science of political economy. 
 
 t See Sully's Memoirs, Book XVI. 
 3* " 
 
XKX 
 
 INTRODUCTION. 
 
 As fai back as the sixteenth century, Botero was engaged 
 in investigating the real sources of public prosperity. In 
 the year 1613, Antonio Serra composed a treatise, in which 
 he particularly noticed the productive power of industry ; 
 but the title of his work sufficiently indicates its errors. 
 Wealth, according to his hypothesis, consisted only of 
 gold and silver.* Davanzati wrote upon money and upon 
 exchange; and at the beginning of the eighteenth century, 
 fifty years before the time of Quesnay, Bandini of Sienna 
 had shown, both from reasoning and experience, that there 
 never had been a scarcity of food, except in those coun- 
 tries where the government had itself interfered to supply 
 the people. Belloni, a banker at Rome, in the year 1750, 
 published a dissertation on commerce, evincing his inti- 
 mate acquaintance with the nature of money and ex- 
 changes, although at the same time infected with the the- 
 ory of the balance of trade. His labours were rewarded 
 by the Pope with the title of marquess. Carli, before Dr. 
 Smith, demonstrated that the balance of trade neither 
 taught nor proved any thing. Algarotti^ whose writings 
 on other subjects Voltaire has made known, wrote also 
 upon the science of political economy; and the little he 
 has left exhibits the accuracy and extent of his knowledge, 
 as well as his acuteness. He confines himself so strictly 
 to facts, and so uniformly founds his speculations on the 
 nature of things, that although he did not get possession 
 of the proof of his principles, and of their relation to each 
 other, he has, nevertheless, guarded himself against every 
 thing like hypothesis and system. In 1764, Genovesi com- 
 menced a course of public lectures on political economy, 
 in the chair founded at Naples by the care of the highly 
 esteemed and learned Intieri. In consequence of this ex- 
 ampie, other professorships of political economy were 
 afterwards established at Milan, and more recently in 
 most of the universities in Germany and Russia. 
 
 In 1750, the abbe Galiani^ so well known since from his 
 connexion with many of the French philosophers, and by 
 his Dialogues on the Corn Trade, although at that time 
 a very young man, published a Treatise on Money, which 
 discovered such uncommon talents and information, as to 
 
 * Breve Trattato dt^e cause che possono far abondare li regni cForo et d'argento dovt 
 von Ktmo minitre 
 
INTRODUCTION. 
 
 induce a belief that he had been assisted in the composi- 
 tion of his work by the abbe Intieri and the Marquess of 
 Rinucdni. Its merits, however, appear to be of a descrip- 
 tion similar to those the author's writings always after- 
 wards displayed ; genius united with erudition, careful- 
 ness in uniformly ascending to the nature of things; and 
 an animated and elegant style. 
 
 One of the most striking peculiarities of this work, is 
 its containing some of the rudiments of the doctrine of 
 Adam Smith ; among others, that labour is the sole crea- 
 tor of the value of things or of wealth ;* a principle al- 
 though not rigorously true, as will be made manifest in 
 the course of this work, but which, pushed to its ultimate 
 consequences, would have put Galiani in the way of dis- 
 covering and completely unfolding the phenomena of pro- 
 duction. Dr. Smith, who was about the same time a pro- 
 fessor in the university of Glasgow, and then taught this 
 doctrine, which has since acquired so much celebrity, in all 
 probability had no knowledge of a work in the Italian lan- 
 guage, published at Naples by a young man then hardly 
 known, and whom he has never quoted. But even had he 
 known it, a truth cannot with so much propriety be said to 
 belong to its fortunate discoverer, as to the inquirer who 
 first proves that it must be so, and demonstrates its con- 
 sequences. Although the existence of universal gravitation 
 had been previously conjectured by Kepler and Pascal, 
 the discovery does not the less belong to Newton.t 
 
 *" Entro ora a dire della factica, la quale, non solo in tute le opere que sono intiera 
 mente dell 1 ante come le pitture, sculture, intagli, etc., ma anchi in molti corpi, come 
 sono i mineral!, i sassi, le piante spontanee delle selve, etc., e I'unica che da valore alia 
 oosa. La quantita della materia non per altro coopera in questi corpi al valore se non 
 parche aumenta o serna la fatica." (GALIANI, della Moneta. Lib. I, cap. 2.) 
 
 " In relation to labour I will remark, that not only in productions which are entirely 
 the work of art, as in painting, sculpture, engraving-, etc., but likewise in productions 
 of nature, as on metals, minerals, and plants, their value is entirely derived from the 
 labour bestowed on their creation. The quantity of matter affects the value of things 
 only so far as it requires more or less labour." 
 
 In the same chapter Galiani also remarks, that man, that is to say his labour, is the 
 only correct measure of value. This, also, according to Dr. Smith, is a principle ; al 
 though considered by me as an error. 
 
 t This same Galiani remarks, in the same work, that whatever is gained by some t 
 must necessarily be lost by others ; in this way proving, that a very ingenious writer 
 may not even know how to deduce the most simple conclusions, and may pass by thf 
 truth without perceiving it. For, if wealth can be created by labour, there may then be 
 u new description of wealth in the world, not taken from anybody. Indeed, this author 
 in his Dialogues on the Corn Trade, published in France a long time afterwards, lm 
 himself, in a very peculiar manner, pronounced his own condemnation. "A truth/' 
 'ie observes, " which is brought to light by pure accident, like a mushroom in a mva 
 
XXX11 INTRODUCTION. 
 
 In Spain, Alvarez Osorio, and Martinez-de-mata, have 
 delivered discourses on political economy, the publication 
 of which we owe to the enlightened patriotism of Campo- 
 manes. Moncada, Navarette, Ustaritz, Ward, and Ulloa, 
 have written on the same subject. These esteemed 
 authors, like those of Italy, entertained many sound views, 
 verified various important facts, and supplied a number of 
 laborious calculations ; but from their inability to estab- 
 lish them upon fundamental principles of the science, which 
 were not then known, they have often been mistaken both 
 as to the end as well as the means of prosecuting this 
 study ; amidst a variety of useless disquisitions, have only 
 cast an uncertain and deceptive light.* 
 
 In France, the science of political economy, at first, was 
 only considered in its application to public finances. Sully 
 remarks correctly enough, that agriculture and commerce 
 are the two teats of the state ; but from a vague and in- 
 distinct conception of the truth. The same observation 
 may be applied to Vauban, a man of a sound practical 
 mind, and although in the army, a philosopher and friend 
 of peace, who, deeply afflicted with the misery into which 
 his country had been plunged by the vain-glory of Louis 
 XIV., proposed a more equitable assessment of the taxes, 
 as a means of alleviating the public burdens. 
 
 Under the influence of the regent, opinions became 
 unsettled ; bank-notes, supposed to be an inexhaustible 
 source of wealth, were only the means of swallowing up 
 capital, of expending what had never been earned, and of 
 making a bankruptcy of all debts. Moderation and eco- 
 nomy were turned into ridicule. The courtiers of the 
 prince, either by persuasion or corruption, encouraged 
 him in every species of extravagance. At this period, the 
 maxim that a state is enriched by luxury was reduced to 
 system. All the talents and wit of the day were exerted 
 in gravely maintaining such a paradox in prose, or in em- 
 bellishing it with the more attractive charms of poetry. 
 
 How, is of no value ; we cannot make use of it, if we are ignorant of its origin and con- 
 or how and by what chain of reasoning it is derived." 
 
 * From my own inability of judging of the merits of such of these writers whoso 
 works have not been translated, I have availed myself of the opinions of one of the 
 translators of this Treatise into the Spanish language, Don Jose Queypo, an individual 
 mike distinguished by his abilities and patriotism, whose remarks I have only copied 
 
INTRODUCTION. 
 
 The dissipation of the national treasures was really sup- 
 posed to merit the public gratitude. The ignorance of 
 first principles, with the debauchery and licentiousness of 
 the duke of Orleans, conspired to effect the ruin of the 
 kingdom. During the long peace maintained by cardinal 
 Fleury, France recovered a little ; the insignificant ad- 
 ministration of this weak minister at least proving, that 
 the ruler of a nation may achieve much good by abstain- 
 ing from the commission of evil. 
 
 The steadily increasing progress of different branches 
 of industry, the advancement of the sciences, whose in- 
 fluence upon wealth we shall have occasion hereafter to 
 notice, and the direction of public opinion, at length esti- 
 mating national prosperity as being of some importance, 
 caused the science of political economy to enter into the 
 contemplation of a great number of writers. Its true 
 principles were not then known; but since, according to 
 the observation of Fontenelle, our condition is such, that 
 we are not permitted at once to arrive at the truth, but 
 must previously pass through various species of errors 
 and various grades of follies, ought these false steps to be 
 considered as altogether useless, which have taught us to 
 advance with more steadiness and certainty ? 
 
 Montesquieu, who was desirous of considering laws in all 
 their relations, inquired into their influence on national 
 wealth. The nature and origin of wealth he should first 
 have ascertained ; of which, however, he did not form any 
 opinion. We are, nevertheless, indebted to this distin- 
 guished author for the first philosophical examination of 
 the principles of legislation ; and, in this point of view, 
 he, perhaps, may be considered as the master of the 
 English writers, who are so generally esteemed as being 
 ours ; just in the same manner as Voltaire has been the 
 master of their best historians, who now furnish us with 
 models worthy of imitation. 
 
 About the' middle of the eighteenth century, certain 
 principles in relation to the origin of wealth, advanced by 
 Doctor Quesnay, made a great number of proselytes. The 
 enthusiastic admiration manifested by these persons for 
 the founder of their doctrines, the scrupulous exactness 
 with which they have uniformly since followed the 
 
xxxiv INTRODUCTION. 
 
 dogmas, and the energy and zeal they displayed in main- 
 taining them, have caused them to be considered as a sect, 
 which has received the name of economists. Instead of 
 first observing the nature of things, or the manner in 
 which they take place, of classifying these observations, 
 and deducing from them general propositions, they com- 
 menced by laying down certain abstract general proposi- 
 tions, which they styled axioms, from supposing them to 
 contain inherent evidence of their own truth. They then 
 endeavoured to accommodate the particular facts to them, 
 and to infer from them their laws ; thus involving them- 
 selves in the defence of maxims evidently at variance with 
 common sense and universal experience,* as will appear 
 hereafter in various parts of this work. Their opponents 
 had not themselves formed any more correct views of the 
 subjects in controversy. With considerable learning and 
 talents on both sides, they were either wrong or right by 
 chance. Points were contested that should have been 
 conceded, and opinions, unquestionably false, acquiesced 
 in ; in short, they combated in the clouds. Voltaire, who 
 so well knew how to detect the ridiculous, wherever it 
 was to be found, in \\isHommeaux guarante ecus, satirised 
 Uic ystem of the economists; yet, in exposing the tire- 
 some trash of Mercer de la Riviere, and the absurdities 
 contained in Mirabearfs L?ami des Hommes, he was him- 
 self unable to point out the errors of either. 
 
 The economists, by promulgating some important truths, 
 directing a more general attention to objects of public 
 utility, and by exciting discussions, which, although at 
 that time of no advantage, subsequently led to more ac- 
 curate investigations, have unquestionably done much 
 good.t In representing agricultural industry as produc- 
 tive of Wealth, they were not deceived; and, perhaps, the 
 necessity they were in of unfolding the nature of produc- 
 tion, caused the further examination of this important phe- 
 nomenon, which conducted their successors to its entire 
 
 When they maintain, for example, that a fall in the price of food is a public calamity. 
 
 t Among 1 the discussions they provoked, we must not forget the entertaining- Dia- 
 
 .OSTUCS on the Corn Trade, by the abbe Galiani, in which the science of political econo- 
 
 ly is treated in the humorous manner of Tristram Shandy. An important truth is 
 
 inserted, and when the author is called upon for its proof, he replies with some ingenious 
 
 pleasantry. 
 
INTRODUCTION. xxxv 
 
 development. On the other hand, the labours of the eco- 
 nomists have been attended with serious evils ; the many 
 useful maxims they decried, their sectarian spirit, the dog- 
 matical and abstract language of the greater part of their 
 writings, arid the tone of inspiration pervading them, gave 
 currency to the opinion, that all who were engaged in 
 such studies were but idle dreamers, whose theories, at 
 best only gratifying literary curiosity, were wholly inap- 
 plicable in practice.* 
 
 No one, however, has ever denied that the writings of 
 the economists have uniformly been favourable to the 
 strictest morality, and to the liberty which every human 
 being ought to possess, of disposing of his person, fortune, 
 and talents, according to the bent of his inclination; with- 
 out which, indeed, individual happiness and national pros- 
 perity are but empty and unmeaning sounds. These 
 opinions alone entitle their authors to universal gratitude 
 and esteem. I do not, moreover, believe that a dishonest 
 man or bad citizen can be found among their number. 
 
 This doubtless is the reason why, since the year 1760, 
 almost all the French writers of any celebrity on subjects 
 connected with political economy, without absolutely being 
 enrolled under the banners of the economists, have, never- 
 theless, been influenced by their opinions. Raynal, Con- 
 dorcet, and many others, will be found among this number. 
 Condillac may also be enumerated among them, notwith- 
 standing his endeavours to found a system of his own in 
 relation to a subject which he did not understand. Many 
 useful hints may be collected from amidst the ingenious 
 
 *The belief that moral and political science is founded upon chimerical theories, 
 arises chiefly from our almost continually confounding- questions of right with matters 
 of fact. Of what consequence, for instance, is the question so long agitated in the 
 writing's of the economists, whether the sovereign power in a country is, or is not, the 
 co-proprietor of the soil ? The fact is, that in every country the government takes, or 
 in the shape of taxes the people are compelled to furnish it with, a part, of the revenue 
 diawn from real estate. Here then is a fact, and an important one; the consequence 
 of certain facts, which we can trace up, as the cause of other facts (such as the rise in 
 the price of commodities) to which we are led with certainty. Questions of right ar 
 always more or less matters of opinion ; matters of fact, on the contrary, are susceptible 
 of proof and demonstration. The former exercise but little influence over the fortunes 
 of mankind ; while the latter, inasmuch as facts grow out of each other, are deeply in- 
 teresting to them ; and, as it is of importance to us that some results should take place 
 in preference to others, it is, therefore, essential to ascertain the means by which theso 
 may be obtained. The Social Contract of J. J. Rousseau, from being almost entirely 
 founded upon questions of right, has thereby become, what I feel no hesitation La avow 
 ing, a work of at least but little practical utility. 
 
INTRODUCTION. 
 
 trifling of his work;* but, like the economists, he almost 
 invariably founds a principle upon some gratuitous assump- 
 tion. Now, an hypothesis may indeed be resorted to, in 
 order to exemplify and elucidate the correctness of an 
 author's general reasoning, but never can be sufficient to 
 establish a fundamental truth. Political economy has only 
 become a science since it has been confined to the results 
 of inductive investigation. 
 
 Turgot was himself too good a citizen, not sincerely to 
 esteem as good citizens as the economists ; and accord- 
 ingly, when in power, he deemed it advantageous to coun- 
 tenance them. The economists, in their turn, found their 
 account in passing off so enlightened an individual and 
 minister of state as one of their adepts; the opinions of 
 Turgot, however, were not borrowed from their school, 
 but derived from the nature of things ; and although on 
 many important points of doctrine he may have been de- 
 ceived, the measures of his administration, either planned 
 or executed, are amongst the most brilliant ever conceived 
 by any statesman. There cannot, therefore, be a stronger 
 proof of the incapacity of his sovereign, than his inability 
 to appreciate such exertions, or if capable of appreciating 
 them, in not knowing how to afford them support. 
 
 The economists not only exercised a particular sway 
 over French writers, but also had a very remarkable in- 
 fluence over many Italian authors, who even went beyond 
 them. Beccaria, in a course of public lectures at Milan,t 
 first analysed the true functions of productive capital. 
 The Count de Fern, the countryman and friend of Beccaria, 
 and worthy of being so, both a man of business and an 
 accomplished scholar, in his Mcditazione suW Economia 
 politica, published in 1771, approached nearer than any 
 other writer, before Dr. Smith, to the real laws which 
 regulate the production and consumption of wealth. Fi- 
 langicri, whose treatise on political and economical laws 
 was not given to the public until the year 1780, appears 
 not to have been acquainted with the work of Dr. Smith, 
 
 * Du Commerce et du Gouverncment consideres Vun relativement a Vautre. 
 
 'f See the syllabus of his lectures, which was printed for the first time in the year 1804, 
 ni the valuable collection published at Milan by Pietro Custodi, under the title of Scril- 
 lori classici italiani di economia politica. It was unknown to me until after the puhh. 
 ration of the first edition of this work in 1803. 
 
INTRODUCTION. xxxvil 
 
 published four years before. The principles de Verrilaid 
 down are followed by Filangieri, and even received from 
 him a more complete development ; but although guided 
 by the torch of analysis and deduction, he did not proceed 
 from the most fortunate premises to the immediate con- 
 sequences which confirm them, at the same time that they 
 exhibit their application and utility. 
 
 But none of these inquiries could lead to any important 
 result. How, indeed, was it possible to become acquainted 
 with the causes of national prosperity, when no clear or 
 distinct notions had been formed respecting the nature of 
 wealth itself? The object of our investigations must be 
 thoroughly perceived before the means of attaining it are 
 sought after. In the year 1776, Adam Smith, educated in 
 that school in Scotland which has produced so many scho- 
 lars, historians, and philosophers, of the highest celebrity, 
 published his Inquiry into the Nature and Causes of the 
 Wealth of Nations. In this work, its author demonstrated 
 that wealth was the exchangeable value of things ; that 
 its extent was proportional to the number of things in our 
 possession having value; and that inasmuch as value 
 could be given or added to matter, that wealth could be 
 created and engrafted on things previously destitute of 
 value, and there be preserved, accumulated, or destroyed.* 
 
 In inquiring into the origin of value, Dr. Smith found it 
 to be derived from the labour of man, which he ought to 
 have denominated industry, from its being a more com- 
 prehensive and significant term than labour. From thi 
 fruitful demonstration he deduced numerous and impor- 
 tant conclusions respecting the causes which, from check- 
 ing the development of the productive powers of labour, 
 are prejudicial to the growth of wealth ; and as they are 
 
 * During the same year that Dr. Smith's work appeared, and immediately before its 
 publication, Browne Dignan published in London, written in the French language, bin 
 Essai sur les principes de V Economic publique, containing the following remarkable 
 passage: "The class of reproducers includes all who, uniting their labour to that of the 
 vegetative power of the soil, or modifying the productions of nature in the p r ocesses of 
 their several arts, create in some sort a new value, of which the sum total forms, what is 
 called the annual reproduction." 
 
 This striking passage, in which reproduction is more clearly characterised than m 
 any part of Dr. Srnith'j writings, did not lead its author to any important conclusions, 
 but merely gave birth to a few scattered hints. A want of connexion in his views, anil 
 of precision in his terms, have rendered his Essay so vague and obscure, that no in- 
 struction whatever can be derived from it. 
 
xxxviii INTRODUCTION. 
 
 rigorous deductions from an indisputable principle, they 
 have only been assailed by individuals, either too careless 
 to have thoroughly understood the principle, or of such 
 perverted understandings as to be wholly incapable of 
 seizing the connexion or relation between any two ideas. 
 Whenever the Inquiry into the Wealth of Nations is 
 perused with the attention it so well merits, it will be per- 
 ceived that until the epoch of its publication, the science 
 of political economy did not exist. 
 
 From this period, gold and silver coins were considered 
 as only constituting a portion, and but a small portion, 
 of national wealth ; a portion the less important, because 
 less susceptible of increase, and because their uses can 
 be more easily supplied than those of many other articles 
 equally valuable; and hence it results that a community, 
 as well as its individual members, are in no way interested 
 in obtaining metallic money beyond the extent of this 
 limited demand. 
 
 These views, we conceive, first enabled Dr. Smith to 
 ascertain, in their whole extent, the true functions of 
 money, and the applications of them, which he made to 
 bank-notes and paper money, are of the utmost impor- 
 tance in practice. They afforded him the means of de- 
 monstrating, that productive capital does not consist of a 
 sum of money, but in the value of the objects made use 
 of in production. He arranged and analyzed the ele- 
 ments of which productive capital is composed, and 
 pointed out their true functions.* 
 
 Many principles strictly correct had often been ad- 
 vanced prior to the time of Dr. Smith ;t he, however, was 
 the first author who established their truth. Nor is this 
 
 *This difficult and abstruse subject has not, perhaps, been treated by Dr. Smith with 
 sufficient method and perspicuity. Owing to this circumstance, his intelligent and acute 
 countryman, lord Lauderdale, has composed an entire treatise, in order to prove that 
 his lordship had completely failed in comprehending this part of the Wealth of Nations. 
 
 t Tn the article Grains, in the Encyclopedic, Quesnay had remarked, that " commo- 
 dities which can be sold, ought always to be considered without distinction, either as 
 uecuniary or real wealth, applicable to the purposes of whoever may make use of it." 
 This, in reality, is Dr. Smith's exchangeable value, De Verri had observed, (chapter 
 1 } that reproduction was nothing more than the reproduction of value, and that the value 
 of things constituted wealth. Galiani, as has been already noticed, had said, that labour 
 was the source of all value ; but Dr. Smith, nevertheless, made these views his own by 
 exhibiting, as we see, their connexion with all the other important phenomena, and in, 
 tieimmstrating' them even by their consequences. 
 
INTRODUCTION. XXXIX 
 
 all. He has furnished us, also, with the true method ot 
 detecting errors ; he has applied to political economy the 
 new mode of scientific investigation, namely, of not look- 
 ing for principles abstractedly, but by ascending from 
 facts the most constantly observed, to the general laws 
 which govern them. As every fact may be said to have 
 a particular cause, it is in the spirit of system to deter- 
 mine the cause -, it is in the spirit of analysis, to be soli- 
 citous to know why a particular cause has produced this 
 effect, in order to be satisfied that it could not have been 
 produced by any other cause. The work of Dr. Smith is 
 a succession of demonstrations, which has elevated many 
 propositions to the rank of indisputable principles, and 
 plunged a still greater number into that imaginary gulph. 
 into which extravagant hypotheses and vague opinions 
 for a certain period struggle, before being forever swal- 
 lowed up. 
 
 It has been said that Dr. Smith was under heavy obli- 
 gations to Stewart* an author whom he has not once 
 quoted, even for the purpose of refuting him. I cannot 
 perceive in what these obligations consist. In the con- 
 ception of his subject, Dr. Smith displays the elevation 
 and comprehensiveness of his views, whilst the researches 
 of Stewart exhibit but a narrow and insignificant scope. 
 Stewart has supported a system already maintained by 
 Colbert, adopted afterwards by all the French writers on 
 commerce, and steadily followed by most European 
 governments; a system which considers national wealth 1 
 as depending, not upon the sum total of its productions, 
 but upon the amount of its sales to foreign countries. 
 One of the most important portions of Dr. Smith's work 
 is devoted to the refutation of this theory. If he has not 
 particularly refuted Stewart, it is from the latter not being 
 considered by him as the father of his school, and from 
 having deemed it of more importance to overthrow an 
 opinion, then universally received, than to confute the 
 doctrines of an author, which in themselves contained 
 nothing peculiar. 
 
 The economists have also pretended, that Dr. Smith 
 
 *Sir James Stewart, author of a Treatise on Political Economy. 
 
x ] INTRODUCTION. 
 
 was under obligations to them. But to what do such prc 
 tensions amount ? A man of genius is indebted to every- 
 thing around him ; to the scattered lights which he has 
 concentrated, to the errors which he has overthrown, and 
 even to the enemies by whom he has been assailed ; inas- 
 much as they all contribute to the formation of his opin- 
 ions. But when out of these materials he afterwards em- 
 bodies enlarged views, useful to his contemporaries and 
 posterity, it rather behoves us to acknowledge the extent 
 of our own obligations, than to reproach him with what 
 he has been supplied by others. Moreover, Dr. Smith has 
 not been backward in acknowledging the advantages he 
 had derived frorri his intercourse with the most enlighten- 
 ed men in France, and from his intimate correspondence 
 with his friend and countryman Hume, whose essays on 
 political economy, as well as on various other subjects, 
 contain so many just views. 
 
 After having shown, as fully as so rapid a sketch will 
 permit, the improvement which the science of political 
 economy owes to Dr. Smith, it will not, perhaps, be use- 
 less to indicate, in as summary a manner, some of the 
 points on which he has erred, and others which he has 
 left to be elucidated. 
 
 To the labour of man alone he ascribes the power of 
 producing values. This is an error. A more exact ana- 
 lysis demonstrates, as will be seen in the course of this 
 work, that all values are derived from the operation of 
 labour, or rather from the industry of man, cxmibilLejlwith 
 the operation of those agents which nature and capital 
 furnish him. Dr. Smith did not, therefore, obtain a 
 thorough knowledge of the most important phenomenon 
 in production ; this has led him into some erroneous con- 
 5 elusions, such, for instance, as attributing a gigantic in- 
 fluence to the division of labour, or rather to the separa- 
 , tion of employments. This influence, however, is by no 
 means inappreciable or even inconsiderable; but the 
 greatest wonders of this description, are not so much 
 nwing to any peculiar property in human labour, as to the 
 usp we make of the powers of nature. His ignorance of 
 this principle precluded him from establishing the true 
 
INTRODUCTION. 
 
 Xli 
 
 theory of machinery in relation to the production of 
 wealth. 
 
 The phenomena of production being now better known 
 than they were in the time of Dr. Smith, have enabled 
 his successors to distinguish, and to assign the difference 
 found to exist, between a real and a relative rise in prices ;* 
 a difference which furnishes the solution of numerous 
 problems, otherwise wholly inexplicable. Such, for exam- 
 ple, as the following: Does a tax, or any other impost, by 
 enhancing the price of commodities, increase the amount of 
 wealth ?T The income of the producer arising from the cost 
 of production, why is not this income impaired by a diminu- 
 tion in the cost of production? Now it is the power of re- 
 solving these abstruse problems which, nevertheless, con- 
 stitutes the science of political economy 4 
 
 By the exclusive restriction of the term wealth to values 
 fixed and realized in material substances, Dr. Smith has 
 
 * See Chapter third, Book second. 
 
 t Dr. Smith has, in a satisfactory manner, established the difference between the real 
 and nominal prices of things, that is to say, between the quantity of real values whicli 
 must be given to obtain a commodity, and the name which is given to the sum of these 
 values. The difference here alluded to, arises from a more perfect analysis, in which 
 llie real price itself is decomposed. 
 
 \ It is not, for example, until after the manner in which production takes place is 
 thoroughly understood, that we can suy how far the circulation of money and commo- 
 dities has contributed towards it, and consequently what circulation is useful, and what 
 is not; otherwise, we should only talk nonsense, as is daily done, respecting the utility 
 of a quick circulation. My being obliged to furnish a chapter on this subject (Book I, 
 Chap. 16.) must be attributed to the inconsiderable advancement made in the science of 
 political economy, and to the consequent necessity of directing our attention to some 
 of its more simple applications. The same remark is applicable to the twentieth chap- 
 ter, in the some book, on the subject of temporary and permanent emigration, considtr- 
 ed in reference to national localth. Any person, however, well acquainted with the prin- 
 ciples of this science, would find no difficulty in arriving at the same conclusions. 
 
 The time is not distant when not only writers on finance, but on history and geogra- 
 phy, will be required to possess a knowledge of at least the fundamental principles of 
 political economy. A modern treatise on Universal Geography, (vol. 2, page 602,) a 
 work in other respects denoting extensive research and information, contains the follow 
 ing passage : " The number of inhabitants of a country is the basis of every good sya 
 tern of finance ; the more numerous is its population, the greater height will its com- 
 merce and manufactures attain ; and the extent of its military force be in proportion 
 to the amount of its population." Unfortunately, every one of these positions may be 
 erroneous. National revenue, necessarily consisting either of the income of the public 
 property, or of the contributions, in the shape of taxes, drawn from the incomes of in- 
 dividuals, docs not depend upon the number, but upnn the wealth, and above all, upon 
 the incomes of the people. Now, an indigent multitude has the fewer contributions to 
 yield, the more mouths it has to feed. It is not the numerical population of a state, but 
 the capital and genius of its inhabitants, that most conduce to the advancement of its 
 commerce ; these benefit population much more than they are benefited by it. Finally, 
 the number of troops a government can maintain depends still less upon the extent of 
 its population than upon its revenues ;/ and it has been already seen that revenue is uol 
 dependent upon population. 
 
 4* F 
 
jjjj INTRODUCTION. 
 
 narrowed the boundary of this science. He should, also, 
 have included under it* values which, although immaterial, 
 are not less real, such as natural or acquired talents. Of 
 two individuals equally destitute of fortune, the one in 
 possession of a particular talent is by no means so poor 
 as the other. Whoever has acquired a particular talent 
 at the expense of an annual sacrifice, enjoys an accumu- 
 lated capital; a description of wealth, notwithstanding its 
 immateriality, so little imaginary, that, in the shape of 
 professional services, it is daily exchanged for gold and 
 silver. 
 
 Dr. Smith, who with so much sagacity unfolds the man- 
 ner in which production takes place, and the peculiar cir- 
 cumstances accompanying it in agriculture and the arts, 
 on the subject of commercial production presents us with 
 only obscure and indistinct notions. He, accordingly, was 
 unable to point out with precision, the reason why, and 
 the extent to which, facilities of communication are con- 
 ducive to production. 
 
 He did not subject to a rigid analysis the different ope- 
 rations comprehended under the general name of industry, 
 or as he calls it, of labour, and, therefore, could not appre- 
 ciate the peculiar importance of each in the business of 
 production. 
 
 (His work does not furnish a satisfactory or well con- 
 nected account of the manner in which wealth is distri- 
 buted in society ; a branch of political economy, it may 
 be remarked, opening an almost new field for cultivation. 
 The too imperfect views of economical writers respecting 
 the production of wealth precluded them from forming 
 any accurate notions in relation to its distribution.* 
 
 Finally, although the phenomena of the consumption of 
 wealth are but the counterpart of its production, and 
 although Dr. Smith's doctrine leads to its correct exami- 
 nation, he did not himself develope it; which precluded 
 him from establishing numerous important truths. Thus, 
 by not characterizing the two different kinds of consump- 
 tion, namely, unproductive and reproductive, he does not 
 
 * Witness Turgofa Reflections sur la formation et la distribution ties richesses t in 
 wJiich he has introduced various views on both these subjects, cither entirely erroneous, 
 r very imnerfecL 
 
INTRODUCTION. x j^ 
 
 satisfactorily demonstrate, that the consumption of values 
 saved and accumulated in order to form capital, is as per- 
 fect as the consumption of values which are dissipated. 
 The better we become acquainted with political economy, 
 the more correctly shall we appreciate the importance of 
 the improvements this science has received from him, as 
 well as those he left to be accomplished.* 
 
 Such are the principal imperfections of the Inquiry into 
 the Nature and Causes of the Wealth of Nations, in rela- 
 tion to its fundamental doctrines. The plan of the work, 
 or, in other words, the manner in which these doctrines 
 are unfolded, is liable to no less weighty objections. 
 
 In many places the author is deficient in perspicuit} r , 
 and the work almost throughout is destitute of method. 
 To understand him thoroughly, it is necessary to accus- 
 tom one's self to collect and digest his views; a labour, 
 at least in respect to some passages, he has placed beyond 
 the reach of most readers; indeed, so much so, that per- 
 sons otherwise enlightened, professing both to comprehend 
 and admire his doctrines, have written on subjects he has 
 discussed, namely, on taxes and bank-notes as supple- 
 mentary to money, without having understood any part 
 of his theory on these points, which, nevertheless, forms 
 one of the most beautiful portions of his Inquiry. 
 
 His fundamental principles, too, are not established in 
 the chapters assigned to their development. Many of 
 them will be found scattered through the two excellent 
 refutations of the exclusive or mercantile system and the 
 system of the economists, but in no other part of the work. 
 The principles relating to the real and nominal prices of 
 things, are introduced into a dissertation on the value of 
 the precious metals during the course of the last four cen- 
 turies ; and the author's opinions on the subject of money 
 are contained in the chapter on commercial treaties. 
 
 Dr. Smith's long digressions, have, moreover, with great 
 propriety, been much censured. An historical account 
 of a particular law or institution as a collection of facts, 
 is in itself, doubtless, highly interesting ; but in a work 
 devoted to the support and illustration of general princi- 
 
 * Many other points of doctrine, besides those here noticed, have been either over- 
 looked, or but imperfectly analyzed by Dr. Smith. 
 
x ]j v INTRODUCTION. 
 
 pies, particular facts not exclusively applicable to these 
 nds, can only unnecessarily overload the attention. His 
 vetch of the progress of opulence in the different nations 
 f Europe after the fall of the Roman empire, is but a 
 lagnificent digression. The same remark is applicable 
 to the highly ingenious disquisition on public education, 
 replete as it is with erudition and the soundest philosophy, 
 at the same time that it abounds with valuable instruction. 
 
 Sometimes these dissertations have but a very remote 
 connexion with his subject. In treating of public expen- 
 ditures, he has gone into a very curious history of the 
 various modes in which war was carried on by different 
 nations at different epochs; in this manner accounting 
 for military successes which have had so decided an in- 
 fluence on the civilization of many parts of the earth. 
 These long digressions at times, also, are devoid of inter- 
 est to every other people but the English. Of this descrip- 
 tion is the long statement of the advantages Great Britain 
 would derive from the admission of all of her colonies into 
 the right of representation in parliament. 
 
 The excellence of a literary composition as much de- 
 pends upon what it does not, as upon what it does con- 
 tain. So many details, although in themselves useful, 
 unnecessarily encumber a work designed to unfold the 
 principles of political economy. Bacon made us sensible 
 of the emptiness of the Aristotelian philosophy ; Smith, 
 in like manner, caused us to perceive the fallaciousness 
 of all the previous systems of political economy ; but the 
 latter no more raised the superstructure of this science, 
 than the former created logic. To both, however, our 
 obligations are sufficiently great, for having deprived their 
 successors of the deplorable possibility of proceeding, for 
 any length of time, with success on an improper route.* 
 
 * Since the time of Dr. Smith, both in England and France, a variety of publications 
 on political economy have made their appearance ; some of considerable length, but sel- 
 dom containing anything worthy of preservation. The greater part of them are of a 
 controversial character, in which the principles of the science are merely laid down for 
 the purpose of maintaining a favourite hypothesis ; but from which, nevertheless, many 
 important facts, and even sound principles, when they coincide with the views of their 
 authors, nriy be collected. The " Essai sur les finances de la Grand-Bretagne" by 
 flenfz, and apology for Mr. Pitt's system of finance, is of this description; so also is 
 Thornton's Inquiry into the nature and effects of paper credit, written with a view to jus- 
 lify the suspension of cash payments by the bank of England ; as well as a great num. 
 bor of other works on the same subject, and in relation to the corn laws. 
 
INTRODUCTION. X J V 
 
 We are, however, not yet in possession of an establish- 
 ed text-book on the science of political economy, in which 
 the fruits ofan enlarged and accurate observation are re- 
 ferred to general principles, that can be admitted by every 
 reflecting mind ; a work in which these results are so 
 complete and well arranged as to afford to each other 
 mutual support, and that may everywhere, and at all 
 times, be studied with advantage. To prepare myself for 
 attempting so useful a task, I have thought it necessary 
 attentively to peruse what had been previously written on 
 the same subject, and afterwards to forget it ; to study 
 these authors, that I might profit by the experience of so 
 many competent inquirers who have preceded me ; to 
 endeavour to obliterate their impressions, not to be mis- 
 led by any system ; and at all times be enabled freely to 
 consult the nature and course of things, as actually exist- 
 ing in society. Having no particular hypothesis to sup-j; 
 port, I have been simply desirous of unfolding the mannei|j 
 in which wealth is produced, distributed, and consumed. 
 A knowledge of these facts could only be acquired by 
 observing them. It is the result of these observations, 
 within the reach of every inquirer, that are here given. 
 The correctness of the general conclusions I ha\ 7 e deduced 
 from them, every one can judge of. 
 
 It was but reasonable to expect from the lights of the 
 age, and from that method of philosophizing which has so 
 powerfully contributed to the advancement of other sci- 
 ences, that I might at all times be able to ascend to the 
 nature of things, and never lay down an abstract princi 
 pie that was not immediately applicable in practice ; so 
 that, always compared with well established facts, any 
 one could easily find its confirmation by at the same time 
 discovering its utility. 
 
 Nor is this all. Solid general principles, previously laid 
 down, must be noticed, and briefly but clearly proved , 
 those which had not been laid down must be established, 
 and the whole so combined, as to satisfy every one that 
 no material omission has taken place, nor any fundamental 
 point been overlooked. The science must be stript of 
 many false opinions; but this labour must be confined to 
 such errors as are generally received, and to authors of 
 
INTRODUCTION. 
 
 acknowledged reputation. For what injury can an ob- 
 scure writer or a discredited dogma effect ? The utmost 
 precision must be given to the phraseology we employ, so 
 as to prevent the same word from ever being understood 
 in two different senses ; and all problems be reduced to 
 their simplest elements, in order to facilitate the detection 
 of any errors, and above all, of our own. In fine, the doc- 
 trines of the science must be conveyed in such a popular* 
 form, that every man of sound understanding may be en- 
 abled to comprehend them in their whole scope of conse- 
 quences, and apply their principles to all the various cir- 
 cumstances of life. 
 
 The position maintained in this work, that the value of 
 things is the measure of wealth, has been especially 
 objected to. This, perhaps, has been my fault; 1 should 
 have taken care not to be misunderstood. The only sa- 
 tisfactory reply I can make to the objection, is to endea- 
 vour to give more perspicuity to this doctrine. I must, 
 therefore, apologize to the owners of the former editions, 
 for the numerous corrections I have made in the present 
 It became my duty in treating of a subject of such essen- 
 tial importance to the general welfare, to give it all the 
 perfection within my reach. 
 
 Since the publications of the former editions of this 
 work, various authors, some of whom enjoy a well merited 
 celebrity ,t have given to the world new treatises on polit- 
 ical economy. It is not my province, either to pronounce 
 upon the general character of these productions, or to de- 
 cide whether they do, or do not, contain a full, clear, and 
 well digested exposition of the fundamental principles of 
 this science. This much I can with sincerity say, that 
 many of these works contain truths and illustrations well 
 calculated greatly to advance the science, and from the 
 
 * By a popular treatise, I do not mean a treatise for the use of persons who neither 
 know how to read, nor to make any use of it. By this expression, I mean a treatise not 
 exclusively addressed to professional or scientific cultivators of this particular branch of 
 knowledge, but one calculated to be read by every intelligent and useful member of so 
 icty. 
 
 f Ricardo, Sismondi, and others. The fair sex begin also to perceive that they had 
 ione themselves injustice, in supposing that they were unequal to a branch of study 
 destined to exercise so benign an influence over domestic happiness. In England, a 
 lady (Mrs. Marcel) has published a work, Conversations on Political Economy" since 
 !ranslated into French, in which the soundest principles are explained in a familiar and 
 style. 
 
INTRODUCTION. x ] v 'j 
 
 perusal of which I have derived important benefit. But, 
 in common with every other inquirer, I am entitled to re- 
 mark how far some of their principles, which at first sight 
 appear to be plausible, are contradicted by a more cau- 
 tious and rigid induction of facts. 
 
 It is, perhaps, a well founded /objection to Mr. Ricarclo, 
 that he sometimes reasons upon abstract principles to 
 which he gives too great a generalization. When once 
 fixed in an hypothesis which cannot be assailed, from its 
 being founded upon observations not called in question, 
 he pushes his reasonings to their remotest consequences, 
 without comparing their results with those of actual expe- 
 rience. In this respect resembling a philosophical me- 
 chanician, who, from undoubted proofs drawn from the 
 nature of the lever, would demonstrate the impossibility 
 of the vaults daily executed by dancers on the stage. And 
 how does this happen ? The reasoning proceeds in a 
 straight line ; but a vital force, often unperceived, and 
 always inappreciable, makes the facts differ very far from 
 our calculation. From that instant nothing in the author's 
 work is represented as it really occurs in nature. It is 
 not sufficient to set out from facts ; they must be brought 
 together, steadily pursued, and the consequences drawn 
 from them constantly compared with the effects observed. 
 The science of political economy, to be of practical utility, 
 should not teach, what must necessarily take place,* if even 
 deduced by legitimate reasoning, and from undoubted pre- 
 mises ; it must show, in what manner that which in reality 
 does take place, is the consequence of other facts equally 
 certain. It must discover the chain which binds them 
 together, and always, from observation, establish the ex- 
 istence of the two links at their point of connexion. 
 
 With respect to the wild or antiquated theories, so 
 often produced, or reproduced by authors who possess 
 neither sufficiently extensive nor well digested information 
 to entitle them to form a sound judgment, the most effec- 
 tual method of refuting them is to display the true doc- 
 trines of the science with still greater clearness, and to 
 leave to time the care of disseminating them. We, other- 
 wise, should be involved in interminable controversies, 
 affording no instruction to the enlightened part of society. 
 
INTRODUCTION. 
 
 and inducing the uninformed to believe that nothing is 
 susceptible of proof, inasmuch as everything is made the 
 subject of argument and disputation. 
 
 Disputants, infected with every kind of prejudice, have r 
 with a sort of doctorial confidence, remarked, that both 
 nations and individuals sufficiently well understand how 
 to improve their fortunes without any knowledge of the 
 ivature of wealth, and that this knowledge is in itself a 
 purely speculative and useless inquiry. This is but saying 
 that we know perfectly well how to live and breathe, with- 
 out any knowledge of anatomy and physiology, and that 
 these sciences are, therefore, superfluous. Such a propo- 
 sition would not be tenable ; but what should we say if it 
 were maintained, and by a class of doctors, too, who, 
 whilst decrying the science of medicine, should themselves 
 subject you to a treatment founded upon antiquated em- 
 piricism and the most absurd prejudices ; who, rejecting 
 all regular and systematic instruction, in spite of your 
 remonstrances, should perform upon your own body the 
 most bloody experiments; and whose orders should be 
 enforced with the weight and solemnity of laws, and, 
 finally, carried into execution by a host of clerks and 
 soldiers ? 
 
 In support of antiquated errors, it has also been said, 
 " that there surely must be some foundations for opinions, 
 so generally embraced by all mankind ; and that we our- 
 selves ought rather to call in question the observations 
 and reasonings which overturn what has been hitherto so 
 uniformly maintained and acquiesced in by so many indi- 
 viduals, distinguished alike by their wisdom and benevo- 
 lence." Such reasoning, it must be acknowledged, should 
 make a profound impression on our minds, and even cast 
 some doubts on the most incontrovertible positions, had 
 we not alternately seen the falsest hypotheses now univer- 
 sally recognized as such, everywhere received and taught 
 during a long succession of ages. It is yet but a very- 
 little time, since the rudest as well as the most refined na- 
 tions, and all mankind, from the unlettered peasant to the 
 enlightened philosopher, believed in the existence of but 
 four material elements. No human being had even dreamt 
 of disputing the doctrine, which is nevertheless false; in- 
 
INTRODUCTION. x |j x 
 
 somuch that a tyro in natural philosophy, who should at 
 present consider earth, air, fire, and water, as distinct ele- 
 ments, would be disgraced.* How many other opinions, 
 as universally prevailing and as much 'respected, will in 
 like manner pass away. There is something epidemical 
 in the opinions of mankind ; they are subject to be attack- 
 ed by moral maladies which infect the whole species. 
 Periods at length arrive when, like the plague, the disease 
 wears itself out and loses all its malignity ; but it still has 
 required time. The entrails of the victims were consulted 
 at Rome three hundred years after Cicero had remarked, 
 f hat the two augurs could no longer examine them without 
 laughter.] 
 
 The contemplation of this excessive fluctuation of 
 opinions must not, however, inspire us with a belief that 
 nothing is to be admitted as certain, and thus induce us 
 to yield up to universal scepticism. Facts repeatedly ob- 
 served by individuals in a situation to examine them un- 
 der all their aspects, when once well established and accu- 
 rately described, can no longer be considered as mere 
 opinions, but must be received as absolute truths. When 
 it was demonstrated that all bodies are expanded by heat, 
 this truth could no longer be called in question. Moral 
 and political science present truths equally indisputable* 
 but of more difficult solution. In these sciences, every 
 individual considers himself not only as being entitled to 
 make discoveries, but as being also authorized to pro- 
 nounce upon the discoveries of others; yet how few per- 
 sons acquire competent knowledge, and views sufficiently 
 enlarged, to become assured that the subject upon which 
 they thus venture to pronounce judgment is thoroughly 
 understood by them in all its bearings. In society, one is 
 astonished to find the most abstruse questions as quickly 
 decided as if every circumstance, which, in any way, 
 could and ought to affect the decision, were known. What. 
 
 O 
 
 * Every branch of knowledge, even the most important, is but of very recent origin 
 The celebrated writer on agriculture, Arthur Young,/ after having bestowed uncommon 
 pains in the collection of all the observations that had been made in relation to soils, one 
 of the most important parts of this science, and which teaches us by what succession 
 of crops the earth may be, at all times, and with the greatest success, cultivated, re* 
 marked, that he could not find that anything had been written on this subject, prior Ur 
 the year 17G8. Other arts, not less essential to the happiness and prosperity of society 
 are still also in their infancy 
 
 5 G 
 
I INTRODUCTION. 
 
 would be said of a party passing rapidly in front of a 
 large castle, that should undertake to give an account of 
 every thing that is going on within ? 
 
 Certain individuals, whose minds have never caught a 
 j glimpse of a more improved state of society, boldly affirm 
 that it could not exist ; they acquiesce in established evils, 
 and console themselves for their existence by remarking, 
 that they could not possibly be otherwise; in this respect 
 reminding us of that emperor of Japan who thought he 
 would have suffocated himself with laughter, upon being 
 told that the Dutch had no king. The Iroquois were at a 
 loss to conceive how wars could be carried on with suc- 
 cess, if prisoners were not to be burnt. 
 
 Although, to all appearance, many European nations 
 may be in a flourishing condition, and some of them an- 
 nually expend from one to two hundred millions of dollars 
 solely for the support of the government, it must not 
 thence be inferred that their situation leaves nothing to be 
 desired. A rich Sybarite, residing according to his incli- 
 nation, either at his castle in the country, or in his palace 
 in the metropolis, in both, at an enormous expense, par- 
 taking of every luxury that sensuality can devise, trans- 
 porting himself with the utmost rapidity and comfort in 
 whatever direction new pleasures invite him* engrossing 
 the industry and talents of a multitude of retainers and 
 servants, and killing a dozen horses to gratify a whim, 
 may be of opinion that things go on sufficiently well, and 
 that the science of political economy is not susceptible of 
 any further improvement. But in countries said to be in 
 a flourishing condition, how many human beings can be 
 enumerated, in a situation to partake of such enjoyments ? 
 One out of a hundred thousand at most ; and out of a 
 thousand, perhaps not one who may be permitted to enjoy 
 what is called a comfortable independence. The haggard- 
 ness of poverty is everywhere seen contrasted with the 
 sleekness of wealth, the extorted labour of some compen- 
 sating for the idleness of others, wretched hovels by the 
 side of stately colonnades, the rags of indigence blended 
 with the ensigns of opulence; in a word, the most useless 
 profusion in the midst of the most urgent wants. 
 
INTRODUCTION. jj 
 
 Persons, who under a vicious order of things have 
 obtained a competent share of social enjoyments, are 
 never in want of arguments to justify to the eye of reason 
 such a state of society ; for what may not admit of 
 apology when exhibited in but one point of view ? If the 
 same individuals were to-morrow required to cast anew 
 the lots assigning them a place in society, they would fine* 
 many things to object to. 
 
 Accordingly, opinions in political economy are not only 
 maintained by vanity, the most universal of human in- 
 firmities, but by self-interest, unquestionably not less so ; 
 and which, without our knowledge, and in spite of our- 
 selves, exercises a powerful influence over our mode of 
 thinking. Hence the sharp and sour intolerance by which 
 truth has been so often alarmed and obliged to retire ; or 
 which, when she is armed with courage, encompasses her 
 with disgrace, and sometimes with persecution. Know- 
 ledge is at present so very generally diffused, that a phi- 
 losopher may assert, without the risk of contradiction, 
 that the laws of nature are the same in a world and in 
 an atom ; but a statesman who should venture to affirm, 
 that there is a perfect analogy between the finances of a 
 nation and those of an individual, and that the same prin- 
 ciples of economy should regulate the management of the 
 affairs of both, would have to;encounter the clamours of 
 various classes of society, and to refute ten or a dozen 
 different systems. 
 
 Nor is this all. Writers are found who possess the 
 lamentable facility of composing articles for journals, 
 pamphlets, and even whole volumes, upon subjects, which, 
 according to their own confession, they do not understand. 
 And what is the consequence ? The science is involved in 
 the clouds of their own minds, and that is rendered obscure 
 which was becoming clear. Such is the indifference of the 
 public, that they rather prefer trusting to assertions than 
 be at the trouble of investigating them. Sometimes, more- 
 over, a display of figures and calculations imposes upon 
 them ; as if numerical calculations alone could prove 
 any thing, and as if any rule could be laid down, front 
 which an inference could be drawn without the aid of 
 sound reasoning. 
 
Ju INTRODUCTION. 
 
 These are among the causes which have retarded the 
 progress of political economy. 
 
 Everything, however, announces that this beautiful, and 
 above all, useful science, is spreading itself with increasing 
 rapidity. Since it has been perceived that it does not rest 
 upon hypothesis, but is founded upon observation and 
 experience, its importance has been felt. It is now taught 
 wherever knowledge is cherished. In the universities of 
 Germany, of Scotland, of Spain, of Italy, and of the north 
 of Europe, professorships of political economy are already 
 established. Hereafter this science will be taught in them, 
 with all the advantages of a regular and systematic study. 
 Whilst the university of Oxford proceeds in her old and 
 beaten track,* within a few years I that of Cambridge has 
 established a chair for the purpose of imparting instruc- 
 tion in this new science. Courses of lectures are delivered 
 in Geneva and various other places ; and the merchants 
 of Barcelona have, at their own expense, founded a pro- 
 fessorship on political economy. It is now considered as 
 forming an essential part of the education of princes ; and 
 those who are called to that high distinction ought to 
 blush at being ignorant of its principles. The emperor 
 of Russia has desired his brothers, the grand dukes Nicho- 
 last and Michael, to pursue a course of study on this sub- 
 ject under the direction of M. Storch. Finally, the 
 government of France, has done itself lasting honour by 
 establishing in this kingdom, under the sanction of public 
 authority, the first professorship of political economy. 
 
 When the youths who are now students shall be scat- 
 tered through all the various classes of society, and ele- 
 vated to the principal posts under government, public 
 affairs will be conducted in a much better manner than 
 they hitherto have been. Princes as well as people, be- 
 coming more enlightened as to their true interests, will 
 perceive that these interests are not at variance with each 
 
 * In the year 1826, a professorship of political economy was founded at the university 
 of Oxford, and a highly able and instructive course of lectures has since been delivered 
 before that university, by Nassau William Senior, A. M., the first professor of political 
 economy. We have rarely read a more masterly and entertaining performance than 
 I he professor's discussion of the mercantile theory of wealth, which occupies three of 
 n.8 lectures. AMERICAN EDITOK. 
 
 r The present Emperor Nicholas. 
 
INTRODUCTION. jj,, 
 
 other; which on the one side will naturally induce less 
 oppression, and on the other heget more confidence. 
 
 At present, authors who venture to write upon politics, 
 history, and d fortiori upon finance, commerce, and the 
 arts, without any previous knowledge of the principles of 
 political economy, only produce works of temporary suc- 
 cess, that do not succeed in fixing public attention. 
 
 But what has chiefly contributed to the advancement 
 of political economy, is the grave posture of affairs in the 
 civilized world during the last thirty years. The expenses 
 of governments have risen to a scandalous height; the 
 appeals which they have been obliged to make to their 
 subjects, in order to relieve their exigencies, have dis- 
 closed to them their own importance. A concurrence of 
 public sentiment, or at least the semblance of it, has been 
 almost everywhere called for, if not brought about. The 
 enormous contributions drawn from the people, under pre- 
 texts more or less specious, not even having been found 
 sufficient, recourse has been had to loans ; and to obtain 
 credit, it became necessary for governments to disclose 
 their wants as well as their resources. Accordingly, the 
 publicity of the national accounts, and the necessity of 
 vindicating to the world the acts of the administration, 
 have in the science of politics produced a moral revolu- 
 tion, whose course can no longer be impeded. 
 
 The disorders and calamities incident to the same pe- 
 riod, have also produced some important experiments. 
 The abuse of paper money, commercial and other restric- 
 tions, have made us feel the ultimate effects of almost all 
 excesses. And the sudden overthrow of the most im- 
 posing bulwarks of society, the gigantic invasions, the 
 destruction of old governments and the creation of new, 
 the formation of rising empires in another hemisphere, 
 the colonies that have become independent, the general 
 impulse given to the human mind, so favourable to the 
 development of all its faculties, and the great expectations 
 and the great mistakes, have all undoubtedly very much 
 enlarged our views ; at first operating upon men of calm 
 observation and reflection, and subsequently upon al 
 mankind. 
 
 5* 
 
,i v INTRODUCTION. 
 
 It is to the facility of tracing the links in the chain of 
 causes and effects that we must ascribe the great improve- 
 ment in the kindred branches of moral and politica 
 science; and hence it is, when once the manner in which 
 political and economical facts bear upon each other is wel. 
 understood, that we are enabled to decide what course of 
 conduct will be most advantageous in any given situation. 
 Thus, for example, to get rid of mendicity, that will not be 
 done which only tends to multiply paupers; and, in ordei 
 to procure abundance, the only measures calculated to 
 prevent it will not be adopted. The certain road to na- 
 tional prosperity and happiness being known, it can and 
 will be chosen. 
 
 For a long time it was thought that the science of po- 
 litical economy could only possibly be useful to the very 
 limited number of persons engaged in the administration 
 of public affairs. It is undoubtedly of importance that 
 men in public life should be more enlightened than others; 
 in private life, the mistakes of individuals can never ruin 
 but a small number of families, whilst those of princes 
 and ministers spread desolation over a whole country. 
 But, is it possible for princes and ministers to be enlight- 
 ened, when private individuals are not so ? This is a 
 question that merits consideration. It is in the middling 
 classes <?f society, equally secure from the intoxication 
 of power, and the compulsory labour of indigence, in 
 which are found moderate fortunes, leisure united with 
 habits of industry, the free intercourse of friendship, a 
 taste for literature, and the ability to travel, that know- 
 ledge originates, and is disseminated amongst the highest 
 ! and lowest orders of the people. For these latter classes, 
 not having the leisure necessary for meditation, only adopt 
 truths when presented to them in the form of axioms, re- 
 quiring no further demonstration. 
 
 Arid although a monarch arid his principal ministers 
 should be well acquainted with the principles upon which 
 national prosperity is founded, of what advantage would 
 this knowledge be to them, if throughout all the different 
 departments of administration, their measures were not 
 supported by men capable of comprehending and enforcing 
 -hem ? The prosperity of a city or province is sometimes 
 
INTRODUCTION. 
 
 dependent upon the official acts of a single individual ; 
 and the head of a subordinate department of government', 
 by provoking an important decision, often exercises an 
 influence even superior to that of the legislator himself. 
 In countries blessed with a representative form of govern- 
 ment, each citizen is under a much greater obligation to 
 make himself acquainted with the principles of political 
 economy ; for there every man is called upon to deliberate 
 upon public affairs. 
 
 Finally, in supposing that every person in any way con- 
 nected with government, from the highest to the lowest, 
 could be well acquainted with these principles, without 
 the nation at large being so, which is wholly improbable, 
 what resistance would not the execution of their wisest 
 plans experience? What obstacles would they not en- 
 counter in the prejudices of those even who should most 
 favour their measures ? 
 
 A nation, in order to enjoy the advantages of a good 
 system of political economy, must not only possess states- 
 men capable of adopting the best plans, but the popula- 
 tion must be in a situation to admit of their application^ 
 
 It is also the way of avoiding doubts and perpetual \ 
 changes of principles, which prevent our profiting even 
 from whatever may be good in a bad system. & steady 
 and consistent policy is an essential element of national 
 prosperity ; thus England has become more opulent and 
 powerful than would seem to comport with her territorial 
 extent, by an uniform and steadfast adherence to a system, 
 even in many respects objectionable to her, of monopo- 
 lizing the maritime commerce of other nations. But to 
 follow for any length of time the same route, it is neces- 
 sary to be able to choose one, not altogether bad ^unfore- 
 seen and insurmountable difficulties would otherwise have 
 
 * I here suppose the higher orders of society to be actuated by a sincere desire to pro 
 mote the public good. When this feeling, however, does not exist, when the government 
 is faithless and corrupt, it is of still greater importance that the people should become 
 acquainted with the real state of things, and comprehend their true interests. Other 
 wise, they suffer without knowing to what causes their distresses ought to be attributed , 
 or indeed, by attributing them to erroneous causes, the views of the public are distracted 
 their efforts disunited, and individuals, thus deprived of general support, fail in resolu 
 tion, and despotism is strengthened ; or what is still worse, where the people are s< 
 badly governed as to become desperate, they listen to pernicious counsels, and exehung* 
 a vicious order of things for one still worse. 
 
to INTRODUCTION. 
 
 to be encountered, which would oblige us to change our 
 course, without even the reproach of versatility. 
 
 It is,iperhaps, to this cause we must attribute the evils 
 which, for two centuries, have tormented; France ; a pe- 
 riod during which she was within reach of that state of 
 high prosperity she was invited to by the fertility of her 
 soil, her geographical position, and the genius of her in- 
 habitants. With no fixed opinions in relation to the 
 causes of public prosperity, the nation, like a ship without 
 chart or compass, was driven about by the caprice of the 
 winds and the folly of the pilot, alike ignorant of the place 
 of her departure or destination.* A consistent policy in 
 France would have extended its influence over many suc- 
 cessive administrations; and the vessel of the state would 
 at least not have been in danger of being wrecked, or ex- 
 posed to the awkward manoeuvres by which she has so 
 \ much suffered. 
 
 Versatility is attended with such ruinous consequences, 
 that it is impossible to pass even from a bad to a good 
 system without serious inconvenience. The exclusive and 
 restrictive system is without doubt vastly injurious to the 
 development of industry, and to the progress of national 
 wealth ; nevertheless, the establishments which this policy 
 has created could not be suddenly suppressed, without 
 causing great distress/!" ^A more favourable state of things 
 can only be brought about, without any inconvenience, by 
 the gradual adoption of measures introduced with infinite 
 skill and care. A traveller whose limbs have been frozen 
 in traversing the Arctic regions, can only be preserved 
 from the dangers of a too sudden cure, and restored to 
 entire health, by the most cautious and imperceptible 
 remedies. 
 
 The soundest principles are not at all times applicable. 
 The essential object is to know them, and then such as 
 are applicable or desirable can be adopted. There can 
 
 *In how many instances have not great pains been taken, and considerable capita! 
 rxpended, to increase the evils mankind have been desirous of shunning ! How many 
 regulations are just so far carried into execution as to produce all the injury restrictions 
 lossibly can effect, and, at the same time, just as far violated as to retain all the incon- 
 leniences arising from their infringement ! 
 
 'This arises from our not being able, without serious losses, to displace the capita* 
 sod talents, which, owing- to an erroneous system, have received a faulty direction 
 
INTRODUCTION. l v jj 
 
 be no doubt that a new community, which in every in- 
 stance should consult them, would rapidly reach the high- 
 est pitch of opulence ; but every nation may, nevertheless, 
 in many respects violate them, and yet attain a satisfac- 
 tory state of prosperity. The powerful action of the vital 
 principle causes the human body to grow and thrive in 
 spite of the accidents and excesses of youth, 'or of the 
 wounds which have been inflicted on it. Absolute perfec- 
 tion, beyond which all is evil, and produces only evil, is 
 nowhere found ; evil is everywhere mixed with good. 
 When the former preponderates, society declines ; when 
 the latter, it advances with more or less rapidity in the 
 road of prosperity. Nothing, therefore, ought to discou- 
 rage our efforts towards the acquisition and dissemination 
 of sound principles. The least step taken towards the 
 attainment of this knowledge is immediately productive 
 of some good, and ultimately will yield the happiest fruits, 
 If, for the interest of the state, it is important that indi- 
 viduals should know what are the true principles of politi- 
 cal economy, who will venture to maintain that the same 
 knowledge will be useless to them in the management of 
 their own private concerns? That money is readily 
 earned without any knowledge of the nature or origin 
 of wealth, I admit. For that purpose, a very simple cal- 
 culation, within the reach of the rudest peasant, is all that 
 is necessary : such an article will, including every expense, 
 cost me so much ; I shall sell it for 50 much, and, therefore, 
 shall gain so much. Nevertheless, accurate ideas respect- 
 ing the nature and growth of wealth, unquestionably 
 afford us many advantages in forming a sound judgment 
 of enterprises in which we are interested, either as prin- 
 cipals or as parties. They enable us to foresee what these 
 enterprises will require, and what will be their results; to 
 devise the means of their success, and to establish our 
 exclusive claims to them ; to select the most secure invest- 
 ments, from anticipating the effects of loans and other 
 public measures ; to cultivate the earth to advantage, 
 from accurately adjusting actual advances with probable 
 returns; to become acquainted with the general want? 
 of society, and thus be enabled to make choice of a pro 
 
viii INTRODUCTION. 
 
 Iession ; and to discern the symptoms of national pros- 
 perity or decline. 
 
 The opinion that the study of the science of political 
 economy is calculated to be useful to statesmen only, fal- 
 lacious as it is, has been attended with other disadvan- 
 tages. Almost all the authors on this subject, until the 
 time of Dr. Adam Smith, had imagined that their/principal 
 object was to enlighten the public authorities ; and as they 
 were far from agreeing among themselves, inasmuch as 
 the facts, and their connexion and consequences, were but 
 imperfectly known to them, and entirely overlooked by 
 the multitude, it is by no means surprising that they should 
 have been regarded as visionary dreamers in relation 
 to the public good. Hence the contempt which men in 
 power always affect towards everything like first prin- 
 ciples. 
 
 But since the rigorous method of philosophizing, which 
 in every other branch of knowledge leads to truth, has 
 been applied to the investigation of facts, and to the rea- 
 sonings founded on them, and the science of political 
 economy jhas been thus confined to a simple exposition of 
 whatever takes place in relation to wealth, it no longer 
 attempts to offer counsel to public authorities. Should 
 they, however, be desirous of ascertaining the good or 
 evil consequences likely to result from any favourite pro- 
 ject, they may consult this science, exactly as they* would 
 consult hydraulics upon the construction of a pump or 
 sluice, All that can be required froia political economy 
 is to furnish governments with a correct representation 
 of the nature of things, and the general laws necessarily 
 resulting from it. Perhaps, until such views be more gene- 
 rally diffused, it may also be required, to point out to them 
 some of the applications of its principles. Should these 
 be despised or neglected, the governments themselves, as 
 well as the people, will be the sufferers. The husbandman 
 who sows tares can never expect to reap wheat. 
 ' Certainly, if political economy discloses the sources of 
 wealth, points out the means of rendering it more abun- 
 dant, and teaches the art of daily obtaining a still greater 
 amount without ever exhausting it; if it demonstrates, 
 that the population of a country may, at the same time, 
 
INTRODUCTION. jj x 
 
 be more numerous and better supplied with the necessaries 
 of life ; if it satisfactorily proves that the interest of the i< 
 rich and poor, and of different nations, are not opposed l 
 to each other, and that all rivalships are mere folly ; and 
 if from all these demonstrations it necessarily results, that 
 u multitude of evils supposed to be without remedy, may 
 not only be reckoned curable, but even easy to cure, and that 
 we need not suffer from them any longer than we are will- 
 ing so to do ; it must be acknowledged that there are 
 few studies of greater importance, or more deserving the 
 attention of an elevated and benevolent mind. 
 
 Time is the great teacher, and nothing can supply its 
 operation. It alone can fully demonstrate the advantages 
 to be derived from a knowledge of political economy in 
 the general principles of legislation and government. On 
 the one hand, the custom which condemns so many men 
 of sense, at the same time that they admit the principles 
 of this science, to speak and act as if they were wholly 
 ignorant of them,* and on the other, the resistance, which 
 individual as well as general interests, imperfectly under- 
 stood, oppose to many of these principles, exhibit nothing 
 that ought either to surprise or alarm individuals animated 
 with a desire of promoting the general welfare. The phi- 
 losophy of Newton, which, during a period of fifty years 
 was unanimously rejected in France, is now taught in all 
 its schools. Ultimately it will be perceived, that there 
 are studies of still greater importance than this, if esti- 
 mated by their influence on the happiness and prosperity 
 of mankind. 
 
 Still how unenlightened and ignorant are the very na- 
 
 * "They would wish, so to express myself, that I might be able to demonstrate that 
 my proofs are conclusive, and that they are not wrong in submitting to them. The 
 soundness of my reasoning has produced a momentary conviction ; but they afterwards 
 feel the habitual influence of their former opinions return with undiminished authority, 
 although without any adequate cause, as in the case of the apparent increase in the 
 diameter of the moon at the horizon. They would wisli to be freed by me from these 
 troublesome relapses, of whose delusiveness they are sensible, but which nevertheless 
 importune them. In a word, they are desirous that I should be enabled to effect by 
 reason what time alone can accomplish ; which is impossible. Every cause has an 
 effect peculiar to itself. Reason may convince, opinions carry us along, and illusions 
 perplex us; but time alone, and the frequent repetition of the same acts, can produce 
 that state of calmness and ease which we call habit. Hence it is, that all new opinions 
 are such a length of time in spreading themselves. If an innovator has ever had im- 
 mediate success, it is only from having discovered and promulgated opinions alreadr 
 floating in every mind." DESTUTT-TRACY, Logique, chap. 8. 
 
I* INTRODUCTION. 
 
 tions we term civilized ! Survey entire provinces of proud 
 Europe ; interrogate a hundred, a thousand, or even ten 
 thousand individuals, and of this whole number, you will 
 hardly, perhaps, find two embued with the slightest tincture 
 of the improved science of which the present age so much 
 boasts. This general ignorance of recondite truths is by 
 no means so remarkable as an utter unacquaintance with 
 the simplest rudiments of knowledge applicable to the 
 situation and circumstances of every one. How rare, also, 
 are the qualifications necessary for one's own instruction, 
 and how few persons are solely capable of observing what 
 daily happens, arid of questioning whatever they do not 
 understand ! 
 
 The highest branches of knowledge are then very far 
 from having yielded to society all the advantages to be 
 expected from them, and without which they would be 
 mere curious speculations. Perhaps their perfect appli- 
 cation is reserved for the nineteenth century. In moral 
 as well as in physical science, inquirers of superior minds 
 will appear, who, after having extended their theoretical 
 views, will disclose methods of placing important truths 
 within the reach of the humblest capacities. In the ordi 
 nary occurrences of life, instead of then being guided by 
 the false lights of a transcendental philosophy, mankind 
 will be governed by the maxims of common sense. Opin- 
 ions will not rest on gratuitous assumptions, but be the 
 result of an accurate observation of the nature of things. 
 Thus, habitually and naturally ascending to the source of 
 all truth, we shall not suffer ourselves to be imposed upon 
 by empty sounds, or submit to the guidance of erroneous 
 impressions. Corruption, deprived of the weapons of em- 
 piricism, will lose her principal strength, and no longer be 
 able to obtain triumphs, calamitous to honest men, and 
 disastrous to nations. 
 
BOOK I. 
 
 OF THE PRODUCTION OF WEALTH. 
 
 CHAPTER I. 
 
 OF WHAT IS TO BE UNDERSTOOD BY THE TERM, PRODUCTION. 
 
 IF we take the pains to inquire what that is, which mankind in a 
 social state of existence denominate wealth, we shall find theMerm 
 employed ; to designate an indefinite quantity of objects bearing 
 inherent value, as of land, of metal, of coin," of grain, of stuffs, of 
 commodities of every description. When they further extend its 
 signification to landed securities, bills, notes of hand, and the like, it 
 is evidently because they contain obligations to deliver things pos- 
 sessed of inherent value. j In point of fact, wealth can only exist 
 where there are things possessed of real and intrinsic value. 
 
 Wealth is proportionate to the quantum of that value ; great, when 
 the aggregate of component value is great ; small, when that aggre- 
 gate is small. 
 
 The value of a specific article is always vague and arbitrary, so 
 long as it remains unacknowledged. Its owner is not a jot the richer, 
 by setting a higher ratio upon it in his own estimation. But the 
 moment that other persons are willing, for the purpose of obtaining 
 it, to give in exchange a certain quantity of other articles, likewise 
 bearing value, the one may then be said to be worth, or to be of 
 equal value with, the other. 
 
 The quantity of money, which is readily parted with to obtain a 
 thing, is called its price. Current price, at a given time and place, 
 is that price which the owner is sure of obtaining for a thing, if he 
 is inclined to part with it.* 
 
 The knowledge of the real nature of wealth, thus defined, of the 
 difficulties that must be surmounted in its attainment, of the course 
 and order of its distribution amongst the members of society, of the 
 
 * The numerous and difficult points arising out of the confusion ofpositiv* and 
 relative value are discussed in different parts of this work; particularly in the 
 leading- chapters of Book II. Not to perplex the attention of the reader, I con- 
 fine myself here to so much as is absolutely necessary to comprehend '-he phe 
 nomenon of the production of wealth. 
 6 
 
02 ON PRODUCTION. BOOK I. 
 
 uses to which it may be applied, and, further, .of the consequences 
 resulting respectively from these several circumstances, constitutes 
 that branch of science now entitled Political Economy. 
 
 The value that mankind attach to objects originates in the use it 
 can make of them. Some afford sustenance ; others serve for cloth- 
 ing; some defend them from the inclemencies of the season, as 
 houses ; others gratify their taste, or, at all events, their vanity, both 
 of which are species of wants: of this class are all mere ornaments 
 and decorations. It is universally true, that, when men attribute 
 value to any thing, it is in consideration of its useful properties ; what 
 \ is good for nothing they set no price upon.* To_thisjnherent fitness 
 'or capability of certain things to satisfy the various wants of man- 
 kind, I shall take leave to affix the name of utility. And I will go 
 on to say, that, to create objects which have any kind of utility, is to 
 Create wealth; for the utility of things is the ground-work of their 
 lvalue, and their value constitutes w r ealth. 
 
 S~ Objects, however, cannot be created by human means ; nor is the 
 I mass of matter, of which this globe consists, capable of increase or 
 Lliminution. All that man can do is, to re-produce existing materials 
 under another form, which may give them an utility they did not 
 oefore possess, or merely enlarge one they may have before present- 
 ed. So that, in fact, there is a creation, not of matter, but of utility : 
 and this I call production of wealth. 
 
 Ln this sense, then, the word production must be understood in 
 
 political economy, and throughout the whole course of the present 
 'work. Productionisthe creation, not of matter, but of ..utility. It 
 ';is not to be esturjaleTTby the length, the bulk, or the weight of the 
 iprodu^t, but by the utility it presents. 
 
 Although price is the measure of the value of things, and their 
 revalue the measure of their utility, it would be absurd to draw the 
 inference, that,, by forcibly raising their price, their utility can be 
 I augmented. Exchangeable value, or price, is an index of the recog- 
 nised utility of a thing, so long only as human dealings are exempt 
 from every influence but that of the identical utility : in like manner 
 as a barometer denotes the weight of the atmosphere, only while the 
 mercury is submitted to the exclusive action of atmospheric gravity. 
 
 In fact, when one man sells any product to another, he sells him 
 the utility vested in that product ; the buyer buys it only for the sake 
 of its utility, of the use he can make of it. IF, by any cause what- 
 ever, the buyer is obliged to pay more than the value* to himself ot 
 
 * It would be out of place here to examine, whether or no the value mankind 
 nttajh to a thing be always proportionate to its actual utility. The accuracy of 
 ihe estimate must depend upon the comparative judgment, intelligence, habits, 
 and prejudices of those who make it. True morality, and the clear perception 
 of their real interests, lead mankind to the just appreciation of benefits. Politi- 
 cal economy takes- this appreciation as it finds it as one of the data of its rea- 
 sonings; leaving to the moralist and the practical man, the several duties of 
 enlightening and of guiding their fellow-creatures, as well in this, as in other 
 'Kirticulars of human conduct. 
 
CHAP. I. ON PRODUCTION. 
 
 63 
 
 that utility, he pays for value that has no existence, and consequent 
 ly which he does not receive.* 
 
 This is precisely the case, when authority grants to a particular 
 class of merchants the exclusive privilege of carrying on a certain 
 branch of trade, the India trade for instance; the price of Indian 
 imports is thereby raised, without any accession to their utility pi- 
 intrinsic value. This excess of price is nothing more or less than so 
 much money transferred from the pockets of the consumers into 
 those of the privileged traders, whereby the latter are enriched ex- 
 actly as much as the former are unnecessarily impoverished. In 
 like manner, when a government imposes on wine a tax, which 
 raises to 15 cents the bottle what would otherwise be sold for 10 
 cents, what does it else, but transfer 5 cents per bottle from the hands 
 of the producers or the consumers of wine to those of the tax-gather- 
 er?f The particular commodity is here only the means resorted to 
 for getting at the tax-payer with more or less convenience ; and its 
 current value is composed of two ingredients, viz. 1. Its real value 
 originating in its utility: 2. The value of the tax that the govern- 
 ment thinks fit to exact, for permitting its manufacture, transport, 
 or consumption. 
 
 Wherefore, there is no actual production of wealth, without a 
 creation or augmentation of utility. Let us see in what manner this 
 utility is to be produced. 
 
 MJ 
 
 r 
 
 CHAPTER II. 
 
 OP THE DIFFERENT KINDS OF INDUSTRY, AND THE MODE IN WHICH THEY 
 CONCUR IN PRODUCTION. 
 
 SOME items of human consumption are the spontaneous gifts of 
 nature, and require no exertion of man for their production ; as air, 
 water, and light, under certain circumstances. These are destitute 
 of exchangeable value ; because the want of them is never felt, others 
 being equally provided with them as ourselves. Being neither pro- 
 curable by production, nor destructible by consumption, they come 
 not \yjthin the province_Qf political economy. 
 '"But there are abundance^Tothers~equally indispensable to our 
 existence and to our happiness, which man would never enjoy at all. 
 did not his industry awaken, assist, or complete the operations of 
 
 *Thia position will hereafter be further illustrated. For the present it is ^ 
 enough to know, that, whatever be the state of society, current prices approx- , 
 mUe to the real value of things, in proportion to the liberty of production ami t 
 mutual dealing. 
 
 f It will be shown in Book III. of this work, what proportion of the tax is pain 
 I the producer, and what by the consumer. 
 
C 4 ON PRODUCTION. BOOK I. 
 
 nature. Such are most of the articles which serve for his food, rai 
 ment and lodging. 
 
 When that industry is limited to the bare collection of natural 
 products, it is called agricultural industry, or simply agriculture. 
 
 When it is employed in severing, compounding, or fashioning the 
 products of nature, so as to fit them to the satisfaction of our various 
 wants, it is called manufacturing industry* 
 
 When it is employed in placing within our reach objects of want 
 which would otherwise be beyond reach, it is called commercial 
 industry, or simply commerce. 
 
 It is solely by means of industry that mankind can be furnished, 
 in any degree of abundance, with actual necessaries, and with that 
 variety of other objects, the use of which, though not altogether in- 
 dispensable, yet marks the distinction between a civilized communi- 
 ty and a tribe of savages. Nature, left entirely to itself, would pro- 
 vide a very scanty subsistence to a small number of human beings. 
 Fertile but desert tracts have been found inadequate to the bare 
 nourishment of a few wretches, cast upon them by the chances of 
 shipwreck: while the presence of industry often exhibits the spec- 
 tacle of a dense population plentifully supplied upon the most un- 
 grateful soil. 
 
 The term products is applied to things that industry furnishes tc 
 mankind. 
 
 A particular product is rarely the fruit of one branch of industry 
 exclusively. A table is a joint product of agricultural industry, 
 which has felled the tree whereof it is made, and of manufacturing 
 industry, which has given it form. Europe is indebted for its cofiee 
 to the agricultural industry, which has planted and cultivated the 
 bean in Arabia or elsewhere, and to the commercial industry, which 
 hands it over to the consumer. 
 
 These three branches of industry, which may at pleasure be again 
 infinitely subdivided, are uniform in their mode of contributing to 
 the act of production. They all either confer an utility on a sub- 
 stance that possessed none before, or increase one which it already 
 possessed. The husbandman who sows a grain of wheat that yields 
 twenty-fold, does not gain this product from nothing: he avails him- 
 self of a powerful agent ; that is to say, of Nature, and merely directs 
 an operation, whereby different substances previously scattered 
 throughout the elements of earth, air, and water, are converted into 
 the form of grains of wheat. 
 
 Gall-nuts, sulphate of iron, and gum-arabic, are substances existing 
 separately in nature. The joint industry of the merchant and manu- 
 facturer brings them together, and from their compound derives the 
 black liquid, applied to the transmission of useful science. This 
 joint operation of the merchant and manufacturer is analogous to that 
 
 * Since matter can only be modified, compounded, or separated, by means 
 either mechanical or chemical, all branches of manufacturing industry may be 
 subdivided into the mechanical and the chemical arts, according to the predomi- 
 nance of the one or the other in their several processes. 
 
CHAP. II. ON PRODUCTION. t;5 
 
 of the husbandman, who chooses his object and effects its attainment 
 by precisely the same kind of means as the other two. 
 I No human being has the faculty of originally creating tnatter, 
 'which is more than nature itself can do. But any one may avail 
 himself of the agents offered him by nature, to invest matter with 
 utility. In fact, industry is nothing more or less than the human 
 employment of natural agents; the most perfect product of labour, 
 the one that derives nearly its whole value from its workmanship, is 
 probably the result of the action of steel, a natural product upon 
 some substance or other, likewise a natural product* 
 
 Through ignorance of this principle, the economists of the 18th 
 century, though many enlightened writers were to be reckoned 
 amongst them, were betrayed into the most serious errors. They 
 'allowed no industry to be productive, but that which procured the 
 raw materials ; as the industry of the husbandman, the fisherman and 
 the miner; not adverting to the distinction, that wealth consists, not 
 in matter, but in the value of matter; because matter without value 
 is no item of wealth; otherwise water, flint-stones, and dust of the 
 roads, would be wealth. Wherefore, if the value of matter consti- 
 tutes wealth, wealth is to be created by the annexation of value. 
 Practically, the man who has in his warehouse a quintal of woo! 
 worked up into fine cloths, is richer than one who has the same 
 quantity of wool in packs. 
 
 To this position the economists replied, that the additional value 
 communicated to a product by manufacture, was no more than equi- 
 valent to the value consumed by the manufacturer during the process ; 
 Tor, said they, the competition of manufactures prevents their ever 
 raising the price beyond the bare amount of their own expenditure 
 and consumption ; wherefore their labour adds nothing to the total 
 wealth of the community, because their wants on the one side destroy 
 as much as their industry produces on the other, f 
 
 * Alagrotti in his Opuscula, by way of exemplifying the prodigious addition 
 of the value given to an object by industry, adduces the spiral springs that 
 check the balance-wheels of watches. A pound weight of pig-iron costs the 
 operative manufacturer about five cents. This is worked up into steel, of which 
 is made the little spring that moves the balance-wheel of a watch. Each of these 
 springs weighs but the tenth part of a grain ; and when completed, may be sold 
 as high as three dollars, so that out of a pound of iron, allowing something for 
 the loss of metal, 80,000 of these springs may be made, and a substance of fiv; 
 cents value be wrought into a value of 240,000 dollars. 
 
 f Merrier de la Riviere, in his work entitled "Ordre Naturel des Societes Poh- 
 tiques" torn. ii. p. 255, while labouring to prove, that manufacturing labour i 
 barren and unproductive, makes use of an argument, which I think it may be of 
 some service to refute, because it has been often repeated in different shapes, 
 and some of them specious enough. He says, " that if the unreal products of 
 industry are considered as realities, it is a necessary inference, that an useless 
 multiplication of workmanship is a multiplication of wealth." But because 
 human labour is productive of value, when it has an useful result, it by no means 
 follows, that it is productive of value, when its result is either useless or injun 
 ous. All labour is not productive ; but such only as adds a real value to an v 
 substance or thino-. And the futility of this argument of the economists is rw 
 6* I 
 
p,0 ON PRODUCTION. BOOK I. 
 
 But it should have been previously demonstrated by those who 
 nade use of this argument, that the value, consumed by mechanics 
 ind artizans, must of necessity barely equal the value produced by 
 them, which is not the fact ; for it is unquestionable, that more savings 
 are made, and more capital accumulated from the profits of trade and 
 manufacture, than from those of agriculture.(l). 
 
 .Besides, even admitting that the profits of manufacturing industry 
 are consumed in the satisfaction of the necessary wants of the manu- 
 facturers and their families, that circumstance does not prevent 
 them being positive acquisitions of wealth. For unless they were 
 so, they could not satisfy their wants : the profits of the land-owner 
 nnd agriculturist are allowed to be items of positive wealth ; yet the}? 
 are equally consumed in the maintenance of those classes. 
 
 } Commercial, in like manner as manufacturing industry, concurs 
 * *jin production, by augmenting the value of a product by its transport 
 
 jfrom one place to another. A quintal of Brazil cotton has acquired 
 '';.. I greater utility, and therefore larger value, by the time it reaches a 
 
 I warehouse in Europe, than it possessed in one at Pernambuco. The 
 transport is a modification that the trader gives to the commodity, 
 whereby he adapts to our use what was not before available ; Which 
 modification is equally useful, complex and uncertain in the result, 
 as any it derives from the other two branches of industry. He 
 avails himself of the natural properties of the timber and the metals 
 used in the construction of his ships, of the hemp whereof his rigging 
 is composed, of the wind that fills his sails, of all the natural agents 
 brought to concur in his purpose, with precisely the same view and 
 the same result, and in the same manner too, as the agriculturist 
 avails himself of the earth, the rain, and the atmosphere.* 
 
 beyond all question by the circumstance, that it may be equally employed 
 against their own system and that of their opponents. They may be told, " You 
 admit the industry of the cultivator to be productive ; therefore he has only to 
 plough and sow his fields ten times a year to increase his productiveness ten- 
 told," which is absurd. 
 
 * Genovesi, who lectured on political economy at Naples, defines commerce 
 r > be "the exchange of superfluities for necessaries." He gives as his reason, 
 that in every transaction of exchange, the article received appears to each of the 
 contracting parties more necessary than that given. This is a far-fetched notion, 
 which I think myself called on to notice, because it has obtained considerable 
 currency. It would be difficult to prove, that a poor labourer, who goes to the 
 
 (1) [Our author, in here asserting, " that more savings are made, and more 
 Capita! accumulated from the profits of trade and manufacture, than from those 
 of agriculture," has fallen into an error, which it is proper to notice. In the 
 absence of prohibitions and restraints, the profits of agriculture, manufactures 
 and commerce, will all be on an equalit}', or always nearly approaching towards 
 it; for any material difference will cause a diversion of capital and industry to 
 r.he more productive channel, and by that means restore the equilibrium. In 
 overthrowing the hypothesis of the economists, the author has inadvertently, for 
 .1 moment, lost sight of his own general principles, which so clearly establish 
 'he equality of profits in all the different branches of industry.] 
 
 , AMERICAN EDITOR. 
 
II. ON PRODUCTION. 67 
 
 Thus, when Raynal says of commerce, as contrasted \vi*h agrioul 
 ture and the arts, that " it produces nothing of itself," he shows him- 
 self to have had no just conception of the phenomenon of production. 
 In this instance Raynal has fallen into the same error with regard to 
 commerce, as the economists made respecting both commerce and 
 manufacture. They pronounced agriculture to be the sole channel 
 of production ; Raynal refers production to the two channels of agri- 
 culture and manufacture: his position is nearer the truth than the 
 other, but still is erroneous. 
 
 . Condillac also is confused in his enrlaavour to explain the mode in 
 'which commerce produces. He pretends that, because all commo- 
 dities cost to the seller less than the buyer, they derive an increase 
 of value from the mere act of transfer from one hand to another. 
 But this is not so ; for, since a sale is nothing else but an act of barter, 
 in which one kind of goods, silver for example, is received in lieu 
 of another kind of goods, the loss which either of the parties dealing 
 should sustain on one article would be equivalent to the profit he 
 would make on the other, and there w r ould be to the community no 
 production of value whatsoever.* When Spanish wine is bought at 
 Paris/equal value is really given for equal value: the silver paid, 
 and the wine received, are worth one the other; but the wine had not 
 the same value before its export from Alicant: its value has really 
 increased in the hands of the trader, by the circumstance of trans- 
 port, and not by the circumstance, or at the moment, of exchange. 
 
 alehouse on a Sunday, exchanges there his superfluity for a necessary. In all 
 fair traffic, there occurs a mutual exchange of two things, which are worth one 
 the other, at the time and place of exchange. Commercial production, that is 
 to say, the value added by commerce to the things exchanged, is not operated by 
 the act of exchange, but by the commercial operations tha,t precede it. 
 
 The Count de Verri is the only writer within my knowledge, who has explain- 
 ed the true principle and ground- work of commerce. In the year 1771, he 
 thus expresses himself: "Commerce is in fact nothing more than the transport, 
 of goods from one place to another." (Meditazioni sulla economia politica, 4.) 
 The celebrated Adam Smith himself appears to have had no very clear idea of 
 commercial production. He merely discards the opinion, that there is any pro- 
 duction of value in the act of exchange. 
 
 * This circumstance has escaped the attention of Sismondi, or he would not 
 ; have said, " The trader places himself between the producer and the consumer, 
 to benefit them both at once, making his charge for that benefit upon both." 
 (Nouveaux Principes cFEconomie Pol. Liv. ii. ch. 8). He would make it 
 appear as if the trader subsisted wholly upon the value produced by the agricul- 
 turist and the manufacturer ; whereas he is maintained by the real value he him- 
 self communicates to commodities by giving them an additional modification, an 
 useful property. It is this very notion that stirs up the popular indignation 
 against the dealers in grain. 
 
 " L. Say, of Nantes, has fallen into the same mistake (Principals Causes de 
 la Richesse, &c. p. 110). By way of demonstrating the value conferred by 
 commerce to be unreal, he alleges it to be absorbed by the charges of transport. 
 By this incidental process of reasoning, the economist concluded manufacture to 
 be unproductive; not perceiving, that in these very charges consists the revenue 
 of the commercial and manufacturing producers; and that it is in this way that 
 the values raised by production at large are distributed amongst the several pro 
 ducers. 
 
53 ON PRODUCTION. BOOK I. 
 
 The seller does not play the rogue, nor the buyer the fool ; and Con- 
 dillac has no grounds for his position, that '* if men always exchang- 
 ed equal value for equal value, there would be no profit to be made 
 by the traders."* 
 
 In some particular cases the two other branches of industry pro- 
 duce in a manner analogous to commerce, viz. by giving a value to 
 things to which they actually communicate no new quality, but that 
 of approximation to the consumer. Of this description is the indus- 
 try of miners. The coal or metal may exist in the earth, in a perfect 
 state, but unpossessed of value. The miner extracts them thence, 
 and this operation gives them a value, by fitting them for the use of 
 mankind. So also of the herring fishery. Whether in or out of 
 the sea, the fish is the same ; but under the latter circumstances, it 
 has acquired an utility, a value, it did not before possess.f 
 
 Examples might be infinitely multiplied, and would all bear as 
 close an affinity, as those natural objects, which the naturalist classi- 
 fies only to facilitate their description. 
 
 This fundamental error of the economists, in w r hich I have shown 
 that their adversaries in some measure participated, led them to the 
 strangest conclusions. According to their theory, the traders and 
 manufacturers, being unable to add an iota to the general stock of 
 wealth, live entirely at the expense of the sole producers, that is to 
 say, the proprietors and cultivators of the land. Whatever new 
 value they may communicate to things, they at the same time con- 
 sume an equivalent product, furnished by the real producers : manu- 
 facturing and commercial nations, therefore, subsist wholly upon the 
 wages they receive from their agricultural customers; in proof of 
 which position, they alleged that Colbert ruined France by his pro- 
 tection of manufactures, &c.J 
 
 The truth is, that, in whatever class of industry a person is 
 engaged, he subsists upon the profit he derives from the additional 
 
 * See his work entitled, " Le Commerce et le Gouvernment consideres rela~ 
 tivement Vun a r<zulre." Ire. partie, ch. 6. 
 
 f We may consider as agents of the same class of industry, the cultivator of 
 the land, the breeder of cattle, the woodcutter, the fisherman that takes fish he 
 has been at no pains in breeding, and the miner who, from the bowels of the 
 earth, extracts metal, stone, or combustibles, that nature has placed there in a 
 perfect state ; and, to avoid multiplicity of denominations, the whole of these 
 occupations may be called by the name of agricultural industry, because the 
 superficial cultivation of the earth, is the chief and most important of all. Terms 
 are of little consequence, when the ideas are clear and definite. The wine- 
 grower, who himself expresses the juice of his grapes, performs a mechanical 
 operation, that partakes more of manufacture than agriculture. But it matters 
 little whether he be classed as a manufacturer or agriculturist; provided that it 
 be clearly comprehended in what manner his industry adds to the value of the 
 product. If we wish to give separate consideration to every possible manner of 
 giving value to things, industry may be infinitely subdivided. If it be the object 
 to generalize to the utmost, it may be treated as one and the same; for every 
 branch of it will resolve itself into this : the employment of natural substances 
 and agents in the adaptation of products to human consumption. 
 
 \ See tne numberless writings of that sect. 
 
CHAP. H. ON PRODUCTION. , D9 
 
 value, or portion of value, no matter in what ratio, which his agency 
 attaches to the product he is at work upon. The total value of pro- 
 ducts serves in this way to pay the profits of those occupied in pro- 
 duction. The wants of mankind are supplied and satisfied out ot 
 the gross values produced and created, and not out of the net values 
 only. 
 
 A nation, or a class of a nation, engaged in manufacturing or com- 
 mercial industry, is not a whit more or less in the pay of another, 
 than one employed in agriculture. The value created by one branch 
 is of the same nature as that created by others. Two equal 
 values are worth one the other, although perhaps the fruit of differ- 
 ent branches of industry: and when Poland barters its staple product, 
 wheat, for the staple commodity of Holland, East and West India 
 produce, Holland is no more in the pay or service of Poland, than 
 Poland is of Holland. 
 
 Nay, Poland herself, which exports at the rate of ten millions of 
 wheat annually, and therefore, according to the economists, takes the 
 sure road to national wealth, is, notwithstanding, poor and depopu- 
 lated : and why? Because she confines her industry to agriculture,, 
 though she might be at the same time a commercial and manufactur- 
 ing state. Instead of keeping Holland in her pay, she may with 
 more propriety be said to receive wages from the latter, for the 
 raising of ten millions of wheat, per annum. Nor is she a jot less 
 dependent than the nations that buy wheat of her: for she has just 
 as much desire to sell to them, as they have to buy of her.* 
 
 Moreover, it is not true that Colbert ruined France. On the con- 
 trary, the fact is that France, under Colbert's administration, emerged 
 from the distress that two regencies and a weak reign had involved 
 her in. She was, indeed, afterwards ruined again ; but for this second 
 calamity, she may thank the pageantry and the wars of Louis XIV. 
 Nay, the very prodigality of that prince is an undeniable evidence 
 of the vast resources that Colbert had placed at his disposal. It must, 
 however, be admitted that those resources would have been still 
 more ample, if he had but given the same protection to agriculture, 
 as to the other branches of industry. 
 
 Thus it is evident, that the means of enlarging and multiplying 
 'wealth within the reach of every community are much less confined 
 than the economists imagined. A nation, by their account, was un- 
 able to produce annually any values beyond the net annual produce 
 of its lands ; to which fund alone recourse could be had for the sup 
 port not only of the proprietary and the idler, but likewise of thr 
 merchant, the manufacturer, and the mechanic, as well as for the tota 
 consumption of the government. Whereas we have just seen thai 
 the annual produce of a nation is composed, not of the mere net pro 
 
 * We shall find in the sequel, that, if any one nation can be said to be in the 
 service of another, it is that which is the most dependent; and that the most 
 dependent nations are, not those which have a scarcity of land, but those wbl 
 have a. scarcity of capital 
 
70 ON PRODUCTION. BOOK 1 
 
 <luce of its agriculture, but of the gross produce of its agriculture, 
 commerce, and manufacture united. For, in fact, is not the sum 
 total, that is to say, the aggregate of the gross product raised by the 
 nation, disposable for its consumption ? Is value produced less an 
 item of wealth, because it must needs be consumed ? And does not 
 value itself originate in this very applicability to consumption. 
 
 The English writer, Stewart,who may be looked upon as the leading 
 advocate of the exclusive system, the system founded on the maxim, 
 that the wealth of one set of men is derived from the impoverish- 
 ment of another, is himself no less mistaken in asserting, that, " when 
 once a atop is put to external commerce, the stock of internal wealth 
 cannot be augmented."* Wealth, it seems, can come only from 
 abroad ; but abroad, where does it come from ? from abroad also. So 
 that in tracing it from abroad to abroad, we must necessarily, in the 
 end, exhaust every source, till at last we are compelled to look for it 
 beyond the limits of our own planet, which is absurd. 
 
 Forbonnais,f too, builds his prohibitory system on this glaring 
 fallacy; and to speak freely, on this fallacy are founded the exclu- 
 sive systems of all the short-sighted merchants, and all the govern- 
 ments of Europe and of the world. They all take it for granted, 
 that what one individual gains must needs be lost to another ; that 
 what is gained by one country is inevitably lost to another : as il 
 the possessions of abundance of individuals and of communities could 
 not be multiplied, without the robbery of somebody or other. It 
 one man or set of men, could only be enriched at others' expense, 
 how could the whole number of individuals, of whom a state is com- 
 posed, be. richer at one period than at another, as they now confess- 
 edly are in France, England, Holland, and Germany, compared with 
 what they were formerly? How is it, that nations are in our days 
 more opulent, and their wants better supplied in every respect, than 
 they were in the seventeenth century? Whence can they have 
 derived that portion of their present wealth, which then had no 
 existence ? Is it from the mines of the new continent ? They had 
 already advanced in wealth before the discovery of America. Be 
 sides, what is that which these mines have furnished? Metallic 
 wealth or value. But all the other values which those nations now 
 possess, beyond what they did in the middle ages, whence are they 
 derived ? Is it not clear, that these can be no other than created 
 values? 
 
 We must conclude, then, that wealth, which consists in the value 
 that human industry, in aid and furtherance of natural agents, com- 
 municates to things, is susceptible of creation and destruction, of 
 increase and diminution, within the limits of each nation and inde- 
 pendently of external agency, according to the method it adopts to 
 l>ring about those effects. An important truth, which ought to teach 
 
 * Essay or. Political Economy, b. ii. c. 26. 
 f Elemens de Commerce. 
 
CHAP. III. ON PRODUCTION. 7 1 
 
 mankind, that the objects of rational desire are within their reach, 
 provided they have the w r ill and intelligence to employ the true- 
 means of obtaining them. Those means it is the purpose of this 
 work to investigate and unfold. 
 
 CHAPTER III. 
 
 OF THE NATURE OF CAPITAL, AND THE MODE IN WHICH IT CONCURS IN 
 THE BUSINESS OF PRODUCTION. 
 
 As we advance in the investigation of the processes of industry 
 we cannot fail to perceive, that mere unassisted industry is insuff- 
 icient to invest things with value. The human agent of industry ./ 
 : must, besides, be provided with pre-existing products ; without which 
 his agency, however skilful and intelligent, would never be put in 
 motion. These pre-existing requisites are, 
 
 1. The tools and implements of the several arts. The husband- 
 man could do nothing without his spade and mattock, the weaver 
 without his loom, or tfie mariner without his ship. 
 
 2. The products necessary for the subsistence of the industrious 
 agent, as long as he is occupied in completing his share of the work 
 or production. This outlay of his subsistence is, indeed, in the long 
 run, replaced by the product he is occupied upon, or the price he 
 will receive for it; but he is obliged continually to make the advance. 
 
 3. The raw materiajs, which are to be converted into finished 
 products bylEe" means of his industry. These materials, it is true, 
 are often the gratuitous offerings of nature, but they are much more 
 generally the products of antecedent industry, as in the case of seed- 
 corn supplied by agriculture, metals, the fruit of the labour of the 
 miner and smelter, drugs brought by the merchant perhaps from the 
 extremities of the globe. The value of all these must be found in 
 advance by the industrious agent that works them up. 
 
 The value of all these items constitutes what is denominated /?rr/-j' , 
 auctiue capital. 
 
 Under this head of productive capital must likewise be classed the 
 value of all erections and improvements upon real or landed property. 
 \vhicn increase its annual produce, as well as that of the farming live 
 and dead stock, that operates as machinery in aid of human industry. 
 
 Another item of productive capital, is money, whenever it ]- 
 employed to facilitate the interchange of products, without whicli 
 production could never make any progress. Money distributed 
 through the whole mechanism ..of human industry, like the oil thai 
 greases the wheels of complex machinery, gives the requisite ease 
 and facility to its movements. But gold arid silver are not produr 
 live unless employed by industry : they are like the oil in a "ftachjiw 
 
72 ON PRODUCTION. BOOK I. 
 
 remaining in a state of inaction. And so also of all other tools and 
 implements of human industry. 
 
 Jt would evidentlybe a great mistake to suppose that the capital 
 of a community consists solely of its money. The merchant, the 
 manufacturer, the cultivator, commonly have the least considerable 
 portion of the value composing their capital invested in the form of 
 money; nay, the more active their concern is, the smaller is their 
 relative proportion of their capital so vested to the residue. The 
 funds of the merchant are placed out in goods on their transit by 
 land or water, or warehoused in different directions : the capital of 
 the manufacturer chiefly consists of the raw material in different 
 .stages of progress, of tools, implements, and necessaries for his work- 
 men: while that of the cultivator is vested in farming buildings, live 
 stock, .fences and enclosures. They all studiously avoid burthening 
 themselves with more money than is sufficient for current use. 
 
 What is true of one, two, three, or four individuals, is true of 
 society in the aggregate. The capital of a nation is made up of the 
 sum total of private capitals ; and, in proportion as a nation is pros- 
 perous and industrious, in the same proportion is that part of its 
 capital, vested in the shape of money, trifling compared to the amount 
 uf the gross national capital. Neckar estimates the circulating 
 medium in France, in the year 1784, at about 440 millions of dol- 
 lars, and there are reasons for believing his estimate exaggerated ; 
 but this is not the time to state them. However, if account be taken 
 of all the works, enclosures, live stock, utensils, machines, ships, 
 commodities, and provisions of all sorts belonging to the French 
 people or their government in any part of the world ; and, if to 
 these be added the furniture, decorations, jewellery, plate, and other 
 items of luxury or convenience, whereof they were possessed, at the 
 *ame period, it will be found that 440 millions of circulating medium 
 was a mere trifle compared to the aggregate of these united values.* 
 
 Becke estimates the total capital of Great Britain at 2300 millions 
 .sterling/)- (equal to more than 11,000 millions of dollars.) The total 
 amount of her circulating specie, before the establishment of her 
 present paper money, was never reckoned by the highest estimates 
 at more than 47 millions sterling ;J that is to say, about l-50th of 
 her capital. Smith reckoned it at no more than 18 millions, which 
 could not be the l-127th part.(l). 
 
 *Artnur Young, in his " Journey in France,'" in spite of the unfavourable 
 -iew he gives of French Agriculture, estimates the total capital employed in 
 that kingdom, in that branch of industry alone, at more than 2200 millions of 
 dollars; and states his belief, that the capital of Great Britain, similarly employ- 
 ed, is in the proportion of two to one. 
 
 f Observations on the produce of the income-tax. 
 
 I Pitt, who is supposed to have overrated the quantity of specie, states the 
 2-old at forty-four-millions; and Price estimates the silver at three millions, 
 making a total of forty -seven millions. 
 
 (1) ("The following summary recapitulation of the value of property in Great 
 liritain and Ireland, in the year 1833, is extracted from "Table XVI. GENERAL 
 
CHAP. III. 
 
 ON PRODUCTION. 
 
 Capital in the hands of a national government forms a part of the 
 gross national capital. 
 
 We shall see, by-and-by, how capital, which is subject to a conti- 
 nual wear and consumption in the process of production, is continu- 
 ally replaced by the very operation of production ; or rather, how its 
 value, when destroyed under one form, re-appears under another. 
 At present it is enough to have a distinct conception, that, without it, 
 industry could produce nothing. Capital must work, as it were, in 
 concert with industry ; and this concurrence is what I call the pro- 
 ductive agency of capital 
 
 ESTIMATE of the PUBLIC and PRIVATE Property of ENGLAND and WALES, SCOT- 
 LAND and IRELAND, (1833)," from " PEBRER on the TAXATION, DEBT, CAPITAL, 
 RESOURCES, &c. of the whole BRITISH EMPIRE," a work of the highest authority, 
 published in London, April, 1833. 
 
 SUMMARY RECAPITULATION. 
 AGGREGATE VALUE OF PROPERTY IN GREAT BRITAIN AND IRELAND. 
 
 Productive Private Property, 
 Unproductive do. 
 
 Public Property, 
 
 Equal to dollars, 
 
 ENGLAND AND WALES: 
 
 Productive Private Property, 
 Unproductive do. 
 
 SCOTLAND : 
 
 Productive Private Property, 
 Unproductive do. 
 
 2,995,000,000 
 580,700,000 
 
 3,575,700,000 
 103,800,000 
 
 Total, 3,679,500,000 
 
 IRELAND : 
 
 Productive Private Property, - - - 
 Unproductive do. - - - 
 
 2,054,600,000 
 374,300,000 
 
 318,300,000 
 51,100,000 
 
 622,100,000 
 116,400,000 
 
 Do. 
 
 do. in Great Britain and Ireland, 
 
 17,661,600,000 
 
 2,428,900,000 
 
 69,400,000 
 
 738,500,000 
 38,900,000 
 
 Public Property in England and Wales, 42,000,000 
 
 Do. in Scotland, - - - - 3,900,000 
 
 Do. in Ireland, - - - - 11,900,000 
 Do. in common to Great Britain } 
 
 and Ireland, as the Navy, Military, and > 46,000,000 
 Ordnance Stores, &c. ...-- ) 
 
 Grand Total, 
 
 Equal to dollars, 
 7 
 
 103,800,0^0 
 3,679,500,000 
 17,661,600,000 
 
 K 
 
 AMERICAN EDITOR. 
 
74 ON PRODUCTION. BOOK I 
 
 CHAPTER IV. 
 
 ON NATURAL AGENTS THAT ASSIST IN THE PRODUCTION OF WEALTH, AND 
 SPECIALLY OF LAND. 
 
 INDEPENDENTLY of the aid that industry receives from capital, 
 that is to say, from products of her own previous creation, towards 
 the creation of still further products, she avails herself of the agency 
 and powers of a variety of agents not of her own creation, but offered 
 spontaneously by nature : and from the co-operation of these natural 
 agents derives a portion of the utility she communicates to things. 
 
 Thus, when a field is ploughed and sown, besides the science and 
 the labour employed in this operation, besides the pre-created values 
 brought into use, the values, for instance, of the plough, the harrow, 
 the seed-corn, the food and clothing consumed by labourers during 
 l he process of production, there is a process performed by the soil, 
 the air, the rain, and the sun, wherein mankind bears no part, but 
 which nevertheless concurs in the creation of the new product that 
 will be acquired at the season of harvest. This process I call the 
 i of natural age?its. 
 
 The term natural agents is here employed in a very extensive 
 sense ; comprising not merely inanimate bodies, whose agency ope- 
 rates to the creation of value, but likewise the laws of the physical 
 world, as gravitation, which makes the weight of a clock descend ; 
 magnetism, which points the needle of the compass : the elasticity of 
 steel ; the gravity of the atmosphere ; the property of heat to dis- 
 charge itself by ignition, &c. &c. 
 
 The productive faculty of capital is often so interwoven with that 
 of natural agents, that it is difficult, or perhaps impossible, to assign, 
 with accuracy, their respective shares in the business of production. 
 A hot-house for the raising of exotic plants, a meadow fertilized by 
 judicious irrigation, owe the greater part of their productive powers 
 to works and erections, the effect of antecedent production, which 
 form a part of the capital devoted to the furtherance of actual and 
 present production. The same may be said of land newly cleared 
 and brought into cultivation ; of farm-buildings ; of enclosures ; and 
 of all other permanent ameliorations of a landed estate. These 
 values are items of capital, though it be no longer possible to sever 
 them from the soil they are attached to.* 
 
 In the employment of machinery, which wonderfully augments 
 the productive power of man, the product obtained is due partly to 
 the value of the capital vested in the machine, and partly to the 
 
 * It is for the proprietor of the land and of the capital respectively, when tho 
 ownership is in different persons, to settle between them the respective value 
 unii efficacy of the agency of these two productive agents. The world at lan- 
 may he content to comprehend, without taking the trouble of measuring, then 
 respective shares in the production of wealth. 
 
CHAP. IV. ON PRODUCTION. 
 
 75 
 
 agency of natural powers. Suppose a tread-mill,* worked by ten 
 men, to be used in place of a wind-mill, the product of the mill 
 might be considered as the fruit of the productive agency of a capi- 
 tal consisting of the value of the machine, and of the labour of ten 
 men employed in turning the wheel. If the tread-mill be supplant- 
 ed by sails, it is evident that the wind, a natural agent, does the work 
 often human beings. 
 
 In this instance, the absence of the natural agent might be reme- 
 died, by the employment of another power ; but there are many 
 ases, in which the agency of nature could not possibly be dispensed 
 with, and is yet equally positive and real; for example, the vegeta- 
 tive power of the soil, the vital principle which concurs in the pro- 
 duction of the animals domesticated to our use. A flock of sheep 
 is the joint result of the owner's and shepherd's care, and the capital 
 advanced in fodder, shelter, and shearing, and of the action of the 
 organs and viscera with which nature has furnished these animals. 
 
 Thus nature is commonly the fellow-labourer of man and his 
 instruments ; a fellowship advantageous to him in proportion as he 
 succeeds in dispensing with his own personal agency, and that of 
 his capital, and in throwing upon nature a larger part of the burthen 
 of production. 
 
 Smith has taken infinite pains to explain, how it happens that 
 civilized communities enjoy so great an abundance of products, in 
 comparison with nations less polished, and in spite of the swarm of 
 idlers and unproductive labourers that is to be met with in society. 
 He has traced the source of that abundance to the division of la- 
 bour ;| and it cannot be doubted, that the productive power of in- 
 dustry is wonderfully enhanced by that division, as we shall here- 
 after see by following his steps ; but this circumstance alone is not 
 sufficient to explain a phenomenon, that will no longer surprise, if 
 \ve consider the power of the natural agents that industry and civili- 
 zation set at work for our advantage. 
 
 Smith admits that human intelligence, and the knowledge of the 
 laws of nature, enable mankind to turn the resources she offers to 
 better account : but he goes on to attribute to the division of labour 
 this very degree of intelligence and knowledge : and he is right to 
 a certain degree ; for a man, by the exclusive pursuit of a single art 
 or science, has ampler means of accelerating its progress towards 
 perfection. But, when once the system of nature is discovered, the 
 production resulting from the discovery, is no longer the product of 
 the inventor's industry. The man who first discovered the property 
 of fire to soften metals, was not the actual creator of the utility this 
 process adds to smelted ore. That utility results from the physical 
 
 * A wheel in the form of a drum, turned by men walking inside, (roue a 
 marchre.) 
 
 Take his own words: "It is the great multiplication of the productions ot 
 all the different arts, in consequence of the division of labour, which occasions, 
 in a well-governed society, that universal opulence, which extends itself to th- 
 lowest ranks of the people." Wealth of Nations, b. i. c. 1. 
 
76 ON PRODUCTION. BOOK 1. 
 
 action of fire, in concurrence, it is true, with the labour and capital 
 of those who employ the process. But are there no processes tha< 
 mankind owes the knowledge of to pure accident? or that are so self- 
 evident, as to have required no skill to discover ? When a tree, a 
 natural product, is felled, is society put into possession of no greater 
 produce than that of the mere labour of the woodman? 
 \ v From this error Smith has drawn the false conclusion, that all 
 ' lvalues produced represent pre-exerted human labour or industry, 
 [either recent or remote ; or, in other words, that wealth is nothing 
 ; '|more than labour accumulated ; from w r hich position he infers a se- 
 ' jlcond consequence equally erroneous, viz. that labour is the sole 
 (measure of wealth, or of value produced. 
 
 This system is obviously in direct opposition to that of the 
 economists of the eighteenth century, who, on the contrary, main- 
 tained that labour produces no value without consuming an equiva- 
 lent; that, consequently, it leaves no surplus, no net produce; and that 
 nothing but the earth produces gratuitous value, therefore nothing 
 else can yield net produce. Each of these positions has been re- 
 duced to system ; I only cite them to warn the student of the dan- 
 gerous consequences of an error in the outset,* and to bring the 
 science back to the simple observation of facts. Now facts demon- 
 strate, that values produced are referable to the agency and concur- 
 rence of industry, of capital,f and of natural agents, whereof the 
 chief, though by no means the only one, is land capable of cultiva- 
 tion ; and that no other but these three sources can produce value, or 
 add to human wealth. 
 
 * Amongst other dangerous consequences of the system of the economists, is 
 the notable one of substituting- a land-tax in lieu of all other taxation ; in the 
 certainty, that this tax would affect all produced value whatever. Upon a con- 
 trary principle, and in pursuance of the maxims laid down by Smith, the net 
 produce of land and of capital ought to be exempted from taxation altogether, if 
 with him we take for granted, that they produce nothing spontaneously 5 ; but this 
 would be as unjust on the opposite side. 
 
 t Although Smith has admitted the productive power of land, he has disre- 
 garded the completely analogous power of capital. A machine, an oil-mill for 
 example, which employs a capital of 4000 dollars, and gives ah annual net return 
 of 200 dollars, after paying all expenses, gives a product quite as substantial as that 
 of a real estate, that cost 4000 dollars, and brings an annual rent or net produce 
 of 200 dollars, all charges deducted. Smith maintains, that a mill which has cost 
 4000 dollars, represents labour to that amount, bestowed at sundry times upon the 
 different parts of its fabric ; therefore, that the net produce of the mill is the net pro- 
 duce of that precedent labour. But he is mistaken : granting for argument sake, the 
 value of the mill itself to be the value of this previous labour ; yet the value daily 
 produced by the mill is a new value altogether; just the same as the rent of a 
 'anded estate is a totally different value from the value of the estate itself, and 
 may be consumed, without at all affecting the value of the estate. If capital 
 Contained in itself no productive faculty, independent of that of the labour which 
 created it, how is it possible, that capital could furnish a revenue in perpetuity, 
 independent of the profit of the industry that employed it? The labour that 
 created the capital would receive wages after it ceased to operate would have 
 'nterminable value; which is absurd. It will be seen by-and-by, that these 
 notions have not been mere matter of speculation. 
 
CHAP. V. ON PRODUCTION. 77 
 
 Of natural agents, some are susceptible of appropriation, that is 
 to say of becoming the property of an occupant, as a field, a cur- 
 rent of water ; others can not be appropriated, but remain liable to 
 public use, as the wind, the sea, free navigable streams, the physical 
 or chemical action of bodies one upon another, &c. &c. 
 
 We shall by-and-by have an opportunity of convincing ourselves, 
 that this alternative, of productive agents being or not being suscep- 
 tible of appropriation, is highly favourable to the progress of wealth. 
 Natural agents, like land, which are susceptible of appropriation, 
 would not produce nearly so much, were not the proprietors certain 
 of exclusively gathering their produce, and able to vest in them, 
 with full confidence, the capital which so much enlarges their pro- 
 ductiveness. On the other hand, the indefinite latitude allowed to 
 industry to occupy at will the unappropriated natural agents, opens 
 a boundless prospect to the extension of her agency and production. 
 It is not nature, but ignorance and bad government, that limit the 
 productive powers of industry. 
 
 Such of the natural agents as are susceptible of appropriation, 
 form an item of productive means ; for they do not yield their con- 
 currence without equivalent ; which equivalent, as we shall see in the 
 proper place, forms an item of the revenues of the appropriators. 
 At present \ve must be content to investigate the productive opera- 
 tion of natural agents of every description, whether already known, 
 or hereafter to be discovered. 
 
 CHAPTER V. 
 
 ON THE MODE IN WHICH INDUSTRY, CAPITAL, AND NATURAL AGENTS 
 UNITE IN PRODUCTION. 
 
 WE have seen how industry, capital, and natural agents concur in 
 production, each in its respective department ; and we have likewise 
 seen that these three sources are indispensable to the creation of 
 products. It is not, however, absolutely necessary that they should 
 all belong to the same individual. 
 
 An industrious person may lend his industry to another possessed 
 of capital and land only. 
 
 The landholder may lend his estate to a person possessing capita, 
 and industry only. 
 
 Whether the thing lent be industry, capital, or land, inasmuch as 
 all three concur in the creation of value, their use also bears 
 and is commonly paid for. 
 
 The price paid for the loan of industry is called wages. 
 
 The price paid for the loan of capital is called interest. 
 
 And that paid for the loan of land is called rent 
 
7S ON PRODUCTION. BOOK I. 
 
 The ownership of land, capital, and industry is sometimes united 
 in the same hands. A man who cultivates his own garden at his 
 own expense, is at once the possessor of land, capital, and industry, 
 and exclusively enjoys the profits of proprietor, capitalist, and 
 labourer. 
 
 The knife-grinder's craft requires no occupancy of land ; he car- 
 ries his stock in trade upon his shoulders, and his skill and industry 
 at his fingers' ends ; being at the same time adventurer, (a) capitalist 
 and labourer. 
 
 It is seldom that we meet with adventurers in industry so poor, 
 as not to own at least a share of the capital embarked in their cori 
 cern. Even the common labourer generally advances some portion ; 
 the bricklayer comes with his trowel in his hand; the journeyman 
 tailor is provided with his thimble and needles ; all are clothed better 
 or worse; and though it be true, that their clothing must be found 
 out of their wages, still they find it themselves in advance. 
 
 Where the land is not exclusive property, as is the case with 
 some stone-quarries, with public rivers and seas to which industry 
 resorts for fish, pearls, coral, &c., products may be obtained by 
 industry and capital only. 
 
 Industry and capital are likewise competent to produce by them- 
 selves, when that industry is employed upon products of foreign 
 growth, procurable by capital only ; as in the European manufac- 
 ture of cotton and many other articles. So that every class of 
 manufacture is competent to raise products, provided there be in- 
 dustry and capital exerted. The presence of land is not absolutely 
 necessary, unless perhaps the area whereon the work is done, and 
 which is commonly rented, may be thought to come under this 
 description, as in extreme strictness it certainly must. However, 
 if the ground where the business of industry is carried on, be 
 reckoned as land used, it must at least be admitted, that, with aid of 
 a large capital, an immense manufacturing concern maybe conducted 
 upon a very trifling spot of ground. Whence this conclusion may be 
 drawn, that national industry is limited, not by territorial extent, 
 but by extent of capital. 
 
 A stocking manufacturer with a capital say of 4000 dollars, may 
 keep in constant work ten stocking frames. If he manages to double 
 his capital he can employ twenty ; that is to say, he may buy ten more 
 frames, pay double ground-rent, purchase double the quantity of 
 silk or cotton to be wrought into stockings, and make the requisite 
 advances to double the number of workmen, &c. &c. 
 
 But that portion of agricultural industry, devoted to the tillage of 
 
 () The term entrepreneur is difficult to render in English ; the corresponding 
 word, undertaker, being already appropriated to a limited sense. It signifies 
 the master-manufacturer in manufacture, the farmer in agriculture, and the mer- 
 chant in commerce ; and generally in all three branches, the person who takes 
 upon himself the immediate responsibility, risk, and conduct of a concern of 
 industry, whether upon his own or a borrowed capital. For want of a better 
 word, it will be rendered into English by the term adventurer. T. 
 
CHAP. VT. ON PRODUCTION. 7r , 
 
 land, is, in the course of nature, limited by extent of surface. Neither 
 individuals nor communities can extend or fertilize their territory, 
 beyond what the nature of things permits ; but they have unlimited 
 power of enlarging their capital, and consequently, of setting at 
 work a larger body of industry, and thus of multiplying their pro- 
 ducts ; in other words, their wealth. 
 
 There have been instances of people, like the Genevese, who with 
 a territory that has not produced the twentieth part of the necessa- 
 ries of life, have yet contrived to live in affluence. The natives of 
 the barren glens of Jura are in easy circumstances because many 
 mechanical arts are there practised. In the 13th century, the worfd 
 beheld the republic of Venice, ere it held a foot of land in Italv, 
 derive wealth enough from its commerce to possess itself of Dalma- 
 tia, together with most of the Greek isles, and even the capital of 
 the Greek empire. The extent and fertility of a nation's territory 
 depend a good deal upon its fortunate position. Whereas the power 
 of its industry and capital depends upon its own good management ; 
 for it is always competent to improve the one and augment the 
 other. " 
 
 Nations deficient in capital, labour under great disadvantage in the 
 sale of their produce; being unable to sell at long credit, or to 
 grant time or accommodation to their home or foreign customers. If 
 the deficiency be very great indeed, they may be unable even to 
 make the advance of the raw material and their own industry. This 
 accounts for the necessity, in the Indian and Russian trade, of re- 
 mitting the purchase-money six months or sometimes a year in 
 advance, before the time when an order for goods can be executed. 
 These nations must be highly favoured in other respects, or they 
 never could make considerable sales in the face of such a disad- 
 vantage. 
 
 Having informed ourselves of the method in which the three 
 great agents of production, industry, capital and natural agents, con- 
 cur in the creation of products, that is to say, of things applicable 
 to the uses of mankind, let us proceed to analyze more minutely the 
 particular operation of each. The inquiry is important, inasmuch 
 as it leads imperceptibly to the knowledge of what is more and what 
 is less favourable to production, the true source of individual affluence, 
 as w ft ll as national power. 
 
 CHAPTER VI. 
 
 OF OPERATIONS ALIKE COMMON TO ALL BRANCHES OF INDUSTRY. 
 
 IF we examine closely the workings of human industry, it will fH 1 
 founa, mat, to whatever object it be applied, it consists of three dis. 
 linct operations. 
 
80 
 
 ON PRODUCTION. BOOK I. 
 
 The first step towards the attainment of any specific product, is 
 the study of the laws and course of nature regarding that product. 
 A lock could never have been constructed without a previous know- 
 ledge of the properties of iron, the method of extracting from the 
 mine and refining the ore, as well as of mollifying and fashioning 
 the metal. 
 
 The next step is the application of this knowlecfge to an useful pur- 
 pose : for instance, the conclusion, or conviction, that a particulai 
 form, communicated to the metal, will furnish the means of closing a 
 door to all the wards, except to the possessor of the key. 
 
 The last step is the execution of the manual labour, suggested and 
 pointed out by the two former operations; as, for instance, the 
 forging, filing, and putting together of the different component parts 
 of the lock. 
 
 These three operations are seldom performed by one and the same 
 person. It commonly happens, that one man studies the laws and 
 conduct of nature; that is to say, the philosopher, or man of science, 
 of whose knowledge another avails himself to create useful products, 
 being either agriculturist, manufacturer, or trader; while the third 
 supplies the executive exertion, under the direction of the former 
 two ; which third person is the operative workman or labourer. 
 
 All products whatever will be found, on analysis, to derive exist- 
 ence from these three operations. 
 
 Take the example of a sack of wheat, or a pipe of wine. The first 
 stage towards the attainment of either of these products was, the 
 discovery by the natural philosopher or geologist, (a) of the con- 
 duct and course of nature in the production of the grain or the grape ; 
 the proper season and soil for sowing or planting ; and the care requi- 
 site to bring the herb or plant to maturity. The tenant, if not the 
 proprietor himself, must afterward have applied this knowledge to 
 his own particular object, brought together the means requisite to 
 the creation of an useful product, and removed the obstacles in the 
 way of its creation. Finally, the labourer must have turned up the 
 soil, sown the seed, or pruned and bound up the vine. These three 
 distinct operations were indispensable to the complete production of 
 the product, corn or wine. 
 
 Or take the example of a product of external commerce; such as 
 indigo. The science of the geographer, the traveller, the astro- 
 nomer, brings us acquainted with the spot where it is to be met with, 
 and the means of crossing the seas to get at it. The merchant equips 
 his vessels, and sends them in quest of the commodity; and the 
 mariner and land-carrier perform the mechanical part of this pro- 
 duction. 
 
 But, loooking at the substance, indigo, as a mere primary material 
 of a further or secondary product, of blue cloth for instance; we all 
 
 (a) Agronome : I am not aware of any corresponding English term, denoting 
 the Student in that branch of geology conversant with the properties of the sur- 
 'iico of the earth; in other words, the scientific agriculturist. T 
 
CHAP. VI. ON PRODUCTION. 
 
 81 
 
 know that the chemist is first applied to for information, as to the 
 nature of the substance, the method of dissolving it, and mordants 
 requisite for fixing the colour ; the means of perfecting the process 
 of dyeing are then collected by the master manufacturer, undei 
 whose orders the labourer executes the manual part of the process. 
 
 Industry is, in all cases, divisible into theory, application, and 
 execution. Nor can it approximate to perfection in any nation, til! 
 that nation excel in all three branches. A people, that is deficient 
 in one or other of them cannot acquire products, which are and 
 must be the result of all three. And thus we may learn to appreci- 
 ate the vast utility of many sciences, which, at first sight, appear to 
 be the objects of mere curiosity and speculation.* 
 
 The negroes of the coast of Africa are possessed of considerable 
 ingenuity, and excel in all athletic exercises and handicraft occupa- 
 tions ; but they seem greatly deficient in the two previous operations 
 of industry. Wherefore, they are under the necessity of purchasing 
 from Europe the stuffs, arms, and ornaments, they stand in need of. 
 Their country yields so few products, notwithstanding its natural 
 fertility, that the slave traders are obliged to lay in their stock of 
 provisions beforehand, to feed the slaves during the voyage.f 
 
 In qualities favourable to industry, the moderns have greatly sur- 
 passed the ancients, and the Europeans outstrip all the other nations 
 of the globe. The meanest inhabitant of an European town enjoys 
 innumerable comforts unattainable to the sovereign of a savage tribe. 
 The single article, glass, that admits light into his apartment, and, at 
 the same time, excludes the inclemency of the weather, is the beauti- 
 ful result of observation and science, accumulated and perfected 
 during a long course of ages. To obtain this luxury, it was neces- 
 sary previously to know what kind of sand was convertible into a 
 substance possessing extension, solidity, and transparency; as well as 
 by the compound of what ingredients, and by what degree of heat, 
 the substance was obtainable: to ascertain, besides, the best form of 
 furnace. The very wood- work, that supports the roof of a glass-house, 
 requires, in its construction, the most extensive knowledge of the 
 strength of timber, and the means of employing it to advantage. 
 
 Nor was the mere knowledge of these matters sufficient ; for that 
 knowledge might possibly have lain dormant in the memory of one 
 or two persons, or in the pages of literature. It was further requi- 
 
 * Besides the direct impulse, given by science to progressive industry, and 
 which indeed is indispensable to its success, it affords an indirect assistance, by 
 the gradual removal of prejudice; and by teaching mankind to rely more upon 
 their own exertions, than on the aid of superhuman power. Ignorance is the 
 inseparable concomitant of practical habits, of that slavery of custom which stands 
 in the way of all improvement ; it is ignorance that imputes to a supernatural 
 cause the ravages of an epidemical disease, which might perhaps be easily pre- 
 vented or eradicated, and makes mankind recur to superstitious observances, 
 when precaution, or the application of the remedy, is all that is wanted. Sci- 
 ences, like facts, are linked together by a chain of genera) connexion, and jie'n 
 one another mutual support and corroboration. 
 
 f See GEuvres de Poivre, p. 77, 78. 
 
 L 
 
S2 ON PRODUCTION. BOOK 1. 
 
 site, that a manufacturer should have been found, possessed of the 
 means of reducing the knowledge into practice; who should have 
 at first made himself master of all that was known of that par- 
 ticular branch of industry, and afterwards have accumulated, 01 
 procured the requisite capital, collected artificers and labourers, and 
 assigned to each his respective occupation. 
 
 Finally, the work must have been completed by the manual skill 
 of the workmen employed ; some in constructing the buildings and 
 furnaces, some in keeping up the fire, mixing up the ingredients, 
 blowing, cutting, rolling out, fitting and fixing the pane of glass. 
 The utility and beauty of the resulting product, are inconceivable to 
 those who have never beheld this admirable creation of human in- 
 dustry. By means of industry, the vilest materials have been in- 
 vested with the highest degree of utility. The very rags and refuse 
 of wearing apparel have been transformed into the white and thin 
 sheets, that convey from one end of the globe to the other, the re- 
 quisitions of commerce and the particulars of art; that serve as the 
 depositories of the conceptions of genius, and trie vehicles of human 
 experience from one age to another ; to them we look for the evi- 
 dence of our properties ; to them we entrust the most noble and 
 amiable sentiments of the heart, and by them we awaken corre- 
 sponding feelings in the breasts of our fellow-creatures. The extra- 
 ordinary facilities for the communication of human intelligence which 
 paper affords, entitles it to be considered as one of the products that 
 have been most efficacious in ameliorating the condition of mankind. 
 Fortunate, indeed, would it have been, had an engine so powerful 
 never have been made the vehicle of falsehood, or the instrument 
 of tyranny ! 
 
 It is worth while to remark, that the knowledge of the man of 
 science, indispensable as it is to the development of industry, circu 
 lates with ease and rapidity from one nation to all the rest. And 
 men of science have themselves an interest in its diffusion ; for upon 
 that diffusion they rest their hopes of fortune, and, what is more 
 prized by them, of reputation too. For this reason, a nation, in 
 which science is but little cultivated, may nevertheless carry its in- 
 dustry to a very great length, by taking advantage of the information 
 derivable from abroad. But there is no way of dispensing with the 
 other two operations of industry, the art of applying the knowledge 
 of man to the supply of his wants, and the skill of execution. These 
 qualities are of advantage to none but their possessors ; so that a 
 country well stocked with intelligent merchants, manufacturers, and 
 ^agriculturists has more powerful means of attaining prosperity, than 
 one devoted chiefly to the pursuit of the arts and sciences. At the 
 period of the revival of literature in Italy, Bologna was the seat of 
 science ; but wealth was centred in Florence, Genoa, and Venice. 
 
 In our days, the enormous wealth of Britain is less owing to her 
 own advances in scientific acquirements, high as she ranks in that 
 department, than to the wonderful practical skill of her adventurers 
 in the useful application of knowledge, and the superiority of her 
 
CHAP. VI. ON PRODUCTION. 8:] 
 
 workmen in rapid and masterly execution. The national pride, that 
 the English are often charged\vith, does not prevent their accom- 
 modating themselves with wonderful facility to the tastes of their 
 customers and the consumers of their produce. They supply with 
 hats both the north and the south, because they have learnt to make 
 them light for the one market, and warm and thick for the other. 
 Whereas the nation that makes but of one pattern, must be content 
 with the home market only. 
 
 The English labourer seconds the master manufacturer; he is 
 commonly patient and laborious, and does not willingly send out an 
 article from his hands, without giving it the utmost possible preci- 
 sion and perfection ; not that he bestows more time upon it, but that 
 he gives it more of his care, attention and diligence, than the work- 
 men of most other nations. 
 
 There is no people, however, that need despair of acquiring the 
 qualities requisite to the perfection of their industry. It is but 150 
 years since England herself had made so little progress, that she pur- 
 chased nearly all her woollens from Belgium ; and it is not more than 
 80 years since Germany supplied with cotton goods the very nation, 
 that now manufactures them for the whole world.* 
 
 I have said that the cultivator, the manufacturer, the trader, make 
 it their business to turn to profit the knowledge already acquired, 
 and apply it to the satisfaction of human wants. I ought further to 
 add, that they have need of knowledge of another kind, which can 
 only be gained in the practical pursuit of their respective occupa- 
 tions, and may be called their technical skill. The most scientific 
 naturalist, with all his superior information, would probably succeed 
 much worse than his tenant, in the attempt to improve his own land. 
 A first-rate mechanist would most likely spin very indifferently 
 without having served his apprenticeship, though admirably skilled 
 in the construction of the cotton-machinery. In the arts there is a 
 certain sort of perfection, that results only from repeated trials, 
 sometimes successful and sometimes the contrary. So that science' 
 alone is not sufficient to ensure the progress, without the aid of ex- 
 periment, which is always attended with more or less of risk, and 
 does not always indemnify the adventurer, whose profit, even when 
 successful, is moderated by competition ; although society at large 
 receives the accession of a new product, or, wnat amounts to the 
 same thing, of an abatement in the price of an old one. 
 
 In agriculture, experiments usually cost the rent of the soil for a 
 year or more, over and above the labour and the capital engaged 
 in them. 
 
 * The cotton manufacture did not exist in England in the 17th century. In 
 1705, we see by the returns of the English customs, that the raw cotton manu- 
 factured in that country then amounted to no more than 1,170,880 pounds weight, 
 In 1785, the quantity imported was 6,706,000 Ibs. ; but in 1790 it had got up to 
 25,941,000 Ibs., and in 1817 to as much as 131,951,000 Ibs., for the English 
 market and for re-exportation. The quantity of cotton imported in 1831 inU 
 the United Kingdoms, was 288,708,453 Ibs. 
 
84 ON PRODUCTION. BOOK I. 
 
 In manufacture, experiment is hazarded on safer grounds of cal- 
 culation, capital engaged for a much shorter period, and if success 
 ensue, the adventurer rewarded by a longer period of exclusive ad- 
 vantage, because his process is less open to observation. In some 
 places; too, the exclusive advantage is protected by patents of inven- 
 tion. For all which reasons, the progress of manufacturing is gene- 
 rally more rapid and more diversified than that of agricultural 
 
 11 In commercial industry, the risk of experiment would be greater 
 than in the other two branches, if the costs of the adventure had no 
 auxiliary and concurrent object. But it is usually in the course of a 
 regular trade, that a merchant hazards the introduction of a virgin 
 commodity of foreign growth into an untried market. In this man- 
 ner it was that the Dutch, about the middle of the seventeenth cen- 
 tury, while prosecuting their commerce with China, with no very 
 sanguine expectation, made experiment of a small assortment of dried 
 leaves, from which the Chinese were in the habit of preparing their fa- 
 vourite beverage. Thus commenced the tea-trade, which now occa- 
 sions the annual transport of more than 45 millions of pounds weight, 
 that are sold in Europe for a sum of more than 80,000,000 of dollars.* 
 
 In some cases of very rare occurrence, boldness is nearly certain 
 of success. When the Europeans had recently discovered the pas 
 sage round the Cape of Good Hope and the continent of America, 
 their world was suddenly expanded to the East and West ; and such 
 was the infinity of new objects of desire in two hemispheres, whereof 
 one was not at all, and the other but very imperfectly known before, 
 that an adventurer had only to make the voyage, and was sure of 
 selling his returns to great advantage. 
 
 In all but such extraordinary cases it is perhaps prudent to defray 
 the charges of experiments in industry, not out of the capital en- 
 gaged in the regular and approved channels of production, but out 
 of the revenue that individuals have to dispose of at pleasure, with- 
 out fear of impairing their fortune. The whims and caprices that 
 divert to an useful end the leisure and revenue which most men 
 devote to mere amusement, or perhaps to something worse, cannot 
 be too highly encouraged. I can conceive no more noble employ- 
 ment of "wealth and talent. A rich and philanthropic individual 
 may, in this way, be the means of conferring upon the industrious 
 classes, and upon the consumers at large, in other \vords, upon the 
 mass of mankind, a benefit far beyond the mere value of what he ac 
 tually disburses, perhaps beyond the whole amount of his fortune 
 however princely it may be. Who will attempt to calculate the valui, 
 conferred on mankind by the unknown inventor of the plough ?f 
 
 A government, that knows and practises its duties, and has large 
 lesources at its disposal, does not abandon to individuals the whole 
 
 * Voyage Commcrciel et Politique aux Indes Orientates, par M. Felix 
 Renouard de Sainte Croix. 
 
 t Thanks to the art of Printing, the names of the benefactors of mankind will 
 Henceforward be lastingly recorded ; and if I mistake not, with more veneration 
 
CHAP. VII. ON PRODUCTION. 85 
 
 glory and merit of invention and discovery in the field of industry. 
 The charges of experiment, when defrayed by the government, are 
 not subtracted from the national capital, but from the national 
 revenue; for taxation never does, or, at least, never ought to touch 
 any thing beyond the revenue of individuals. The portion of them 
 so spent is scarcely felt at all, because the burthen is divided among 
 innumerable contributors; and, the advantages resulting from suc- 
 cess being a common benefit to all, it is by no means inequitable 
 that the sacrifices, by which they are obtained, should fall on the 
 community at large. 
 
 CHAPTER VII. 
 
 OF THE LABOUR OP MANKIND, OF NATURE, AND OF MACHINERY 
 RESPECTIVELY. 
 
 BY the term labour I shall designate that continuous action, exert- 
 ed to perform any one of the operations of industry, or a part only 
 of one of those operations. 
 
 Labour, upon whichever of those operations it be bestowed, is 
 productive, because it concurs in the creation of a product. Thus 
 the labour of the philosopher, whether experimental or literary, is 
 productive; the labour of the adventurer or master-manufacturer is 
 productive, although he perform no actual manual work; the labour 
 of every operative workman is productive, from the common day- 
 labourer in agriculture, to the pilot that governs the motion of a ship. 
 
 Labour of an unproductive kind, that is to say, such as does not 
 contribute to the raising of the products of some branch of industry 
 or other, is seldom undertaken voluntarily; for labour, under the 
 definition above given, implies trouble, and trouble so bestowed 
 could yield no compensation or resulting benefit: wherefore, it 
 would be mere folly or waste in the person bestowing it. When 
 trouble is directed to the stripping another person of the goods in 
 his possession by means of fraud or violence, what was before mere 
 extravagance and folly, degenerates to absolute criminality; and 
 there results no production, but only a forcible transfer of wealth 
 from one individual to another. 
 
 Man, as we have already seen, obliges natural agents, and even 
 
 than those which derive lustre from the deplorable exploits of military prowess. 
 Among these will be preserved the names of Olivier de Serres, the father of 
 French agriculture; the first who established an experimental farm; of Duhamel, 
 of Malsherbes, to whom France is indebted for many vegetables now naturalized 
 in her soil and climate: of Lavoisier, whose new system of chemistry has effecc- 
 ed a still more important revolution in the arts ; and of the numerous scientific 
 travellers of modern times; for travels, with an useful object, may be regarded 
 as adventures in the field of industry. 
 8 
 
86 ON PRODUCTION. BOOK I. 
 
 the products of his own previous industry, to work in concert with 
 him in the business of production. There will, therefore, be no 
 difficulty in comprehending the terms labour or productive service 
 of nature, and labour or productive service of capital. 
 
 The labour performed by natural agents, and that executed by 
 pre-existent products, to which we have given the name of capital, 
 are closely analogous, and are perpetually confounded one with the 
 other: for the tools and machines which form a principal item of 
 capital, are commonly but expedients more or less ingenious, for 
 turning natural powers to account. The steam engine is but a com- 
 plicated method of taking advantage of the alternation of the elas- 
 ticity of water reduced to vapour, and of the weight of the atmo- 
 sphere. So that, in point of fact, a steam engine employs more pro- 
 ductive agency, than the agency of the capital embarked in it: for 
 that machine *is an expedient for forcing into the service of man a 
 variety of natural agents, whose gratuitous aid may perhaps infinitely 
 exceed in value the interest of the capital invested in the machine. 
 
 It is in this light that all machinery must be regarded, from the 
 
 simplest to the most complicated instrument, from a common file to 
 
 the most expensive and complex apparatus. Tools are but simple 
 
 machines, and machines but complicated tools, whereby we enlarge 
 
 the limited powers of our hands and fingers; and both are, in many 
 
 jttsspects, mere means of obtaining the co-operation of natural agents.* 
 
 trheir obvious effect is to make less labour requisite for the raising 
 
 j the same quantity of produce, or, what comes exactly to the same 
 
 I thing, to obtain a larger produce from the same quantity of human 
 
 > labour. And this is the grand object and the acme of industry. 
 
 Whenever a new machine, or a new and more expeditious process 
 is substituted in the place of human labour previously in activity, 
 part of the industrious human agents, whose service is thus ingeni- 
 ously dispensed with, must needs be thrown out of employ. Whence 
 many objections have been raised against the- use of machinery, 
 which has been often obstructed by popular violence, and sometimes 
 by the act of authority itself. 
 
 To give any chance of wise conduct in such cases, it is necessary 
 beforehand to acquire a clear notion of the economical effect result- 
 ing from the introduction of machinery. 
 
 A new^ machine supplants a portion of human labour, but does 
 not diminish the amount of the product; if it did, it would be absurd 
 to adopt it. When water-carriers are relieved in the supply of a city 
 by any kind of hydraulic engine, the inhabitants are equally well 
 supplied with water. The revenue of the district is at least as 
 threat, but it takes a different direction. That of the water-carriers 
 is reduced, while that of the mechanists and capitalists, who furnish 
 
 * Generalization may at pleasure be carried still further ; a landed estate may 
 le considered as a vast machine for the production of grain, which is refitted and 
 Kept in repair by cultivation : or a flock of sheep as a machine for the raising of 
 niution or wool. 
 
1 
 
 CHAP. VII. ON PRODUCTION. 
 
 the funds, is increased. But, if the superior abundance of the pro- 
 duct and the inferior charges of its production, lower its exchange- 
 able value, the revenue of the consumers is benefited; for to them 
 every saving of expenditure is so much gain. 
 
 This new direction of revenue, however advantageous to the com- 
 munity at large, as we shall presently see, is always attended with 
 some painful circumstances. For the distress of a capitalist, when 
 his funds are unprofitably engaged or in a state of inactivity, is 
 nothing to that of an industrious population deprived of the means 
 of subsistence. 
 
 Inasmuch as machinery produces that evil, it is clearly objection- 
 able. But there are circumstances that commonly accompany its 
 introduction, and wonderfully reduce the mischiefs, while at the 
 same time they give full play to the benefits of the innovation. For, I 
 
 1. New machines are slowly constructed, and still more slowly 
 brought into use ; so as to give time for those who are interested, to 
 take their measures, and for the public administration to provide a 
 remedy.* 
 
 2. Machines cannot be constructed without considerable labour, 
 which gives occupation to the hands they throw out of employ. For 
 .nstance, the supply of a city with water by conduits gives increased 
 occupation to carpenters, masons, smiths, paviours, &c. in the con- ( 
 struction of the works, the laying down the main and branch pipes, 
 ifcc. &c. 
 
 3. ,The condition of consumers at large, and consequently, 
 amongst them, of the class of labourers affected by the innovation, 
 is improved by the reduced value of the product that class was 
 occupied upon. 
 
 Besides- it would be vain to attempt to avoid the transient evil, 
 consequenti il upon the invention of a new machine, by prohibiting 
 its employment, i If beneficial, it is or will be introduced some- 
 where or other; its products will be cheaper than those of labour 
 conducted on the old principle; and sooner or later that cheapness 
 will run away with the consumption and demand. Had the cotton 
 spinners on the old principle, who destroyed the spinning-jennies on 
 their introduction into Normandy, in 1789, succeeded in their object 
 France must have abandoned the cotton manufacture; every body 
 would have bought the foreign article, or used some substitute; and 
 the spinners of Normandy, who, in the end, most of them, found 
 employment in the new establishments, would have been yet worse 
 off for employment. 
 
 * Without having recourse to local or temporary restrictions on the use of new j 
 ' methods or machinery, which are invasions of the property of the inventors or ) 
 fabricators, a benevolent administration can make provision for the employment 
 of supplanted or inactive labour in the construction of works of public utility at 
 the public expense, as of canals, roads, churches, or the like ; in extended colo- 
 nization ; in the transfer of population from one spot to another. Employmen 
 is the more readily found for the hands thrown out of work by machinery 
 because thev are commonly already inured to labour. 
 
S8 ON PRODUCTION. BOOK I. 
 
 So much for the immediate effect of the introduction of machinery. 
 The ultimate effect is wholly in its favour. 
 
 Indeed if by its means man makes a conquest of nature, and com- 
 pels the powers of nature and the properties of natural agents to 
 work for his use and advantage, the gain is too obvious to need illus- 
 tration. There must always be an increase of product, or a dimi- 
 nution in the cost of production. If the sale-price of a product do 
 not fall, the acquisition redounds to the profit of the producer; and 
 that without any loss to the consumer. If it do fall, the consumer is 
 benefited to the whole amount of the fall, without any loss to the 
 producer. 
 
 The multiplication of a product commonly reduces its price, that 
 reduction extends its consumption; and so its production, though 
 become more rapid, nevertheless gives employment to more hands 
 than before. It is beyond question, that the manufacture of cot 
 ton now occupies more hands in England, France, and Germany, 
 than it did before the introduction of the machinery that has abridg- 
 ed and perfected this branch of manufacture in so remarkable a 
 degree. 
 
 Another striking example of a similar effect is presented by the 
 machine used to multiply with rapidity the copies of a literary per- 
 formance, I mean the printing press. 
 
 Setting aside all consideration of the prodigious impulse given by 
 the art of printing to the progress of human knowledge and civiliza- 
 tion, I will speak of it merely as a manufacture, and in an economi 
 cal point of view. When printing was first brought into use, a 
 multitude of copyists were of course immediately deprived of occu- 
 pation ; for it may be fairly reckoned, that one journeyman printer 
 does the business of two hundred copyists. We may, therefore, 
 conclude, that 199 out of 200 were thrown out of work. What 
 followed ? Why, in a little time, the greater facility of reading 
 printed than written books, the low price to which books fell, the 
 stimulus this invention gave to authorship, whether devoted to 
 amusement or instruction, the combination, in short, of all these 
 causes, operated so effectually as to set at work, in a very little time, 
 more journeymen printers than there were formerly copyists. And 
 if we could now calculate with precision, besides the* number of 
 journeymen printers, the total number of other industrious people 
 that the press finds occupation for, whether as type-founders and 
 moulders, paper-makers, carriers, compositors, bookbinders, book- 
 sellers, and the like, we should probably find, that the number of 
 persons occupied in the manufacture of books is now 100 times what 
 it was before the art of printing was invented. 
 
 It may be allowable to add, that viewing human labour and ma- 
 chinery in the aggregate, in the supposition of the extreme case, viz. 
 lhat machinery should be brought to supersede human labour alto 
 <rether, yet the numbers of mankind would not be thinned ; for the 
 sum total of products would be the same, and there would probabiy 
 be less suffering to the poorer and labouring classes to be apprehend- 
 
CHAP. VII. ON PRODUCTION. S9 
 
 cd ; for in that case the momentary fluctuations, that distress tho 
 different branches of industry, would principally affect machinery. 1 
 which, and not human labour, would be paralyzed ; and machinery 
 cannot die of hunger ; it can only cease to yield profit to its employ- 
 ers, who are generally farther removed from want than mere 
 labourers. 
 
 But however great may be the advantages, which the adventur- 
 ers in industry, and even the operative classes, may ultimately 
 derive from the employment of improved machinery, the great ^ain 
 accrues to the consumers, which is always the most important cTass, 
 because it is the most numerous; because it comprehends every 
 description of producers whatever; and because the welfare of this 
 class, wherein all others are comprised, constitutes the general well- 
 being and prosperity of a nation.* I repeat, that it is the consumers 
 who draw the greatest benefit from machinery; for though the 
 invei/or may indeed for some years enjoy the exclusive advantage 
 of his invention, which it is highly just and proper he should, yet 
 there is no instance of a secret remaining long undivulged. Nothing 
 can long escape publicity, least of all what people have a personal 
 interest in discovering, especially if the secret be necessarily con- 
 fided to the discretion of a number of persons employed in construct- 
 ing or in working the machine. The product is thenceforward cheap- 
 ened by competition to the full extent of the saving in the cost of 
 production ; and thenceforward begins the full advantage to the con- 
 sumer. The grinding of corn is probably not more profitable to the 
 miller now than formerly; but it costs infinitely less to the con- 
 sumer. 
 
 Nor is cheapness the sole benefit that the consumer reaps from the 
 introduction of more expeditious processes: he generally gains in 
 addition the greater perfection of the product. Painters could un- 
 doubtedly execute with the brush or pencil the designs that ornament 
 our printed calicoes and furniture papers, but the copperplates and 
 rollers employed for that purpose give a regularity of pattern, ana 
 uniformity of colour, which the most skilful artist could never equal. 
 
 The close pursuit of this inquiry through all the arts of industry 
 would show, that the advantage of machinery is not limited to the 
 bare substitution of it for human labour, but that, in fact, it gives a 
 positive new product, inasmuch as it gives a degree of perfection 
 before unknown. The flatting-mill and the die execute products, 
 that the utmost skill and attention of the human hand could never 
 accomplish. 
 
 In fine, machinery does still more; it multiplies products with 
 which it has no immediate connexion. Without taking the trouble 
 to reflect, one perhaps would scarcely imagine that the plough, the 
 harrow, and other similar machines, whose origin is lost in the night 
 
 * Paradoxical as it may appear, it is nevertheless true, that the labouring class 
 is of all others the most interested in promoting 1 the economy of human labour; 
 for that is the class which benefits the most by the general cheapness, and suf 
 fers most from the general dearness of commodities. 
 8* M 
 
90 ON PRODUCTION. BOOK I. 
 
 of ages, have powerfully contributed to procure for mankhd, besides 
 the absolute necessaries of life, a vast number of the superfluities 
 they now enjoy, whereof they would otherwise never have had any 
 conception. Yet, if the different dressings the soil requires could 
 be no otherwise given, than by the spade, the hoe, and other such 
 simple and tardy expedients, if we were unable to make available in 
 agricultural production those domestic animals, that, in the eye of 
 political economy, are but a kind of machines, it is most likely th^it 
 the whole mass of human labour, now applicable to the arts of indus- 
 try, would be occupied in raising the bare necessary subsistence of 
 the actual population. Thus, the plough has been instrumental in 
 releasing a number of hands for the prosecution of the arts, even of 
 the most frivolous kind; and what is of more importance, for the 
 cultivation of the intellectual faculties. 
 
 The ancients were unacquainted with water or wind-mills. In 
 their time, the wheat their bread was made of, was pounded by the 
 labour of the hand : so that perhaps no less than twenty individuals 
 were occupied in pounding as much wheat as one mill can grind.* 
 Now a single miller, or two at the most, is enough to feed Find 
 superintend a mill. By the aid, then, of this ingenious piece of 
 mechanism, two persons are as productive as twenty were in the days 
 of Caesar. Wherefore, in every one of our mills, we make the wind, 
 or a current of water, do the work of eighteen persons ; which 
 eighteen extra persons are just as well provided with subsistence ; 
 for the mill has in no respect diminished the general produce of the 
 community: and whose exertions may be directed to the creation of 
 new products, to be given by them in exchange for the produce of 
 the mill; thereby augmenting the general wealth of the community.-)- 
 
 CHAPTER Vin. 
 
 OP THE ADVANTAGES AND DISADVANTAGES RESULTING FROM DIVISION OP 
 LABOUR, AND OP THE EXTENT TO WHICH IT MAY BE CARRIED. 
 
 have already observed that the several operations, the com- 
 bination of which forms but one branch of industry, are not in gene- 
 ral undertaken or performed by the same person ; for they commonlv 
 
 * Homer tells us, in the Odyssey, b. xx., that twelve women were daily em- 
 ployed in grinding corn for the family consumption of Ulysses, whose establish- 
 ment is not represented as larger than that of a private gentleman of fortune of 
 modern days. 
 
 t Since the publication of the third edition of this work, M. de Sismondi has 
 published his Nouveaux Principes d'Economie Politique. This valuable writer 
 seems to have been impressed with an exaggerated notion of the transient evils 
 
CHAP. VIII. ON PRODUCTION. 91 
 
 require different kinds of talent ; and the labour requisite to each is 
 enough to take up a man's whole time and attention. Nay, in some 
 instances, a single one of these operations is split again into smaller 
 subdivisions, each of them sufficient for one person's exclusive occu- 
 pation. 
 
 Thus, the study of nature is shared amongst the chemist, the 
 botanist, the astronomer, and many other classes of students in 
 philosophy. 
 
 Thus, too, in the application of human knowledge to the satisfac- 
 tion of human wants, in manufacturing industry, for instance, we 
 find different classes of manufacturers employed exclusively in the 
 fabric of woollens, pottery, furniture, cottons, &c. &c. 
 
 Finally, in the executive part of each of the three branches of in- 
 dustry, there are often as many different classes of workmen as there 
 are different kinds of work. To make the cloth of a coat, there 
 must have been set to work the several classes of spinners, weavers, 
 dressers, shearers, dyers, and many other classes of labourers, each 
 of whom is constantly and exclusively occupied upon one operation. 
 
 The celebrated Adam Smith was the first to point out the im- 
 mense increase of production, and the superior perfection of products 
 referable to this division of labour.* He has cited among other 
 
 and a faint one of the permanent benefits of machinery, and to be utterly unac- 
 quainted with those principles of the science, which place those benefits beyond 
 controversy, (a) 
 
 * Beccaria, in a public course of lectures on political economy, delivered at 
 Milan in the year 1769, and before the publication of Smith's work, had remark- 
 ed the favourable influence of the division of labour upon the multiplication of 
 products. These are his words: " Ciascuno prova coir esperienza, che, applican- 
 do la mano e Fingegne sempre allo stesso genere di opere e di prodotti, egli piu 
 facilli, piu abondanti e migliori ne travo i resultati, di quello, che se ciascuno 
 isolatamente le cose tutte a se necessarie soltanto facesse : onde altri pascono 
 le pecore, altri ne cardano le lane, altri le tessonoe \ chi coltiva blade, chi nefa 
 il pane : chi veste, chi fabrica agli agricoltorie la voranti ; crescendo e conca- 
 tenandosi le arti, e dividendosi in tal maniera, per la commune e privata ufilitd 
 gli nomini in varie classi e condizioni" " We all know, by personal experi- 
 ence, that, by the continual application of the corporeal and intellectual faculties 
 to one peculiar kind of work or product, we can obtain the product with more 
 ease, and in greater abundance and perfection, than if each were to depend upon 
 his own exertions for all the objects of his wants. For this reason, one man feeds 
 sheep, a second cards the wool, and a third weaves it: one man cultivates wheat, 
 another makes bread, another makes clothing or lodging for the cultivators and 
 mechanics : this multiplication and concatenation of the arts, and division of 
 mankind into a variety of classes and conditions, operating to promote both pub- 
 lic and private welfare." 
 
 However, I have given Smith the credit of originality in his ideas of the di- 
 vision of labour; first, because, in all probability, he had published his opinions 
 from his chair of professor of philosophy at Glasgow before Beccaria, as it is 
 
 (a)Our author, in his recent argument with Malthus, upon the subject of the 
 excess of manufacturing power and produce, appears to me to have completely 
 vindicated his own positions against the attacks of Sismondi and Malthus ; and 
 to have exposed the fallacy of "the appalling doctrine, that the powers of human 
 industry can ever be too great and too productive. Vide Letters a M. Malthus 
 
112 ON PRODUCTION. BOOK T. 
 
 examples, the manufacture of pins. The workmen occupied in this 
 manufacture execute each but one part of a pin. One draws the 
 wire, another cuts it, a third sharpens the points. The head of a 
 pin alone requires two or three distinct operations, each performed 
 by a different individual. By means of this division, an ill-appointed 
 establishment, with but ten labourers employed, could make 48,000 
 pins per day, by Smith's account. Whereas, if each person were 
 obliged to finish off the pins one by one, going through every opera- 
 tion successively from first to last, each would probably make but 
 20 per day, and the ten workmen would produce in the whole but 
 200, in lieu of 48,000. 
 
 Smith attributes this prodigious difference to three causes : 
 ] The improved dexterity, corporeal and intellectual, acquired 
 by frequent repetition of one simple operation. In some fabrics the 
 rapidity with which some of the operations are performed exceeds 
 what the human hand could, by those who had never seen them, be 
 supposed capable of acquiring. 
 
 2. The saving of the time which is commonly lost in passing from 
 one species of work to another, and in the change of place, position, 
 and tools. The attention, which is always slowly transferred, has 
 no occasion to transport itself and settle upon a new object. 
 
 3. The invention of a great number of machines, which facilitate 
 and abridge labour in all its departments. For the division of labour 
 naturally limits each operation to an extremely simple task, and one 
 that is incessantly repeated; which is precisely what machinery 
 may most easily be made to perform. 
 
 Besides, men soonest discover the methods of arriving at a parti- 
 cular end, when the end is approximate, and their attention exclu- 
 
 well known he did the principles that form the ground-work of his book ; but 
 chiefly because he has the merit of having deduced from them the most import- 
 ant conclusions. (1) 
 
 (1) [All the fundamental doctrines contained in the Inquiry into the Wealth 
 of Nations, were comprehended in Dr. Smith's course of political lectures, deliv- 
 ered at Glasgow as early as the year 1752; "at a period surely," says DUGALD 
 STEWART, " when there existed no French (and he might have added, nor 
 Italian) performance on the subject, that could be of much use to him in guiding 1 
 his researches." A short manuscript, drawn up by Dr. Smith in the year 1755, 
 fully establishes his exclusive claim to the most important opinions detailed in 
 his treatise on the Wealth of Nations, which did not appear until the beginning 
 of the year 1776. " A great part of the opinions enumerated in .this paper, (he 
 observes,) is treated of at length in some lectures which I have still by me 
 (1755,) and which were written in the hand of a clerk who left my service six 
 years ago. They have all of them been the constant subject of my lectures, 
 since I first taught Mr. Craigie's class, the first winter I spent in Glasgow, 
 down to this day, without any considerable variation. They had all of them 
 been the subject of lectures which I read in Edinburgh the winter before I left it, 
 and I can adduce innumerable witnesses, both from that place and from this, 
 who will ascertain them sufficiently to be mine." Vide Mr. Stewart's Account 
 of the Life and Writings of Adam Smith, LL. D. read before the Royal Society 
 of Edinburgh, January 21 and March 18, 1793.] 
 
 AMERICAN EDITOR. 
 
CHAP. VIII. ON PRODUCTION. 9S 
 
 sively directed to it. Discoveries, even in the walk of philosophy, 
 are for the most part referable, in their origin, to the subdivision of 
 labour ; because it is this subdivision that enables men to devote 
 themselves to the exclusive pursuit of one branch of knowledge ; 
 which exclusive devotion has wonderfully favoured their advance- 
 ment.* 
 
 Thus the knowledge or theory necessary to the advancement of 
 commercial industry for instance, attains a far greater degree of per- 
 fection, when different persons engage in the several studies ; one of 
 geography, with the view of ascertaining the respective position and 
 products of different countries ; another of politics, with a view to 
 inform himself of their national laws and manners, and the advan- 
 tages and disadvantages of commercial intercourse with them ; a third 
 of geometry and mechanics, by way ot determining the preferable 
 form of the ships, carriages, and machinery of all kinds, that must 
 be employed ; a fourth of astronomy and natural philosophy, for the 
 purposes of navigation, &c. &c. 
 
 Thus, too, the application of knowledge in the same department 
 of commercial industry will obviously arrive at a higher degree of 
 perfection, when divided amongst the several branches of internal, 
 Mediterranean, East and West Indian, American, wholesale and 
 retail, &c. &c. 
 
 Moreover, such a division is no obstacle to the combination of 
 operations not altogether incompatible, more especially if they aid 
 and assist each other. There is no occasion for two different mer- 
 chants to conduct, one the trade of import for home consumption, 
 and the other the trade of export of home products ; because these 
 operations, far from clashing, mutually facilitate and assist each 
 other, (a) 
 
 The division of labour cheapens products, by raising a greater 
 quantity at the same or less charge of production. Competition soon 
 obliges the producer to lower the price to the whole amount of the 
 saving effected ; so that he derives much less benefit than the consu- 
 mer ; and every obstacle the latter throws in the way of that division 
 is an injury to himself. 
 
 * But though many important discoveries in the arts have originated in divi- 
 sion oflabour, we must not refer to that source the actual products that have re- 
 sulted, and will to eternity result, from those discoveries. The increased product 
 must flow from the productive power of natural agents, no matter what may have 
 been the occasion of our first becoming acquainted with the means of employing 
 those agents. Vide supra, Chap. IV. 
 
 (a) The combination of operations which at first sight appears to be distinct, 
 is far more practicable in what our author calls the branch of application, than in 
 either the theoretical or the executive branch. A general merchant, by means of 
 clerks and brokers, will combine a vast variety of different commercial opera- 
 tions, and yet prosper. Why! Because his own peculiar task is that of super- 
 intendence of commercial dealings ; which superintendence may be extended 
 over a greater surface of dealing without incongruity, being on a closer m 
 spection, but a repetition of the same operation. 
 
94 ON PRODUCTION. BOOK I 
 
 Should a tailor try to make his own shoes as well as his coat, he 
 would infallibly ruin himself.* We see every day people acting as 
 their own merchants, to avoid paying a regular trader the ordinary 
 profit of his business ; to use their own expression, with the view of 
 pocketing that profit themselves. But this is an erroneous calcula- 
 tion ; forlhis division of labour enables the regular dealer to execute 
 the business for them much cheaper than they can do it themselves. 
 Let them reckon up the trouble it costs them, the loss of time, the 
 money thrown away in extra charges, which is always proportion- 
 ally more in small than in large operations, and see if all these to- 
 gether do not amount to more than the two or three per cent, that 
 might be saved on every paltry item of consumption ; even suppo- 
 sing them not to be deprived of what little advantage they might 
 expect, by the avarice of the cultivator or manufacturer they \vould 
 have to deal directly with, who will of course impose, if he can, 
 upon their inexperience. 
 
 I* is no advantage, even to the cultivator or manufacturer himself, 
 except under very particular circumstances, to intrude upon the 
 province of the merchant, and endeavonr to deal directly with the 
 consumer without his intervention. He would only divert his at- 
 tention from his ordinary occupation, and lose time that might be 
 far better employed in his own peculiar line ; besides being under 
 the necessity of keeping up an establishment of people, horses, car- 
 riages, &c. the expenses of which would far exceed the merchant's 
 profit, reduced as it always must be by competition. 
 
 The advantages accruing from division of labour can be enjoyed 
 in respect of particular kinds of products only; and not in them, un- 
 til their consumption has exceeded a certain point of extension. Ten 
 workmen can make 48,000 pins in a day; but would hardly do so, 
 unless where there was a daily consumption of pins to that amount ; 
 for, to arrive at this degree of division of labour, one \vorkman must 
 be wholly and exclusively occupied in sharpening the points, while 
 the rest are severally engaged, each in a different part of the process. 
 If there be a daily demand for no more than 24,000, he must needs 
 lose half his day's work, or change his occupation, in which case, 
 the division of labour will be less extensive and complete. 
 
 For this reason, divisions of labour cannot be carried to the extreme 
 limit, except in products capable of distant transport and the conse- 
 quent increase of consumption ; or where manufacture is carried on 
 amidst a dense population, offering an extensive local consumption. 
 For the same reason, too, many kinds of work, the products of which 
 are destined to instantaneous consumption, are executed by the same 
 individual, in places where the population is limited. In a small 
 town or village, the same person is often barber, surgeon, doctor, 
 
 *The low price of sugar in China is probably occasioned, in part, by the cir- 
 (.iimstance of the grower leaving to a separate class the extraction of the sugar 
 from the cane. This operation is performed by itinerant sugar pressers, who 
 tfo from house to house, offering their services, and provided with an extremely 
 simple appar?*us Vide Macartney's Embassy, vol. iv. p. 198. 
 
CHAP, VIII. ON PRODUCTION. 95 
 
 and apothecary ; while in a populous city, and there only, those are 
 not merely separate and distinct occupations, but some of them are 
 again subdivided into several branches; that of the surgeon, for in- 
 stance, is split into the several occupations of dentist, oculist, ac- 
 coucher, &c. ; each of which practitioners, by confining his practice 
 to a single branch of this extensive art, acquires a degree of skill, 
 which, but for this division, he could never attain. 
 
 The same circumstance applies equally to commercial industry. 
 Take the village grocer ; the consumption of his groceries is so lim- 
 ited, as to oblige him to be at the same time haberdasher, stationer, 
 innkeeper, and who knows what, perhaps even news-writer and pub- 
 lisher; whereas in large cities, not only grocery at large, but even 
 the sale of a single article of grocery, is a great commercial concern. 
 At Paris, London, and Amsterdam, there are shops, where nothing 
 else is sold but the single article tea, oil or vinegar; and it is natural 
 to suppose that such shops have a much better assortment of the sin- 
 gle article, than those dealing in many different commodities at once. 
 Thus, in a rich and populous country, the carrier, the wholesale, the 
 intermediate, and the retail dealer conduct each a separate branch of 
 commercial industry, and conduct it with greater perfection as well 
 as greater economy. Yet they all benefit by this economy ; and that 
 they do so, if the explanations already given are not convincing, ex- 
 perience bears irrefragable testimony ; for consumers always buy 
 cheapest where commercial industry is the most subdivided. Ceteris 
 paribus, a commodity brought from the same distance is sold cheap- 
 er at a large town or fair, than in a village or hamlet. 
 
 The limited consumption of hamlets and villages, besides obliging 
 dealers to combine many elsewhere distinct occupations, prevents 
 many articles from finding a regular sale at all seasons. Some are 
 not presented for sale at all, except on market or fair days ; on such 
 days the whole week's or perhaps year's consumption is laid in. 
 On all other days, the dealer either travels elsewhere with his wares, 
 or finds some other kind of occupation. In a very rich and very 
 populous district, the consumption is so great, as to make the sale of 
 one article only, quite as much as a trader can manage, though he 
 devote every day in the week to the business. Fairs and markets 
 are expedients of an early stage of national prosperity ; the trade by 
 caravans is a still earlier stage of international commerce ; but even 
 these expedients are far better than none at all.* 
 
 * The country markets of France not only exhibit extreme inertness in parti- 
 cular channels of consumption ; but a very cursory observation is sufficient to 
 show, that the sale of products in them is very limited, and the quality of what 
 are sold very inferior. Besides the local products of the district, one sees nothing 
 there, except a few tools, woollens, linens, and cottons of the most inferior 
 quality. In a more advanced stage of prosperity, one would find some few object?} 
 of gratification of wants peculiar to a more refined state of existence: some arti- 
 cles of furniture combining convenience and elegance of form ; woollens of some 
 variety or' fineness and pattern ; articles of food of a more expensive kind, wlie- 
 
90 ON PRODUCTION. BOOK I. 
 
 From the necessity of the existence of a very extended consump- 
 tion, before division of labour can be carried to its extreme point, it 
 follows, that such division can never be introduced in the manufac- 
 ture of products, which, from their high price, are placed within the 
 reach of few purchasers. In jewellery, especially of the better kinds, 
 ,t is practised in a very limited degree ; and such division being, as 
 we have seen, one cause of the invention and application of ingenious 
 processes, it is not surprising that such processes are least often met 
 with in the preparation of products of highly finished workmanship. 
 In visiting the workshop of a lapidary, one is often dazzled with the 
 costliness of the materials, and the skill and patience of the work- 
 man; but it is only in the grand manufactories of articles of univer- 
 sal consumption, that one is astonished with the display of ingenuity 
 employed to give additional expedition and perfection to the pro- 
 duct. In looking at an article of jewellery, it is easy to form an idea 
 of the tools and processes, by means of which it has been executed; 
 whereas few people, on viewing a common stay-lace, would suppose 
 it had been made by a horse or a current of water, which is actually 
 the case. 
 
 Of the three branches of industry, agriculture is the one that admits 
 division of labour in the least degree. It is impossible to collect any 
 great number of cultivators on the same spot, to use their joint exer- 
 tions in the raising of one and the same product. The soil they 
 work upon is extended over the whole surface of the globe, and 
 obliges them to work at considerable distance from each other. Be- 
 sides, agriculture does not allow of one person being continually 
 employed in the same operation. One man cannot be all the yeai 
 ploughing or digging, any more than another can find constant occu- 
 pation in gathering in the crop. Moreover, it is very rarely that the 
 whole of one's land can be devoted to the same kind of cultivation, 
 or that the same kind of cultivation can be continued on the same 
 spot for many successive years. The land would be exhausted ; and, 
 supposing the cultivation of the whole property to be uniform, yet 
 even then, the preparing and dressing of the whole ground, and the 
 getting in of the whole of the crops, would come on at the same time, 
 and the labourers be unoccupied at other periods of the year.* 
 
 ther on account of their preparation or the distance they may have been brought 
 from ; a few works of instruction or tasteful amusement ; a few books beside? 
 mere almanacs and prayer-books. In a still more advanced stage, the consump- 
 tion of all these things would be constant and extensive enough to support regu- 
 lar and well-stocked shops in all these different lines. Of this degree of wealth 
 examples are to be found in Europe, particularly in parts of England, Holland, 
 and Germany. 
 
 * It is not common to meet with such large concerns in agriculture, as in the 
 branches of commerce and manufacture. A farmer or proprietor seldom under- 
 takes more than four or five hundred acres; and his concern, in point of capital 
 and amount of produce, does not exceed that of a middling tradesman, or manu- 
 facturer. This difference is attributable to many concurrent causes ; chiefly to 
 Hie extensive area this branch of industry requires; to the bulky nature of the 
 
CHAP. VTII. ON PRODUCTION. 97 
 
 Moreover, the nature of his occupation and of agricultural pro- 
 ducts makes it highly convenient for the cultivator to raise his own 
 vegetables, fruit, and cattle, and even to manufacture part of the 
 tools and utensils employed in his house-keeping ; though in the other 
 channels of industry, these items of consumption give exclusive 
 occupation to a number of distinct classes. 
 
 Where concerns of industry are carried on in manufactories, in 
 which one and the same master manufacturer conducts the product 
 through all its stages, he can never establish any great subdivision 
 of the various operations, without great command of capital. For 
 such division requires larger advances of wages, of raw materials, 
 and of tools and implements. Where eighteen workmen manufacture 
 but twenty pins each per day, that is to say, in all 360 pins, weigh- 
 ing scarcely an ounce of metal, the daily advance of an ounce of 
 fresh metal is enough to keep them in regular work. But if, in con- 
 sequence of division of labour, these same eighteen persons can be 
 brought, as we know they can, to produce 86,400 pins, the daily 
 supply of raw material requisite for their regular employ will be 
 240 ounces weight of metal ; consequently a much more considerable 
 advance will be called for. If we further take into calculation, that 
 there is an interval of probably a month or more, from the purchase 
 of the metal by the manufacturer to the period of his reimbursement 
 by the sale of his pins, we shall find that he must necessarily have at 
 all times on hand, in different stages of progressive manufacture, 30 
 times 240 ounces of metal ; in other words, the portion of his capital 
 vested in raw material alone will amount to the value of 450 Ibs. of 
 metal. In addition to which, it must be observed, that fhe division 
 of labour cannot be effected without the aid of various implements 
 and machines, that form themselves an important item of capital. 
 Thus, in poor countries, we frequently find a product carried through 
 all its stages, from first to last, by one and the same workman, from 
 mere want of the capital requisite for a judicious division of the dif- 
 ferent operations. 
 
 We must not however suppose, that, to effect this division of 
 labour, it is necessary the capital should be placed all in the hands 
 of a single adventurer, or the business conducted all within the walls 
 of one grand establishment. A pair of boots undergoes a variety of 
 processes, whereof all are not executed by the bootmaker alone ; the 
 grazier, the tanner, the currier, all others, who immediately or re- 
 motely furnish any substance or tool used in the making of boots, 
 contribute to the raising of the product ; and though there is a very 
 considerable subdivision of labour in the making of this article, tb.3 
 
 produce, and consequently difficulty of collecting it at one point from the distant 
 parts of the farm, or sending it to very remote markets; to the nature c 
 business itself, which is not susceptible of any regular and uniform system, and 
 requires in the adventurer a succession of temporary expedients and direct 
 suggested by the difference of culture, of manuring and dressings, and the vari 
 ofeach labourer's occupations, according to the seasons, the change of wea 
 
 &c ' 
 
 9 N 
 
98 ON PRODUCTION. BOOK L 
 
 greater part of the joint and concurrent producers may have very 
 little command of capital. 
 
 Having detailed the advantages of the subdivision of the various 
 occupations of industry, and the extent to which it may be carried, 
 the view of the subject would be incomplete, were we to omit 
 noticing, on the other hand, the inconveniences that inseparably 
 attend it. 
 
 A man, whose whole life is devoted to the execution of a single 
 operation, will most assuredly acquire the faculty of executing it 
 better and quicker than others ; but he will, at the same time, be 
 rendered less fit for every other occupation, corporeal or intellectual; 
 his other faculties will be gradually blunted or extinguished ; and the 
 man, as an individual, will degenerate in consequence. To have 
 never done any thing but make the eighteenth part of a pin, is a 
 sorry account for a human being to give of his existence. JNor is it 
 to be imagined that this degeneracy from the dignity of human 
 nature is confined to the labourer, that plies all his life at the file or 
 the hammer ; men, whose professional duties call into play the finest 
 faculties of the mind, are subject to similar degradation. This divi- 
 sion of occupations has given rise to the profession of attorneys, 
 whose sole business it is to appear in the courts of justice instead of 
 the principals, and to follow up the different steps of the process on 
 their behalf. These legal practitioners are, confessedly, seldom 
 deficient in technical skill and ability ; yet it is not uncommor? to 
 meet with men, even of eminence in this profession, wholly igno- 
 rant of the most simple processes of the manufactures they every 
 day make use of; who, if they were set to work to mend the simplest 
 article of their furniture, would scarcely know how to begin, and 
 could probably not drive a nail, without exciting the risibility of 
 every carpenter's awkward apprentice; and if placed in a situation 
 of a greater emergency, called upon, for instance, to save a drowning 
 friend, or to rescue a fellow-townsman from a hostile attack, would 
 be in a truly distressing perplexity ; whereas a rough peasant, inha- 
 biting a semi-barbarous district, would probably extricate himself 
 from a similar situation with honour. 
 
 With regard to the labouring class, the incapacity for any other 
 than a single occupation, renders the condition of mere labourers 
 more hard and wearisome, as well as less profitable. They have 
 less means of enforcing their own rights to an equitable portion of 
 the gross value of the product. The workman, that carries about 
 with him the whole implements of his trade, can change his locality 
 at pleasure, and earn his subsistence wherever he pleases: in the 
 other case, he is a mere adjective, without individual capacity, inde- 
 pendence, or substantive importance, when separated from his fellow- 
 labourers, and obliged to accept whatever terms his employer thinks 
 fit to impose 
 
 On the whole, we may conclude, that division of labour is a skil- 
 ful mode of employing human agency, that it consequently multiplies 
 the productions of society; in other words, the powers and the enjoy- 
 
CHAP. IX. ON PRODUCTION. 99 
 
 ments of mankind ; but that it in some degree degrades the faculties 
 of man in his individual capacity, (a) (1) 
 
 CHAPTER IX. 
 
 CP THE DIFFERENT METHODS OF EMPLOYING COMMERCIAL INDUSTRY, AND 
 THE MODE IN WHICH THEY CONCUR IN PRODUCTION. 
 
 COMMODITIES are not all to be had in all places indifferently. 
 The immediate products of the earth depend upon the local varie- 
 ties of soil and climate ; and even the products of industry are met 
 with only in such places as are most favourable to their production. 
 
 Whence it follows that, where products, whether of industry or 
 of the earth, do not grow naturally, they can not be introduced or 
 produced in a perfect state, and fit for consumption, without under- 
 going a certain modification ; that is to say, that of transport or con- 
 veyance. 
 
 This transfer gives occupation to what has been called commercial 
 industry. 
 
 External commerce consists of the supply of the home market 
 with foreign, and of foreign markets with home products.* 
 
 Wholesale commerce is the buying of large quantities and re- 
 selling to inferior dealers. 
 
 Retail commerce is the buying of wholesale dealers, and re-selling 
 to consumers. 
 
 * Products that are bought to be re-sold, are called merchandise; and merchan- 
 dise bought for consumption is denominated commodities. (6) 
 
 (a) This consideration makes it peculiarly incumbent upon the government 
 of a manufacturing nation to diffuse the benefits of early education, and thus 
 prevent the degeneration from being intellectual as well as corporeal. T. 
 
 (6) This distinction has been discarded in the translation, for the sake of 
 simplification; the general term products being sufficiently intelligible and 
 specific. T. 
 
 (1) ["The extensive propagation of light and refinement," says DUGALD 
 STEWART, " arising from the influence of the press, aided by the spirit of com- 
 merce, seems to be the remedy to be provided by nature against the fatal effects 
 which would otherwise be produced, by the subdivision of labour accompanying 
 the progress of the mechanical arts : nor is any thing wanting to make the 
 remedy effectual, but wise institutions to facilitate general instruction, and to 
 adapt the education of individuals to the stations they are to occupy. The mind 
 of the artist, which, from the limited sphere of his activity, would sink below 
 the level of the peasant or the savage, might receive in infancy the means of 
 intellectual enjoyment and the seeds of moral improvement; and even the insipid 
 uniformity of his professional engagements, by presenting no object to awaken 
 his ingenuity or to distract his attention, might leave him at liberty to employ 
 his faculties on subjects more interesting to himself, and more extensively useful 
 to others."] 
 
 AMERICAN EDTTOE. 
 
100 ON PRODUCTION. BOOK I. 
 
 The commerce of money or specie is conducted by the banker, 
 who receives or pays on account of other people, or gives bills, or- 
 ders, or letters of credit, payable elsewhere than at the place where 
 they are given. This is sometimes called the banking trade, (a) 
 
 The broker brings buyers and sellers together. 
 
 The persons engaged in these several branches are all agents of 
 commercial industry, whose agency tends to approximate products 
 to the hands of the ultimate consumer. The agency of the retailer 
 of an ounce of pepper is quite as indispensable to the consumer, as 
 that of the merchant, who despatches his vessel to the Moluccas for 
 a cargo ; and the only reason why these different functions are not 
 both performed by one and the same individual is, because they can 
 be executed with more economy and convenience by two. To enter 
 minutely into an examination of the limits and practices of these 
 various departments of commercial industry, would be to write a 
 treatise on commerce.* All we have to do in this work is, to in- 
 quire in what manner and degree they influence the production of 
 values. 
 
 In Book II., we shall see how the actual demand for a product 
 originating in its utility, is limited by the amount of the cost of 
 production, and upon what principle its relative value is determined 
 in each particular place. At present it is sufficient for the clear con 
 ception of commercial production, to consider the value of a product 
 as a given quantity or datum. Thus, without examining the reason 
 why oil of olives is worth at Marseilles thirty, and at Paris forty 
 sous per lb., I shall content myself with simply stating, that who- 
 ever effects the transport of that article from Marseilles to Paris, 
 thereby increases its value to the amount of ten sous per lb. Nor 
 is it to be supposed, that its intrinsic value has received no accession 
 by the transit. The value has positively augmented. The intrinsic 
 value of silver is greater at Paris than at Lima ; and the cases are 
 precisely similar. 
 
 In fact, the transport of products can not be effected without the 
 concurrence of a variety of means, which have each an intrinsic 
 value of their own, and of which the actual transport itself, in the 
 literal and confined sense of the term, is commonly not the most 
 chargeable. There must be one commercial establishment at tho 
 
 * A complete treatise on commerce is still a desideratum in literature, not- 
 withstanding- the labours of Melon and Forbonnais, for hitherto the principles 
 and consequences of commerce have been little understood. (1) 
 
 (a) The banker's business is not confined to dealing's in metal, coined or un- 
 coined, but is extended to dealing's in paper-money, and dealing's in credit, as 
 we shall see when we come to the chapter upon money, infra. ' T. 
 
 (1) The Society for the Diffusion of Useful Knowledge, in London, in 1833, 
 published a Treatise on Commerce, by J. R. M'Culloch, Esq. the eminent poli- 
 tical economist, in which the grand principles, practice and history of Com- 
 merce, are unfolded and explained with great ability. It is a work that should 
 be lead by every well-educated merchant. 
 
 AMERICAN EDITOR. 
 
CHAP. IX. ON PRODUCTION. 101 
 
 place where the products are collected ; another at the place it is 
 transported to ; besides package and warehousing. 
 
 There must be an advance of capital equivalent to the value trans- 
 ported. Moreover, there are agents, insurers, and brokers, to be 
 paid. All these are really productive occupations, since, without 
 their agency, the consumer can never enjoy the product; and suppos- 
 ing their remuneration to be reduced by competition to the lowest 
 rate possible, he can be in no way cheaper supplied. 
 
 In commercial, as well as manufacturing industry, the discovery 
 of a more economical or more expeditious process, the more skilful 
 employment of natural agents, the substitution, for instance, of a canal 
 in place of a road, or the removal of a difficulty interposed by nature 
 or by human institutions, reduces the cost of production, and pro- 
 cures a gain to the consumer, \vithout any consequent loss to the 
 producer, who can lower his price without prejudice to himself, 
 because his own outlay and advance are likewise reduced. 
 
 The same principles govern both external and internal commerce. 
 The merchant that exports silks to Germany or to Russia, and sells 
 at Petersburg for 40 cents per yard, stuffs that have cost but 30 
 cents at Lyons, creates a value of 10 cents per yard. If the same mer- 
 chant brings a return cargo of peltry from Russia, and sells at Havre 
 for 240 dollars what cost him at Riga but 200 dollars, or a value equiva- 
 lent to 200 dollars, there will be a new value of 40 dollars, created and 
 shared amongst the different agents engaged in this production of 
 value, whatever nation they may belong to, and whatever be the rela- 
 tive importance of their respective productive agency, from the first- 
 rate merchant to the ticket-porter inclusive.* And by this creation 
 of value, the wealth of the French nation is enriched to the amount of 
 all the gains of French industry and of French capital, in the course 
 of this production; and the Russian nation to the amount of those of 
 Russian industry and Russian capital. Nay, perhaps a third nation, 
 independent both of France and of Russia, may get the whole profit 
 accruing from the mutual commercial intercourse between these 
 nations; and yet neither of them loses any thing, if their industry and 
 capital have other equally lucrative employments at home. The 
 very circumstance of the existence of an active external commerce, 
 no matter what agents it be conducted by, is a very powerful stimu- 
 lus to internal industry. The Chinese, who abandon the whole of 
 their external commerce to other nations, must nevertheless raise an 
 enormous gross product, otherwise they could never support, as they 
 do, a population twice as large as that of all Europe, upon a surface 
 of nearly equal extent. A shop-keeper in good business is quite as 
 well off as a pedlar that travels the country with his wares on his 
 back.f Commercial jealousy is, after all, nothing but prejudice : it 
 is a wild fruit, that w T ill drop of itself when it has arrived at maturity. 
 
 *The ordinary proportions of this division will be explained, infra, Book II. 
 Chap. 7. 
 
 f It has been often asked, Why not combine commercial with agricultura 1 and 
 9* 
 
102 ON PRODUCTION. BOOK I. 
 
 The external commerce of all countries is inconsiderable, com- 
 
 sumpti , 
 
 values of foreign growth, in comparison with those of home produc- 
 tion; especially, if we take into the account, as we ought to do, the 
 value of buildings and habitations, which is necessarily of home 
 production.* (a) 
 
 The internal commerce of a country, though, from its minute 
 lamification, it is less obvious and striking, besides being the most 
 considerable, is likewise the most advantageous. (1) For both the 
 remittances and returns of this commerce are necessarily home pro- 
 ducts. It sets in motion a double production, and the profits of it 
 are not participated with foreigners. For this reason, roads, canals, 
 bridges, the abolition of internal duties, (b) tolls, duties on transit, (c) 
 which are in effect tolls, every measure, in short, which promotes 
 internal circulation, is favourable to national wealth. 
 
 manufacturing productions? Why, for the same reason that makes a whole- 
 sale cotton spinner, if he have a surplus of time and capital, more apt to extend 
 his spinning 1 concern, than to employ his labour and capital in the working up 
 of his own filiature into muslin and printed calicoes. 
 
 * It would be impossible to estimate the proportion with any tolerable accu- 
 racy, even in countries where calculations of this kind are most in vogue. In- 
 deed, the attempt would be a sad waste of time. To say the truth, statistical 
 statements are of little real utility ; for, be their accuracy ever so well assured, 
 hey can only be correct for the moment. The only knowledge really useful is, 
 the knowledge of general principles and laws, that is to say, the knowledge of 
 the connexion between cause and effect, which alone can safely teach us what 
 measures it is best to adopt in every possible emergency. The sole use of sta- 
 tistics in political economy is, to supply examples and illustrations of general 
 principles. They can never be the basis of principles, which are grounded upon 
 the nature of things ; whereas statistics, in the most improved state, are only an 
 index of their quantity. 
 
 (a) This position may be correct or not, according to circumstances. The 
 national wants must always, in the long run, be supplied by the national indus- 
 try and exertions: but what is there to prevent a nation from exchanging the 
 larger portion of its domestic products for the products of other nations 1 The 
 people of Tyre probably consumed more products of external than of domestic 
 industry, although indeed those external must have been purchased with domes- 
 tic products. Tyre, it is true, was rather a city than a nation. Holland resem- 
 bled her in many particulars. The observation applies to every community, the 
 chief part of whose production is, the modification of external products. T. 
 
 (6) Douanes. ( c ) Octrois. 
 
 ^ (1) [The author has here, in common with Dr. 'Smith, fallen into an error. 
 Capital, whether employed in the home or foreign trade, is equally productive. 
 If, for example, the home trade realized greater profits than foreign commerce, 
 every cent of capital employed in the latter would, in a very little time, be with- 
 drawn from so comparatively disadvantageous an investment. Capital will flow 
 into the foreign, instead of the home trade, only because it will thereby yield a 
 larjrpr profit. The internal commerce of a country cannot therefore be said to be 
 " fhe most advantageous."] AMERICAN EDITOR, 
 
CHAP. IX. ON PRODUCTION. 103 
 
 There is a further branch of commerce, called the trade of specu- 
 lation, which consists in the purchase of goods at one time, to be 
 re-sold in the same place and condition at another time, when they 
 are expected to be dearer. Even this trade is productive ; its utility 
 consists in the employment of capital, warehouses, care in the pre- 
 servation, in short, human industry in the withdrawing from circu- 
 lation a commodity depressed in value by temporary superabun- 
 dance, and thereby reduced in price below the charges of production, 
 so as to discourage its production, with the design and purpose of 
 restoring it to circulation when it shall become more scarce, and 
 when its price shall be raised above the natural price, the charges of 
 production, so as to throw a loss upon the consumers. The evident 
 operation of this kind of trade is, to transport commodities in respect 
 of time, instead of locality. If it prove an unprofitable or losing 
 concern, it is a sign that it was useless in the particular instance, and 
 that the commodity was not redundant at the time of purchase, and 
 scarce at the time of re-sale. This operation has also been denomi- 
 nated, with much propriety, the trade of reserve, (a) Where it is 
 directed to the buying up of the whole of an article, for the sake of 
 exacting an exorbitant monopoly price, it is called forestalling, 
 which is happily difficult, in proportion as the national, commerce is 
 extensive, and, consequently, the commodities in circulation both 
 abundant and various. 
 
 The carrying trade, as Smith calls it, consists in the purchase of 
 goods in one foreign market for re-sale in another foreign market. 
 This branch of industry is beneficial not only to the merchant that 
 practises it, but also to the two nations between whom it is practised ; 
 and that for reasons which have been explained while treating of ex- 
 ternal commerce. The carrying trade is but little suited to nations 
 possessed of small capital, whereof the whole is wanted to give activ- 
 ity to internal industry, which is always entitled to the preference. 
 The Dutch carry it on in ordinary times with advantage, because their 
 population and capital are both redundant, (b) The French, in peace 
 time, have carried on a lucrative carrying trade between the different 
 ports of the Levant; because adventurers could procure advances of 
 capital on better terms in France than in the Levant, and were per- 
 haps less exposed to the oppression of the detestable government of 
 that country. They have since been supplanted by other nations, 
 whose possession of the carrying trade is so far from being an injury 
 to the subjects of the Porte, that it actually keeps alive the little 
 remaining industry of its territories. Some governments, less wise 
 in this particular than x the Turkish, have interdicted their carrying 
 trade to foreign adventurers. If the native traders can carry on the 
 
 ^0) Commerce de reserve. There is no corresponding term in English ; it ia 
 intelligible enough. 
 
 (6) The carrying trade of Holland is now almost extinct. In fact, whether 01 
 no it be suited to a given nation at a given time, depends upon a great variety of 
 circumstances. The advantage of the neutral character gave a very large pro- 
 portion of it for some years to the American Union, though notoriously deficient 
 in capital for the purposes of internal cultivation. T 
 
104 
 
 ON PRODUCTION. BOOK I. 
 
 transport to greater profit than foreigners, there is no occasion to 
 exclude the latter; and, if it can be conducted cheaper by foreigners, 
 their exclusion is a voluntary sacrifice of the profit of employing 
 them. An example will serve to elucidate this position. The freight 
 of hemp from Riga to Havre costs a Dutch skipper, say 7 dollars per 
 ton. It must be taken for granted, that no other but the Dutchman can 
 carry it so cheap. He makes a tender to the French government, 
 which is a consumer of Russian hemp, to provide tonnage at 8 dollars 
 per ton, thereby obviously securing to himself a profit of 1 dollar per 
 ton. Suppose then, that the French government, with a view to favour 
 the national shipping, prefers to employ French tonnage, which can 
 not be navigated for less than 10 dollars per ton, or 11 dollars, allow- 
 ing the same profit to the ship-owner What is the consequence? The 
 government will be out of pocket 3 dollars per ton, for the mere pur- 
 pose of giving a profit of 1 dollar to the national ship-owners. And, 
 as -none but the individuals of the nation contribute towards the na- 
 tional expenditure, this operation will have cost to one class of French- 
 men 3 dollars for the purpose of giving to another class of Frenchmen 
 a profit of 1 dollar only. However the numbers may vary, the result 
 must be similar; for there is but one fair way of stating the account. 
 It is hardly necessary to caution the reader, that I have through- 
 out been considering maritime industry solely in its relation to 
 national wealth. Its influence upon national security is another thing. 
 The art of navigation is an expedient of war, as well as of commerce. 
 The working of a vessel is a military manoeuvre ; and the nation 
 containing the larger proportion of seamen, is, therefore, ceteris 
 paribus, the more powerful in a military point of view; conse- 
 quently, political and military considerations have always interfered 
 with national views of commerce, in matters of navigation; and Eng- 
 land, in passing her celebrated Navigation Act, interdicting her car- 
 rying trade to all vessels, the owners and at least three-fourths of the 
 crews whereof were not British subjects, had in view, not so much 
 the profits of the carrying trade, as the increase of her own military 
 marine, and the diminution of that of the other powers, especially of 
 Holland, which then enjoyed an immense carrying trade, and was 
 the chief object of English jealousy. 
 
 Nor can it be denied, that these views may actuate a wise national 
 i administration; assuming always, that it is an advantage to one 
 nation to domineer over others. But these political dogmas are fast 
 growing obsolete. Policy will some day or other be held to consist 
 in coveting the pre-eminence of merit Vather than of force. The 
 love of domination never attains more than a factitious elevation, that 
 is sure to make enemies of all its neighbours. It is this that engen- 
 ders national debt, internal abuse, tyranny and revolution; while the 
 sense of mutual interest begets international kindness, extends the 
 sphere of useful intercourse, and leads to a prosperity, permanent, 
 because it is natural. (1) 
 
 (1) [The operation of the British Navigation-acts, like all other restrictive re- 
 putations, has been prejudicial to the growth of national wealth, without, at the 
 same time, having contributed in any degree to the establishment of the naval . 
 
CHAP X. ON PRODUCTION. 105 
 
 CHAPTER X. 
 
 OF THE TRANSFORMATIONS UNDERGONE BY CAPITAL IN THE PROGRESS 
 OF PRODUCTION 
 
 WE have seen above (Chap. III.) of what the productive capital of 
 a nation consists, and to what uses it is applicable. So much it was 
 necessary to specify, in enumerating the various means of produc- 
 tion. We now come to consider and examine, what becomes of 
 capital in the progress of production, and how it is perpetuated and 
 increased. 
 
 To avoid fatiguing the reader with abstract speculation, I shall 
 begin with giving examples, which I shall take from every day's 
 experience and observation. The general principles will follow of 
 themselves, and the reader will immediately see their applicability 
 to all other cases, which he may have occasion to pronounce a judg- 
 ment upon. 
 
 When the land-owner is himself the cultivator, he must possess a 
 capital over and above the value of his land ; that is to say, value to 
 some amount or other consisting, in the first place, of clearance of the 
 ground, together with works and erections thereon, which may at 
 pleasure be looked upon as part of the value of the estate, but which 
 
 preponderance of Great Britain. " If it can be made to appear," says a highly 
 distinguished political economist, "that the greater wealth which we should, in 
 the absence of these laws, have possessed, would have supplied a revenue ade- 
 quate to the maintenance of an equal number of seamen in the navy, it would 
 follow that we are no gainers by these acts ; and if it further appear that this ad- 
 ditional revenue would have been equal to the maintenance of twice or three 
 times as many seamen, it would be clear that we are losers by them. It is acknow- 
 ledged by many of the advocates for these laws, that their tendency has not been 
 to increase the national revenue, but in some degree the reverse. 
 
 " Our national preponderance," says, we believe, Mr. Homer, " rests on a very 
 different basis. Our national energy and wealth originate in our freedom, and 
 in that security of property which is its happy consequence. The number of 
 our seamen in merchant shipping is owing to the spirit and capital of our tra- 
 ders, and to our great extent of coast. The magnitude of our navy is due neither 
 to navigation-acts, nor to colonial monopolies, but to the resources of an indus- 
 trious country. 
 
 " How different are the ideas suggested by such observations, from the narrow 
 theories of those who trace our naval superiority to the operation of a few acts 
 of Parliament ! They remind us of the technical philosophy of the judge, who 
 gravely ascribed the lamentable prevalence of duelling, not to the violence of 
 human passions, but to a misapprehension of the law of the land ! Besides, our 
 naval greatness, as ifc is well remarked by Dr. Smith, was conspicuous before 
 our navigation laws were framed. It existed then, as it had done before, and 
 has done since, in a degree commensurate with our commerce, and with the ex- 
 tent of our national prosperity. These circumstances, and not navigation laws, 
 will be found the regulator of naval power in all countries. They determine 
 its extent among the Dutch, to whom, even in the season of their greatest strength, 
 navigation laws were entirely unknown." Vide Edinburgh Review, vol. xiv. 
 page 95.] 
 
 AMERICAN EDITOR 
 
 o 
 
]06 ON PRODUCTION. BOOK L 
 
 are, nevertheless, the result of previous human exertion, and an ac- 
 cession to the original value of the land.* 
 
 r This portion of his capital is little subject to wear and tear ; trifling 
 c occasional repairs will preserve it entire. If the cultivator obtain 
 ( from the annual produce wherewithal to effect these repairs, this 
 ) item of capital is thereby preservable in perpetuity. 
 V Ploughs, and other farming implements and utensils, together 
 with the animals employed in tillage, form another item of the culti- 
 vator's capital, and an article of much quicker consumption, which, 
 however, may in like manner be kept up and renovated, as occasion 
 may require, at the expense of the annual produce of the concern, 
 and thus be maintained at its full original amount. 
 f Finally, he must have stores of various kinds; seeds for his ground, 
 \ provisions, fodder for his cattle, and food as well as money for his 
 / labourers' wages, &c.f Observe, that this branch of capital is totally 
 ( decomposed once in the course of the year, at least ; and sometimes 
 \ three or four times over. The money, grain and provisions of eve- 
 ^1 ry description disappear altogether ; but so it must necessarily be, 
 / and yet not an atom of the capital is lost, if the cultivator, after 
 ( abstracting from the produce a fair allowance for the productive 
 j service of his land (rent) for the productive service of the capital 
 / embarked (interest) and for the productive service of the personal 
 I labour that has set the whole in motion (wages), contrive to make the 
 V annual produce replace the outlay of money, seed, live stock, &c., 
 even to the article of manure, so as to put himself in possession of a 
 I value equal to what he started with the preceding year. 
 
 Thus we find, that capital may yet be kept up, though almost 
 every part of it have undergone some change, and many parts be 
 completely annihilated ; for, indeed, capital consists not in this or 
 that commodity or substance, but in its value. 
 
 Nor is it difficult to conceive, that if the estate be sufficiently 
 extensive, and managed with order, economy, and intelligence, the 
 profits of the cultivator may enable him to lay by a surplus, after 
 replacing the entire value of his capital, and defraying the expenses 
 of himself and family. The mode of disposing of this surplus is of 
 the utmost importance to the community, and will be treated of in 
 the next chapter. All that is at present necessary is, to impress a 
 
 ^Arthur Young, in his View of the Agriculture of France, makes no estimate 
 of this item of capital permanently vested in the land of France within its old 
 limits; but merely reckons it to be less than the capital so vested in England, in 
 the proportion of 36 livres tournois per English acre. So that, in the very mode- 
 rate supposition, that half as much capital is vested in permanent amelioration of 
 the land in France as in England, the capital so vested in Old France, reckoned 
 at 7 dollars per acre, would amount, upon 131 millions of acres, to 817 millions 
 of dollars for this item of French capital alone. 
 
 f The same writer (Young) estimates, that in France, these two last items of 
 capital, viz. implement-?, beasts of husbandry, stores of provisions, &c. may be 
 set down at 9 dollars per acre, one acre with another ; making an aggregate of 
 1179 millions of dollars; which, added to the former estimate, shows a total of 
 1996 millions of dollars, capital engaged in the agricultural industry of Old 
 France. He estimates the same items of capital in England at twice as mucr. 
 
CHAP. X. ON PRODUCTION. 107 
 
 clear conviction, that the value of capital, though consumed, is not ) 
 yet destroyed, wherever it has been consumed in such way as to re- \ 
 produce itself; and that a concern may go on forever, and annually f 
 render a new product with the same capital, although that capital be J 
 in a perpetual course of consumption. 
 
 After tracing capital through its various transformations in the 
 department of agriculture, it will be easy to follow its transforma- 
 tions in the other two departments of manufacture and commerce. 
 
 In manufacture, as well as agriculture, there are some branches of 
 capital that last for years ; buildings and fixtures for instance, machi- 
 nery and some kinds of tools ; others, on the contrary, lose their 
 form entirely ; the oil and pot-ash used by soap-makers cease to be 
 oil and pot-ash when they assume the form of soap. In the same 
 manner, the drugs employed in dyeing indigo cease to be Brazil 
 wood or annatto, as the case may be, and are incorporated with the 
 fabric they are employed in colouring. And so of the wages and 
 maintenance of the labourers. 
 
 In commerce, almost the whole capital undergoes complete trans- 
 mutation, and many items of it several times in the course of a year. 
 A merchant exchanges his specie for woollens or jewellery, which is 
 one change of form. He ships them for Turkey, and on the voyage, 
 some more of his money is converted into the wages of the crew. 
 The cargo arrives at Constantinople, where he sells the investment 
 to the wholesale dealers, who pay him in bills upon Smyrna, which 
 is a second metamorphosis ; the capital embarked is now in the shape 
 of bills, which he makes use of in the purchase of cotton at Smyrna; 
 a third transformation. The cotton is shipped for France and sold 
 there, which completes the fourth change of form; thus reproducing 
 the capital, most probably with profit, under its original shape of 
 French coin. 
 
 It is obvious, that the objects capable of acting the part of capital 
 are innumerable. If, at any given period, one wishes to know 
 what the capital of a nation consisted of, it would be found composed 
 of an infinity of objects, commodities and substances, of which it 
 would be impossible to guess the aggregate value with any tolerable 
 accuracy, and of which some are situated many thousand leagues 
 from its frontiers. At the same time, it appears that the most in- 
 significant and perishable articles- are a part, and often a very im- 
 portant part, too, of the national capital ; that although the items of 
 capital are in a continual course of consumption and decomposition, 
 it by no means follows, that the capital itself is destroyed and con- 
 sumed, provided that its value be preserved in some other shape ; 
 consequently, that the introduction or import of the vilest and most 
 perishable commodities may be just as profitable as that of the most 
 costly and durable gold or silver; that, in fact, the former, are 
 more profitable the instant they are more sought after; that the pro- 
 ducers themselves are the only competent judges of the transforma- 
 tion, export, and import, of these various matters and commodities: 
 
108 ON PRODUCTION. BOOK I. 
 
 and that every government which interferes, every system calculated 
 to influence production, can only do mischief. 
 
 There are concerns, in which the capital is completely renovated, 
 and the work of production begun afresh, several times in the year. 
 An operation of manufacture, that can be perfected and the product 
 sold in three months, will admit of the capital being turned to 
 account annually four times. It may be supposed that the profit 
 each time is less than when the capital is turned but once in twelve 
 months. Were it otherwise, there would be four times the profit 
 gained ; an advantage that would soon attract an overflow of capital 
 in this particular channel, and lower the profit by competition. On 
 the other hand, products that it requires more than a year to perfect, 
 such as leather, must, over and above the original capital, yield the 
 profits of more than one year ; otherwise, who could undertake to 
 raise them ? 
 
 In the trade of Europe with China and the East Indies, the capi- 
 tal embarked is two or three years before its return. Nor is it ne- 
 cessary in commerce or in manufacture, any more than in agricul- 
 ture, which has been cited as an example, that the capital should be 
 realized in the form of money, to be entirely replaced. Merchants 
 and manufacturers, for the most part, realize in this way the whole 
 of their capital but once in their lives, and that is when they wind 
 up and leave off business. Yet they are at no loss to discover at any 
 time whether their capital be enlarged or diminished, by referring to 
 the inventory of their assets for the time being. 
 
 The capital employed on a productive operation is always a mere 
 advance made for payment of productive services, and reimbursed 
 by the value of their resulting product. 
 
 The miner extracts the ore from the bowels of the earth ; the 
 iron-founder pays him for it. Here ends the miner's production, 
 which is paid for by an advance out of the capital of the iron-found- 
 er. ^ This latter next smelts the ore, refines and makes it into steel, 
 which he sells to the cutler : thus is the production of the founder 
 paid, and his advance reimbursed by a second advance on the part 
 of the cutler, made in the price for the steel. This again the cutler 
 works up into razor-blades, the price for which replaces his advance 
 of capital, and at the same time pays for his productive agencv. 
 
 It is manifest, then, that the value of the ultimate product, ra^or- 
 blades, has been sufficient to replace all the capital successively em- 
 ployed in its production, and, at the same time, to pay for the pro- 
 duction itself; or rather, that the successive advances of capital have 
 paid for the productive services, and the price of the product has 
 reimbursed those advances ; which is precisely the same tning as if 
 rne aggregate or gross value of the product had gone immediately 
 10 defray tne charges of its production. 
 
CHAP. XI. ON PRODUCTION. 109 
 
 CHAPTER XI. 
 
 OP THE FORMATION AND MULTIPLICATION OP CAPITAL. 
 
 Lv the foregoing chapter, I have shown how productive capital, 
 though kept, during the progress of production, in a continual state 
 of employment, and subject to perpetual change and wear, is yet 
 ultimately reproduced in full value, when the business of production 
 is at an end. Since, then, wealth consists in the value of matter or 
 substance, not in the substance or matter itself, I trust my readers 
 have clearly comprehended, that the productive capital employed, 
 notwithstanding its frequent transmutations, is all the while the same 
 capital. 
 
 It will be conceived with equal facility, that, inasmuch as the value 
 produced has replaced the value consumed, that produced value may 
 be equal, inferior, or superior in amount, to the value consumed, 
 according to circumstances. If equal, the capital has been merely 
 replaced and kept up ; if inferior, the capital has been encroached 
 upon ; but if superior, there has been an actual increase and accession 
 of capital. This is precisely the point to which we traced the culti- 
 vator, cited by way of an example in the preceding chapter. We 
 suj)rjosedjiim, after the complete re-establishment of his capital, so 
 as to put him in a condition to begin the new year's cultivation with 
 equal means at his disposal, to have netted a surplus produce beyond 
 his consumption of some value or other ; say of 1000 dollars. / 
 
 Now, let us observe the various methods, in which he may dispose 
 of his surplus of 1000 dollars; for simple as the matter may appear 
 to be, there is no point upon which more error has prevailed, or 
 which has greater influence upon the condition of mankind. 
 
 Whatever kind of produce this surplus, which we have valued at 
 1000 dollars, may consist of, the owner may exchange it for gold or 
 silver specie, and bury it in the earth till he wants it again. Does 
 the national capital suffer a loss of 1000 dollars by this operation? 
 Certainly not ; for we have just seen, that the value of that capital 
 was before completely replaced. Has any one been injured to that 
 amount ? By no means ; for he has neither robbed nor cheated any 
 body, and has received no value whatever, without giving an equiva- 
 lent. It may be said, perhaps, he has given wheat in exchange for 
 the dollars he has thus buried, which wheat was very soon con- 
 sumed; yet the 1000 dollars still continue withdrawn from the 
 capital of the community. But I trust it will be recollected, that 
 wheat, as well as silver or gold, may compose a part of the national 
 capital ; indeed, we have seen that national capital must necessarily 
 consist, in a great measure, of wheat and such like substances, liable 
 to either partial or total consumption, without any diminution of 
 capital thereupon ; for, in short, that reproduction completely replaces 
 the value consumed, including the profits of the producers, whose 
 in 
 
110 
 
 ON PRODUCTION. BOOK I. 
 
 productive agency is part of the value consumed. Wherefore, the 
 instant that the cultivator has fully replaced his capital, and begins 
 again with the same means as before, the 1000 dollars may be 
 thrown into the sea without reducing the national capital. 
 
 But let us trace the disposal of this surplus of 1000 dollars to 
 every imaginable destination. Suppose, for instance, that instead of 
 being buried, they have been spent by the cultivator upon an elegant 
 entertainment. In this case, this whole value has been destroyed in 
 an afternoon; a sumptuous feast, a ball, and fireworks, will have 
 swallowed up the whole. The value thus destroyed exists no longer 
 in the community : it no longer forms an item in the aggregate of 
 wealth; for those persons, into whose hands the identical pieces of 
 silver have come, have given an equivalent in wines, refreshments, 
 eatables, gunpowder, &c., all which values are reduced to nothing ; 
 the gross national capital, however, is no more diminished in this 
 case than in the former. A surplus value had been produced ; and 
 this surplus is all that has been destroyed, so that things remain just 
 as they were. 
 
 Again, suppose these 1000 dollars to have been spent in the pur- 
 chase of furniture, plate, or linen. Still there is no reduction of 
 national productive capital ; although it must be allowed there is no 
 accession ; for in this case, nothing more is gained than the additional 
 comforts the cultivator and his family derive from the newly pur 
 chased moveables. 
 
 Fourthly and lastly, suppose the cultivator to add this excess of 
 1000 dollars to his productive capital, that is to say, to re-employ it 
 in increasing the productive powers of his farm as circumstances 
 may require, in the purchase of more beasts of husbandry, or the 
 hire and support of more labourers ; and in consequence, at the end 
 of the year, to gather produce enough to replace the full value of the 
 1000 dollars, with a profit, in such manner, as to make them capable 
 of yielding a fresh product the year after, and so on every year to 
 eternity. It is then, and then only, that the productive capital of the 
 community is really augmented to that extent. 
 
 It must on no account be overlooked, that, in one way or other, a 
 saving such as that we have been speaking of, whether expended 
 productively or unproductively, still is in all cases expended ano 
 consumed ; and this is a truth, that must remove a notion extremely 
 false, though very much in vogue namely, that saving limits an*d 
 injures consumption. No act of saving subtracts in the least from 
 consumption, provided the thing saved be re-invested or restored to 
 productive employment. On the contrary, it gives rise to a con- 
 sumption perpetually renovated and recurring ; whereas there is no 
 repetition of an unproductive consumption, (a) 
 
 ^(cr) On the subject of saving, Sismondi, and after him our own Malthus, have 
 adopted a different opinion. According to them, the powers of production have 
 already outrun the desire and the ability to consume ; consequently, every thing 
 that tends to reduce that desire is injurious, because it is already too inert for 
 the interests of production. Wherefore, inasmuch as the desire of accumulation 
 
CHAP. XI. ON PRODUCTION. 1]1 
 
 It must be observed, too, that the form in which the value saved 
 is so saved and re-employed productively, makes no essential differ- 
 ence. The saving is made with more or less advantage, according 
 to the circumstances and intelligence of the person making it. Nor 
 is there any reason why this portion of capital should not have been 
 accumulated, without ever having for a moment assumed the form of 
 specie. It may be that an actual product of the farm has been saved 
 and resown or planted, without having undergone any transmutation ; 
 perhaps the wood, that might have been used as firing to warm su- 
 perfluous apartments, may have been converted into palings or other 
 carpenter's work ; and what was cut down in the first instance as an 
 item of revenue, be so employed, as to become an item of capital. 
 .Now, the only way of augmenting the productive capital of indi- 
 viduals, as well as the aggregate productive capital of the community, 
 is by this process of saving; in other words, of re-employing in pro-,' 
 duction more products created than have been consumed n their ere- v 
 ation. Productive capital cannot be accumulated by the mere scra-i 
 ping together of values without consuming them; nor any otherwise, 
 than by withdrawing them from unproductive, and devoting them to 
 reproductive consumption. There is nothing odious in the real 
 picture of the accumulation of capital ; we shall presently see its 
 happy consequences. 
 
 is the direct opposite of that of consumption, it must of necessity be injurious in 
 the highest degree. On these principles, it might be proved without difficulty, 
 that the prodigality of public authority, war, or the poor law of England, is a 
 national benefit : for all of them stimulate consumption. Indeed they leave their 
 readers to draw this inevitable conclusion ; for they maintain in plain terms, that 
 the enlargement of the productive powers of man, by the use of machinery or 
 otherwise, makes the existence of unproductive consumers a matter, not of mere 
 possibility or probability, but of actual necessity and expedience. {Vide Sis- 
 mondi, Nouv. Prin. liv. ii. c. 3. and liv. iv. c. 4. Malthus, Prin. of Pol. jEcon.) 
 These maxims would justify the prodigality of Louis XIV. of France, and of the 
 Pitt system of England. But fortunately they are erroneous ; and if the contrary 
 principles laid down by our author here and infra, Chap. XV., needed further 
 illustration or support, they have been rendered still more clear and convincing 1 
 by his recent Lettres a M. Malthus. It is true, that the enlargement of pro- 
 ductive power naturally leads to the multiplication of unproductive consumers : 
 why 1 because the desire of barren consumption, instead of being inert, is always 
 active in the human breast. But that multiplication is not necessary ; fcr the 
 consumer may be made a producer, if not of material, at least of immaterial pro- 
 ducts, which latter are capable of infinitely more multiplication and variety, as 
 well as of more general diffusion than material products. While this field re- 
 mains open, a national administration never need despair of finding occupation 
 for the human labour supplanted by machinery. And what is the parsimony of 
 modern days ? It is not the hoarding of coin or other valuables, which, though 
 as our author observes, it subtracts nothing from the national capital, is yet a 
 social mischief, because it suspends the utility of an existing product, or at any 
 rate, prevents it from yielding the human gratification, which its barren con- 
 sumption would afford. The accumulations of the miser are now either vested in 
 reproduction which is beneficial, or in the ownership of the sources of produc- 
 tion, land, &c. &c. which it matters not to public wealth who may be possessed 
 of, or in the incumbrances of those sources, mortgages, national funds, &c. &c , 
 which are but portions of that ownership, and to which the same observation 
 applies. T. 
 
112 
 
 ON PRODUCTION. BOOK I. 
 
 in 
 
 The form under which national capital is accumulated, is com- 
 _only determined by the respective geographical position, the moral 
 character, and the peculiar wants of each nation. The accumula- 
 tions of a society in its early stages consist, for the most part, of 
 buildings, implements of husbandry, live stock, improvements of 
 land; those of a manufacturing people chiefly of raw materials, or 
 such as are still in the hands of its workmen, in a more or less 
 finished state ; and in some part, of the necessary manufacturing 
 tools and machinery. In a nation devoted to commerce, capital is 
 mostly accumulated in the form of wrought or unwrought goods, 
 that have been bought by the merchant for the purpose of re-sale. 
 
 A nation that at the same time directs its energies to all three 
 branches of industry, namely, agriculture, manufactures, and com- 
 merce, has a capital compounded of all three different forms of pro- 
 duction; of that amazing quantity of stores of every kind, that we 
 find civilized society actually possessed of; and which, by the intel- 
 ligent use that is made of them, are constantly renovated, or even 
 increased, in spite of their enormous consumption, provided that the 
 industry of the community produces more than is destroyed by its 
 consumption. 
 
 I do not mean to say, that each nation has produced and laid by 
 the identical article that composes its actual capital. Values, in some 
 shape or other, have been produced and laid by ; and these, through 
 various transmutations, have assumed the form most convenient foi 
 the time being. A bushel of wheat saved will feed a mason as well 
 as a worker in embroidery. In the one case, the bushel of *wheat 
 will be reproduced in the shape of the masonry of a house ; in the 
 other, under that of a laced suit 
 
 Every adventurer in industry, that has a capital of his own em- 
 barked in it, has ready means of employing his saving productively ; 
 if engaged in husbandry, he buys fresh parcels of land ; or, by judi- 
 cious outlays and improvements, augments the productive powers of 
 what already belongs to him ; if in trade, he buys and sells a greater 
 quantity of merchandise. Capitalists have nearly the same advan- 
 tage : they invest their whole savings in the same manner as their 
 former capital is invested, and increase it pro tanto a or look out for 
 new ways of investment, which they are at no loss to discover ; for 
 the moment they are known to be possessed of loose funds, they 
 seldom have to wa^it for propositions for the employment of them ; 
 whereas the proprietors of lands let out to farm, and individuals that 
 live upon fixed income, or the wages of their personal labour, have 
 not equal facility in the advantageous disposal of their savings, and 
 can seldom invest them till they amount to a good round sum, 
 Many savings are therefore consumed, that might otherwise have 
 swelled the capitals of individuals, and consequently of the nation al 
 large. Banks and associations, whose object is to receive, collect, 
 and turn to profit the small savings of individuals, are consequent])) 
 very favourable to the multiplication of capital, whenever they art 
 ?ei foctly secure. 
 
CHAP. XI. ON PRODUCTION. 113 
 
 The increase of capital is naturally slow of progress : for it can 
 never take place without actual production of value, and the creation 
 of value is the work of time and labour, besides other ingredients.* 
 Since the producers are compelled to consume values all the while 
 they are engaged in the creation of fresh ones, the utmost they can 
 accumulate, that is to say, add to reproductive capital, is the value 
 they produce beyond what they consume ; and the sum of this sur- 
 plus is all the additional wealth that the public or individuals can 
 acquire. The more values are saved and reproductively employed 
 in the year, the more rapid is the national progress towards pros- 
 perity. Its capital is swelled, a larger quantity of industry is set in 
 motion, and saving becomes more and more practicable, because the 
 additional capital and industry are additional means of production. 
 
 Every saving or increase of capital lays the groundwork of a 
 perpetual annual profit, not only to the saver himself, but likewise to 
 all those whose industry is set in motion by this item of new capital. 
 It is for this reason that the celebrated Adam Smith likens the frugal 
 man, who enlarges his productive capital but in a solitary instance, 
 to the founder of an alrnshouse for the perpetual support of a body 
 of labouring persons upon the fruits of their own labour ; and on the 
 other hand, compares the prodigal that encroaches upon his capital, 
 to the roguish steward that should squander the funds of a charitable 
 institution, and leave destitute, not merely those that derived present 
 subsistence from it, but likewise all who might derive it hereafter. 
 He pronounces, without reserve, every prodigal to be a public pest, 
 and every careful arid frugal person to be a benefactor of society .f 
 
 It is fortunate, that self-interest is always on the watch to preserve 
 the capital of individuals ; and that capital can at no time be with- 
 drawn from productive employment, without a proportionate loss of 
 revenue. 
 
 Smith is of opinion, that, in every country, the profusion and igno- 
 rance of individuals and of the public authorities, is more than com- 
 pensated by the prevalent frugality of the people at large, and by 
 
 *The savings of a rich contractor, of a swindler or cheat, of a royal favourite, 
 saturated with grants, pensions, and unmerited emoluments, are actual accumu- 
 lations of capital, and are sometimes made with facility enough. But the values 
 thus amassed by a privileged few, are, in reality, the product of the labour, 
 capital, and land, of numbers, who might themselves have made the saving, and 
 turned it to their own account, but for the spoliation of injustice, fraud, or vio- 
 lence. 
 
 f Wealth of Nations, b. ii. c. 3. Lord Lauderdale, in a work entitled, " Enquiry 
 .nto the Nature and Origin of Public Wealth" has proved, to his own conviction, 
 *n opposition to Smith, that the accumulation of capital is adverse to the increase 
 of wealth : grounding his argument on the position that such accumulation with- 
 draws from circulation values which would be serviceable to industry. But this 
 position is untenable. Neither productive capital, nor the additions made to it, 
 are withdrawn from circulation : otherwise they would remain inactive, and yield 
 no profit whatever. On the contrary, the adventurer in industry, who makes 
 use of it, employs, disposes of, and wholly consumes it, but in a way that re- 
 produces it, ami that with profit. I have noted this error of his lordship, because 
 it has been ma He the basis of other works on political economy, which abound 
 in false conch eions. havinff set out on this false principle. 
 
114 ON PRODUCTION. BOOB I. 
 
 their careful atttention to their own interests.* At least it seems 
 undeniable, that almost all the nations of Europe are at this moment 
 advancing in opulence ; which could not be the case, unless each of 
 them, taken in the aggregate, produced more than it consumed 
 unproductively.f Even the revolutions of modern times appear to 
 have been rather favourable than otherwise to the progress of opu- 
 lence ; for they are no longer, as in ancient days, followed by con- 
 tinued hostile invasion, or universal and protracted pillage ; whereas, 
 on the other hand, they have commonly overthrown the barriers of 
 prejudice, and opened a wider field for talent and enterprise,. But 
 it is still a question, whether this frugality, which Smith gives indi- 
 viduals credit for, be not, in the most numerous classes of society, a 
 forced consequence of a vicious political organization. Is it true, 
 that those classes receive their fair proportion of the gross produce, 
 in return for their productive exertions? How many individuals 
 live in constant penury, in the countries considered as the most 
 wealthy! How many families are there, both in town and country, 
 whose whole existence is a succession of privations ; who, with every 
 thing around them to awaken their desires, are reduced to the satis- 
 faction of the very lowest wants, as if they lived in an age of the 
 grossest barbarism and national poverty ! 
 
 Thus I am forced to infer, that, though unquestionably there is an 
 annual saving of produce in almost all the nations of Europe, this 
 saving is extorted much more commonly from urgent and natural 
 wants, than from the consumption of superfluities, to which policy 
 and humanity would hope to trace it. Whence arises a strong sus- 
 picion of some radical defect in the policy and internal economical 
 systems of most of their governments. 
 
 Again, Smith thinks that the moderns are indebted for their com- 
 j parative opulence, rather to the prevalence of individual frugality, 
 
 * Wealth of Nations, b. ii. c. 3. 
 
 f Except during the continuance of ruinous wars, or excessive public extra- 
 vagance, such as occured in France under the domination of Napoleon. It can- 
 not be doubted, that, at that disastrous period of her history, even in the moments 
 of her most brilliant military successes, the amount of capital dilapidated exceed- 
 ed the aggregate of savings. Requisitions and the havoc of war, in addition to 
 the compulsory expenditure of individuals, and the pressure of exorbitant taxa^ 
 lion, must unquestionably have destroyed more values than the exertions of 
 individual economy could devote to reproductive investment. This sovereign, 
 wholly ignorant of political economy himself, and consequently affecting to 
 despise its suggestions, encouraged his courtiers, like himself, to squander the 
 enormous revenues derived from his favour, in the apprehension that wealth 
 might make them independent. (1) 
 
 (1) [We are told by Dr. Bowring and Mr. Villiers, in their valuable report on 
 the Commercial Relations between France and Great Britain, published during 
 1 he present year (1834), that the best authorities agree in declaring that the 
 national riches of France were greatly diminished by the Imperial Regime, and, 
 probably, a much larger amount was sacrificed in increased prices and diminish- 
 ed trade than was lost by the more direct operation of Napoleon's policy.] 
 
 AMERICAN EDITOR. 
 
CHAP. XI. ON PRODUCTION. H5 
 
 than to the enlargement of productive power. I admit, that some 
 absurd kinds of profusion are more rare now-a-days than formerly ;* 
 but it should be recollected, that such profusion can never be prac- 
 tised, except by a very small number of persons ; and if we take 
 the pains to consider how widely the enjoyment of a more abundant 
 and varied consumption is diffused, particularly among the middle 1 
 classes of society, I think it will be found, that consumption and fru-j 
 gality have increased both together; for they are by no means inconM 
 patible. How many concerns are there in every branch of industry,* 
 that, in times of prosperity, yield enough produce to the adventurers 
 to enable them to enlarge both their expenses and their savings ? 
 What is true of one particular concern, may possibly be true of the 
 national production in the aggregate. The wealth of France was 
 progressively increasing during the first forty years of the reign of 
 Louis XIV., in spite of the profusion, public and private, that the 
 splendour of the court occasioned. The stimulus given to produc- 
 tion by Colbert, multiplied her resources faster than the court squan- 
 dered them. Some people supposed, that this very prodigality was 
 the cause of their multiplication ; the gross fallacy of which notion 
 is demonstrated by the circumstance, that after the death of that 
 minister, the extravagancies of the court continuing at the same rate, 
 and the progress of production being unable to keep pace with them, 
 the kingdom was reduced to an alarming state of exhaustion. The 
 close of that reign was the most gloomy that can be imagined. 
 
 After the death of Louis XIV., the public and private expendi- 
 ture of France have been still further increasing ;f and to me it ap- 
 
 *It is not, however, to be supposed, that the internal economy of ancient and 
 of modern states is so widely different as some may be led to imagine. There 
 is a striking similarity between the rise and fall of the opulent cities of Tyre, 
 Carthage, and Alexandria, and those of the Venetian, Florentine, Genoese, and 
 Dutch republics. The same cause must ever be attended with the same effect. 
 We read of the wonderful riches of Croesus, king of Lydia, even before his 
 conquest of some neighbouring states : whence we may infer, that the Lydians 
 were an industrious and frugal people ; for a king can draw his resources solely 
 from his subjects. I'he dry study of political economy would lead to this infer- 
 ence ; but it happens to be also confirmed by the historical testimony of Justin, 
 who calls the Lydians a people once powerful in the resources of industry ; (gens 
 industria quandam potens ;) and gives a notion of their enterprising character, 
 when he tells us that Cyrus did not complete their subjugation, until he had 
 habituated them to indolence, gaming and debauchery. (Jussique cauponias et 
 ludicras artes et lenocinia exercere.) It is clear, therefore, that they must have 
 before been possessed of the opposite qualities. Had Croesus not taken a turn 
 for pomp and military renown, he would probably have remained a powerful 
 monarch, instead of ending his days in misfortune. The art of connecting cause 
 with effect, and the study of political economy, are probably as conducive to the 
 personal welfare of kings, as to that of their subjects. 
 
 f This increase of expenditure has not been altogether nominal, and consequen 
 tial upon the reduction in the standard of the silver coinage of France ; a greater 
 quantity and variety of products were consumed, and those of a better and more* 
 expensive quality. And though refined silver is now intrinsically worth nearly 
 as much as in the days of Louis XIV., since the same weight of silver is^ given 
 for the same quantity of wheat; yet the same ranks of society now actually ex- 
 pend more silver in weight as well as in denomination. 
 
116 ON PRODUCTION. BOOK I. 
 
 pears indisputable, that her national wealth has advanced likewise : 
 Smith himself admits that it did ; and what is true of France is so of 
 most of the other states of Europe in some degree or other. 
 
 Turgot* falls in with Smith's opinion. He expresses his belief, 
 that frugality is more generally prevalent now than in former times, 
 and gives the following reasons : that, in most European countries, 
 the interest of money was, on the average, lower than it had ever 
 before been, a clear proof of the greater abundance of capital ; there- 
 fore, that greater frugality must have been exerted in the accumula- 
 tion of that capital than at any former period ; and, certainly, the 
 low rate of interest proves the existence of more abundant capital : 
 but it proves nothing with regard to the manner of its acquirement 
 in fact, it may have been acquired just as well by enlarged produc- 
 tion as by greater frugality, as I have just been demonstrating. 
 
 However, I am far from denying, that in many particulars, the 
 moderns have improved the art of saving as well as that of producing. 
 \ A man is not easily satisfied with less gratifications than he has been 
 j accustomed to: but there are many which he has learnt to procure 
 ' at a cheaper rate. For instance, what can be more beautiful than the 
 coloured furniture papers that adorn the walls of our apartments, 
 combining the grace of design with the freshness of colouring ? For- 
 merly, many of those classes of society that now make use of paper 
 hangings, were content with whitewashed walls, or a coarse ill-exe- 
 cuted tapestry, infinitely dearer than the modern paperings. By the 
 recent discovery of the efficacy of sulphuric acid in destroying the 
 mucilaginous articles of vegetable oils, they have been rendered 
 serviceable in lamps on the Argand principle of a double current of 
 air, which before could only be lighted with fish oil, twice or thrice 
 as dear. This discovery has of itself placed the use of those lamps, 
 and the fine light they give, within reach of almost every class.f 
 
 For this improvement in frugality, we are indebted to the advances 
 !of industry, which has, on the one hand, discovered a greater number 
 of economical processes ; and, on the other, everywhere solicited 
 the loan of capital, and tempted the holders of it, great or small, by 
 better terms and greater security. In times when little industry 
 existed, capital, being unprofitable, was seldom in any other shape 
 than that of a hoard of specie locked up in a strong box, or buried in 
 the earth as a reserve against emergency: however considerable in 
 amount, it yielded no sort of benefit whatever, being in fact little 
 else than a mere precautionary deposit, great or small. But the 
 moment that this hoard was found capable of yielding a profit pro- 
 portionate to its magnitude, its possessor had a double motive for 
 increasing it, and that not of remote or precautionary, but of actual, 
 
 * Reflex sur la Form, et la Distrib. des Rich. \ 81. 
 
 \ It is to be feared, that taxation will ultimately deprive the consumer of the 
 advantage of such improvements. The increase of the internal taxes (droits 
 reunis\ of the stamps on patents, of the taxes and impediments affecting the 
 internal transport of commodities, have already brought the price of these vege- 
 'ahlp oils almost to a par with the article they had so beneficially supplanted 
 
CHAP. XI. ON PRODUCTION. 117 
 
 immediate benefit; since the profit yielded by the capital might, 
 without the least diminution of it, be consumed and procure addi- 
 tional gratifications. Thenceforward it became an object of greater 
 and more general solicitude than before, in those that had none to 
 create, and in those that had one to augment, productive capital; and 
 a capital bearing interest began to be regarded as a property equally 
 lucrative, and sometimes equally substantial with land yielding rent. 
 To such as regard the accumulation of capital as an evil, insomuch as 
 it tends to aggravate the inequality of human fortune, I would sug- 
 gesi, that, if accumulation has a constant tendency to the multiplying 
 of large fortunes, the course of nature has an equal tendency to divide 
 tnem again. A man, whose life has been spent in augmenting his 
 own capital and that of his country, must die at last, and the succes- 
 sion rarely devolves upon a sole heir or legatee, except where the 
 national laws sanction entails and the right of primogeniture. In 
 countries exempt from the baneful influence of such institutions, 
 where nature is left to its own free and beneficen-t action, wealth is 
 naturally diffused by subdivision through all the ramifications of the 
 social tree, carrying health and life to the furthest extremities.* 
 The total capital of the nation is enlarged at the same time that the 
 capital of individuals is subdivided. 
 
 Thus, the growing wealth of an individual, when honestly acquired 
 and reproductively employed, far from being viewed with jealous 
 eyes, ought to be hailed as a source of general prosperity. I say 
 honestly acquired, because a fortune amassed by rapine or extortion 
 is no addition to the national stock ; it is rather a portion of capital 
 transferred from the hands of one man, where it already existed, to 
 those of another, who has exerted no productive industry. On the 
 contrary, it is but too common, that wealth ill-gotten is ill-spent also. 
 
 The faculty of amassing capital, or, in other words, value, I appre-l 
 hend to be one cause of the vast superiority of man over'the brute' 
 creation. Capital, taken in the aggregate, is a powerful engine con- 
 signed to the use of man alone. He can direct towards any one 
 channel of employment the successive accumulations of many gene- 
 rations. Other animals can command, at most, no more than their 
 
 * It is to be regretted that people should be so little attentive to merit in their 
 testamentary dispositions. There is always a degree of discredit thrown upon 
 the memory of a testator, by his bounty to an unworthy object ; and, on the con- 
 trary, nothing endears him more to the survivors than a bequest dictated by public 
 spirit, or the love of private virtue. The foundation of a hospital, of an establish- 
 ment for the education of the poor, of a perpetual premium for good actions, or a 
 bequest to a writer of eminent merit, extends the influence of the wealthy beyonc 1 
 the limits of mortality, and enrols his name in the records of honour, (a) 
 
 () This laudable ambition is always proportionate to the wealth, the civil 
 liberty, and the intelligence of a nation. In England, scarcely a year passes 
 over our heads without more than one instance of useful aiid extensive muni- 
 ficence. The bequests to the elder Pitt, to Wilberforce, and other public men, 
 the frequent foundations and enlargements of institutions of relief or education, 
 reflect equal honour on the character of the nation, and the memory of the iuJi- 
 vidaals. T. 
 
US ON PRODUCTION. BOOK I. 
 
 respective individual accumulations, scraped together in the course 
 of a few days, or a season at the utmost, which can never amount 
 to any thing considerable : so that, granting them a degree of intel- 
 lio-ence they do not seem possessed of, that intelligence would yet 
 remain ineffectual, for want of the materials to set it in motion. 
 
 Moreover, it may be remarked, that the powers of man, resulting 
 from the faculty of amassing capital, are absolutely indefinable; 
 
 i because there is no assignable limit to the capital he may accumu- 
 late, with the aid of time, industry, and frugality 
 
 CHAPTER XII. 
 
 OF UNPRODUCTIVE CAPITAL 
 
 WE have seen above, that values once produced may be devoted-, 
 either to the satisfaction of the wants of those who have acquired 
 them, or to a further act of production. They may also be with- 
 drawn both from unproductive consumption and from reproductive 
 employment, and remain buried or concealed. 
 
 The owner of values, in so disposing of them, not only deprives 
 himself of the self-gratification he might have derived from their 
 consumption, but also of the advantage he might draw from the 
 productive agency of the value hoarded. He furthermore withholds 
 from industry the profits it might make by the employment of that 
 value. 
 
 Amongst abundance of other causes of the misery and weakness 
 of the countries subjected to the Ottoman dominion, it cannot be 
 doubted, that one of the principal is, the vast quantity of capital 
 remaining in a state of inactivity. The general distrust and uncer- 
 tainty of the future induce people of every rank, from the peasant 
 1 j to the pacha, to withdraw a part of their property from the greedy 
 eyes of power: and value can never be invisible, without being inac- 
 . This misfortune is common to all countries, where the govern- 
 ment is arbitrary, though in different degrees proportionate to the 
 severity of despotism. For the same reason, during the violence of 
 political convulsions, there is always a sensible contraction of capital, 
 a stagnation of industry, a disappearance of profit, and a general de- 
 pression while the alarm continues : and, on the contrary, an instan- 
 taneous energy and activity highly favourable to public prosperity, 
 upon the re-establishment of confidence. The saints and madonnas 
 of superstitious nations, the splendid pageantry and richly decorated 
 idols of Asiatic worship, gave life to no agricultural or manufacturing 
 enterprise. The riches of the fane and the time lost in adoration 
 would really purchase the blessings that barren prayers can never 
 extort from the object of idolatry. There is a great deal of inert 
 nnpital in countries, where the national habits lead to the extended 
 
CHAP. XIII. ON PRODUCTION. 110 
 
 use of the precious metals in furniture, clothes, and decorations. 
 The silly admiration bestowed by the lower orders on the display 
 of such idle and unproductive finery, is hostile to their own interests. 
 "For" the opulent individual, who vests 20,000 dollars, in gilding, 
 plate, and the splendour of his establishment, has it not to lay out at 
 interest, and withdraws it from the support of industry of any kind. 
 The nation loses the annual revenue of so much capital, and the 
 annual profit of the industry it might have kept in activity. 
 
 Hitherto we have been considering that kind of value only, which 
 is capable, after its creation, of being, as it were, incorporated with 
 matter, and preserved for a longer or shorter period. But all the 
 values producible by human industry, have not this quality. Some 
 there are, which must have reality, because they are in high estima- 
 tion, and purchased by the exchange of costly and durable products, 
 which nevertheless have themselves no durability, but perish the 
 moment of their production. This class of values I shall define in 
 the ensuing chapter, and denominate immaterial products.* 
 
 CHAPTER XIII. 
 
 OP IMMATERIAL PRODUCTS, OR VALUES CONSUMED AT THE MOMENT OP 
 PRODUCTION. 
 
 A PHYSICIAN goes to visit a sick person, observes the symptoms 
 of disease, prescribes a remedy, and takes his leave without deposit- 
 ing any product, that the invalid or his family can transfer to a third 
 person, or even keep for the consumption of a future day. 
 
 Has the industry of the physician been unproductive? Who can 
 for a moment suppose so 1 The patient's life has been saved perhaps. 
 Was this product incapable of becoming an object of barter? By 
 no means: the physician's advice has been exchanged for his fee; 
 but the want of this advice ceased the moment it was given. The 
 act of giving was its production, of hearing its consumption, and 
 the consumption and production were simultaneous. 
 
 This is what I call an immaterial product. 
 
 The industry of a musician or an actor yields a product of the/ 
 same kind : it gives one an amusement, a pleasure one can not pos-i 
 sibly retain or preserve for future consumption, or as the object of 
 barter for other enjoyments. This pleasure has its price, it is true . 
 
 * It was my first intention to call these perishable products, but this *errn 
 would be equally applicable to products of a material kind. Intransfarablf 
 would be equally incorrect, for this class of products does pass from the pro- 
 ducer to the consumer. The word transient does not exclude all idea of dura 
 tion whatever, neither does the word momentary. 
 
JOQ ON PRODUCTION. BOOK I 
 
 ^ but it has no further existence, except perhaps in the memory, ana 
 ' no exchangeable value, after the instant of its production. 
 
 Smith will not allow the name of products to the results of these 
 branches of industry. Labour so bestowed he calls unproductive; 
 an error he was led* into by his definition of wealth, which he defines 
 to consist of things bearing a value capable of being preserved, 
 instead of extending the name to all things bearing exchangeable 
 value: consequently, excluding products consumed as soon as created. 
 The industry of the physician, however, as w r ell as that of the public 
 functionary, the advocate or the judge, which are all of them of the 
 same class, satisfies wants of so essential a nature, that without those 
 professions no society could exist. Are not, then, the fruits of their 
 labour real? They are so far so, as to be purchased at the price of 
 other and material products, which Smith allows to be wealth ; and 
 by the repetition of this kind of barter, the producers of immaterial 
 products acquire fortunes.* 
 
 To descend to items of pure amusement, it cannot be denied, that 
 the representation of a good comedy gives as solid a pleasure as a 
 box of comfits, or a discharge of fire-works, which are products, 
 even within Smith's definition. Nor can I discover any sound rea- 
 son, why tho talent of the painter should be deemed productive, 
 and not the lalent of the musician.f 
 
 Smith himself has exposed the error of the economist in confining 
 the term, wealth, to the mere value of the raw material contained 
 in each product ; he advanced a great step in political economy, by 
 demonstrating wealth to consist of the raw material, plus the value 
 added to it by industry; but, having gone so far as to promote to 
 the rank of wealth an abstract commodity, value, why reckon it as 
 nothing, however real and exchangeable, when not incorporated in 
 matter? This is the more surprising, because he went so far as to 
 treat of labour, abstracted from the matter wherein it is employed; 
 to examine the causes which operate upon and influence its value; 
 and even to propose that value as the safest and least variable mea- 
 sure of all other values.J 
 
 The nature of immaterial products makes it impossible ever to 
 accumulate them, so as to render them a part of the national capital. 
 A people containing a host of musicians, priests, and public func- 
 tionaries might be abundantly amused, well versed in religious 
 doctrines, and admirably governed ; but that is all. Its capital 
 would receive no direct accession from the total labour of all these 
 individuals, though industrious enough in their respective vocations, 
 because their products would be consumed as fast as produced. 
 
 * Wherefore de Verri is wrong- in asserting 1 , that the occupations of the sove- 
 leign, the magistrate, the soldier, and the priest, do not fall within the cognizance 
 vf political economy. (Meditazioni sulla Economia Politico, 24.) 
 
 I This error has already been pointed out by M. Germain Gamier, in the notes 
 to his French translation of Smith. 
 
 T Some writer?, who have probably taken but a cursory view of the positions 
 Here Jaid down, still persist in setting down the producers of immaterial product* 
 
I,HAP. XIII. ON PRODUCTION. 121 
 
 Consequently, nothing is gained on the score of public prosperity, 
 by ingeniously creating an unnatural demand for the labour of any 
 of these professions ; the labour diverted into that channel of produc- 
 tion can not be increased, without increasing the consumption also. 
 If this consumption yield a gratification, then indeed we may console 
 ourselves for the sacrifice; but when that consumption is itself an 
 evil, it must be confessed the system which causes it is deplorable 
 enough. 
 
 This occurs in practice, whenever legislation is too complicated. 
 The study of the law, becoming more intricate and tedious, occupies 
 more persons, whose labour must likewise be better paid. What does 
 society gain by this 1 Are the respective rights of its members bet- 
 ter protected ? Undoubtedly not : the intricacy of law, on the con- 
 trary, holds out a great encouragement to fraud, by multiplying the 
 chances of evasion, and very rarely adds to the solidity of title or of 
 right. The only advantage is, the greater frequency and duration of 
 suits. The same reasoning applies to superfluous offices in the pub- 
 lic administration. To create an office for the administration of what 
 ought to be left to itself, is to do an injury to the subject in the 
 first instance, and make him pay for it afterwards as if it were a 
 benefit.* 
 
 Wherefore it is impossible to admit the inference offM. Gamier, 
 that because the labour of physicians, lawyers, and the like, is pro- 
 ductive, therefore a nation gains as much by the multiplication of tha 
 class of labour as of any other. This would be the same as bestow- 
 ing upon a material product more manual labour than is necessary 
 for its completion. The labour productive of immaterial products, 
 like every other labour, is productive so far only as it augments the 
 utility, and thereby the value of a product: beyond this point it is a 
 purely unproductive exertion. To render the laws intricate pur- 
 posely to give lawyers full business in expounding them, would be 
 equally absurd, as to spread a disease that doctors may find practice. 
 
 Immaterial products are the fruit of human industry, in which 
 term we have comprised every kind of productive labour. It is not 
 so easy to understand how they can at the same time be tire fruit of 
 capital. Yet these products are for the most part the result of some 
 talent or other, which always implies previous study ; and no study 
 can take place without advances of capital. 
 
 Before the advice of the physician can be given or taken, the phy- 
 
 amongst the unproductive labourers. But it is vain to struggle against the 
 nature of things. Those at all conversant with the science of political economy, 
 are compelled to yield involuntary homage to its principles. Thus Sismondi, 
 after having spoken of the values expended in the wages of unproductive 
 labourers, goes on to say, " Ce sont des Consummations rapides qui suivent imme- 
 diatement la production" Nouv. Princ. torn. ii. p. 203 ; admitting a production 
 oy those he had pronounced to be unproductive ! 
 
 * What, then, are we to think of those who assert in substance, if not in 
 words, that such a formality or such a tax is productive of one benefit at least, 
 namely, the maintenance of such or such an establishment of clerks and officers * 
 
 i Traduction de Smith, note 20. 
 
 i i O 
 
12 2 ON PRODUCTION. BOOK I. 
 
 sician or his relations must first have defrayed the charges of an edu- 
 cation of many years' duration: he must have subsisted while a stu- 
 dent ; professors must have been paid ; books purchased ; journeys 
 perhaps have been performed ; all which implies the disbursement 
 of a capital previously accumulated.* So likewise the lawyer's opin- 
 ion, the musician's song, &c. are products, that can never be raised 
 without the concurrence of industry and capital. Even the ability 
 of the public functionary is an accumulated ^capital. It requires the 
 same kind of outlay, for the education of a civil or military engineer, 
 as for that of a physician. Indeed we may take it for granted, that 
 the funds expended in the training of a young man for the public 
 service, are found by experience to be a fair investment of capital, 
 and that labour of this description is well paid; for we find more 
 applicants than offices in almost every branch of administration, even 
 in countries where offices are unnecessarily multiplied. 
 
 The industry productive of immaterial products will be found to 
 go through exactly the same process, as, in the analysis made in the 
 beginning of this work, we have shown to be followed by industry 
 m general. This may be illustrated by an example. Before an 
 ordinary song can be executed, the arts of the composer and the 
 practical musician must have been regular and distinct callings ; and 
 the best mode of acquiring skill in them must have been discovered ; 
 this is the department of the man of science, or theorist. The appli- 
 cation of this mode and of this art, has been left to the composer and 
 singer, who have calculated, the one in composing his tune, the others 
 in the execution of it, that it would afford a pleasure, to which the 
 audience would attach some value or other. Finally, the execution 
 is the concluding operation of industry. 
 
 There are, however, some immaterial products, with respect to 
 which the two first operations are so extremely trifling, that one may 
 almost account them as nothing. Of this description is the service 
 of a menial domestic. The art of service is little or nothing, and 
 the application of that art is made by the employer ; so that nothing 
 is left to the servant, but the executive business of service, which is 
 the last and lowest of industrious operations. 
 
 It necessarily follows, that, in this class of industry, and some few 
 others practised by the lowest ranks of society, that of the porter for 
 instance, or of the prostitute, &c. &c. : the charge of training being 
 Httle or nothing, the products may be looked upon not only as the 
 fruits of very coarse and primitive industry, but likewise as products, 
 to the creation of which capital has contributed nothing; for I can 
 not think the expense of these agents' subsistence from infancy, till 
 the age of emancipation from parental care, can be considered as a 
 
 * I will not here anticipate the investigation of the profits of industry and ca- 
 pital, but confine myself to observe, en passant, that capital is thrown away upon 
 the physician, and his fees improperly limited, unless, besides the recompense of 
 his actual labour and talent, (which latter is a natural agent gratuitously given 
 to him,) they defray the interest of the capital expended in his education, and 
 act the common rate of interest, but calculated at the rate of an annuity. 
 
CIIAP. XIII. ON PRODUCTION. 123 
 
 capital, the interest of which is paid by the subsequent profits. I 
 shall give my reasons for this opinion when I come to speak of 
 wages.* 
 
 The pleasures one enjoys at the price of any kind of personal exer- 
 tion, are immaterial products, consumed at the instant of production 
 by the very person that has created them. Of this description are 
 the pleasures derived from arts studied solely for self-amusement. 
 In learning music, a man devotes to that study some small capital, 
 some time and personal labour ; all which together are the price 
 paid for the pleasure of singing a new air or taking part in a concert. 
 
 Gaming, dancing, and field-sports, are labours of the same kind. 
 The amusement derived from them is instantly consumed by the 
 persons who have performed them. When a man executes a paint- 
 ing, or makes any article of smith's or joiner's work for his amuse- 
 ment, he at the same time creates a durable product or value, and 
 an immaterial product, viz. his personal amusement.f 
 
 In speaking of capital, we have seen, that part of it is devoted to 
 the production of material products, and part remains wholly unpro- 
 ductive. There is also a further part productive of utility or plea- 
 sure, which, can, therefore, be reckoned as a portion neither of the 
 capital engaged in the production of material objects, nor of that 
 absolutely inactive. Under this head may be comprised dwelling- 
 houses, furniture and decorations, that are an addition to the mere 
 pleasures of life. The utility they afford is an immaterial product. 
 
 When a young couple sets up house-keeping for the first time, the 
 plate they provide themselves with cannot be considered as abso- 
 lutely inactive capital, for it is in constant domestic use ; nor can it 
 be reckoned as capital engaged in the raising of material products ; 
 for it leads to the production of no one object capable of being re- 
 served for future consumption ; neither is it an object of annual con 
 sumption, for it may last, perhaps, for their joint lives, and be handed 
 down to their children ; but it is capital productive of utility and 
 pleasure. Indeed, it is so much value accumulated or in other words 
 withdrawn from reproductive consumption ; consequently, yielding 
 neither profit nor interest, but productive of some degree of benefit 
 or utility, which is gradually consumed and incapable of being real- 
 ised, yet it is possessed of real and positive value, since it is occa- 
 
 * The wages of the mere labourer are limited to the bare necessaries of life, 
 without which his agency cannot be continued and renewed ; there is no surplus 
 for the interest on capital. But the subsistence of his children, until old enough 
 to earn their livelihood, is comprised in the necessaries of the labourer. 
 
 f An indolent and inert people is always little addicted to amusements result- 
 ing from the exercise of personal faculties. Labour is attended with so much 
 pain to them, as very few pleasures are intense enough to repay. The Turks 
 think us mad to find pleasure in the violent motions of the dance; without re 
 fleeting, that it causes to us infinitely less fatigue than to themselves. They 
 prefer pleasures prepared by the fatigue of others. There is, perhaps, as much 
 industry expended on pleasures in Turkey as with us ; but it is exerted in generaj 
 by slaves, who do not participate in the product. 
 
124 ON PRODUCTION. BOOK 1 
 
 sionally the object of purchase : as in the instance of the rent of a 
 house or the hire of furniture, and the like. 
 
 Although it be a sad mistake of personal interest to vest the small- 
 est particle of capital in a manner wholly unproductive, it is by no 
 means so to lay out, in a way productive of utility or amusement, so 
 much as may be not disproportionate to the circumstances of -the 
 individual. There is a regular gradation of the ratio of capital so vest- 
 ed by individuals respectively, from the rude furniture of the poor 
 man's hovel, up to the costly ornaments and dazzling jewels of the 
 wealthy. When a nation is rich, the poorest family in it possesses a 
 capital of this kind, not indeed of any great amount, but still enough 
 to satisfy moderate and limited desires. The prevalence of general 
 wealth in a community is more strongly indicated by meeting uni- 
 versally with some useful and agreeable household conveniences in 
 the dwellings of the inferior ranks, than by the splendid palaces and 
 costly magnificence of a few favourites of fortune, or by the casual 
 display of diamonds and finery we sometimes see brought together 
 in a large city, where the whole wealth of the place is often exhibit- 
 ed at one view, at a fete or a theatre of public resort ; but which, 
 after all, are a mere trifle, compared with the aggregate value of 
 the household articles of a great people. 
 
 The component items of a capital producing bare utility or amuse- 
 ment, are liable to wear and tear, though in a very slight degree; 
 and if that wear and tear be not made good out of the savings of 
 annual revenue, there is a gradual dissipation and reduction of capital. 
 
 This remark may appear trifling ; yet how many people think they 
 are living upon their revenue, when they are at the same time par- 
 tially consuming their capital ! Suppose, for instance, a man is the 
 proprietor of the house he lives in ; if the house be calculated to last 
 100 years, and have cost 20,000 dollars in the building, it costs the 
 proprietor or his heirs 200 dollars per annum, exclusive of the 
 interest upon the original cost, otherwise the whole capital will be 
 extinguished, or nearly so, by the end of 100 years. The same rea- 
 soning is applicable to every other item of capital devoted to the 
 production of utility or pleasure; to a sideboard, a jewel, every im- 
 aginable object, in short, that comes under the same denomination. 
 
 And, vice versa, when annual revenue, arising from whatever 
 source, is encroached upon for the purpose of enlarging the capital 
 devoted to the production of useful or agreeable objects, there is an 
 actual increase of capital and of fortune, though none of revenue. 
 
 Capital of this class, like all other capital, without exception, is 
 formed by the partial accumulations of annual products. There is 
 no other way of acquiring capital, but by personal accumulation, or 
 by succession to accumulation of others. Wherefore, the reader is 
 referred on this head to Chap. XI, wt>ere I have treated of the accu- 
 mulation of capital. 
 
 A public edifice, a bridge, i higftwa\ . are savings or accumulations 
 of revenue, devoted to the tonnatiui of a capital, whose returns art 
 an immaterial product cousamcd by iho public at large. If the con 
 
CHAP. Xin. ON PRODUCTION. 12 5 
 
 struction of a bridge or highway, added to the purchase of the 
 ground it stands upon, have cost 200,000 dollars, the use the public 
 makes of it may be estimated to cost 10,000 dollars per annum.* 
 
 There are some immaterial products, towards which the land is a 
 principal contributor. Such is the pleasure derived from a park or 
 pleasure-garden. The pleasure is afforded by the continual and daily 
 agency of the natural object, and is consumed as fast as produced. A 
 ground yielding pleasure must, therefore, not be confounded with 
 ground lying waste or in fallow. Wherein again appears the anal- 
 ogy of land to capital, of which, as we have seen, some part is pro- 
 ductive of immaterial products, and some part is altogether inactive. 
 
 Gardens and pleasure-grounds have generally cost some expense 
 in embellishment; in which case, capital and land unite their 
 agency to yield an immaterial product. 
 
 Some pleasure-grounds yield likewise timber and pasturage : these 
 are productive of both classes of products. The old-fashioned gar- 
 dens in France yielded no material product ; those of modern times 
 are somewhat improved in this particular, and would be more so, 
 if culinary herbs and fruit-trees were oftener introduced. Doubtless, 
 it would be harsh to find fault with a proprietor in easy circumstances, 
 for appropriating part of his freehold to the mere purpose of amuse- 
 ment. The delightful moments he there passes with his family around 
 him, the wholesome exercise he takes, the spirits he inhales, are 
 among the most valuable and substantial blessings of life. By all 
 means then let him lay out on the ground as he likes, and give full 
 scope to his taste, or even caprice ; but if caprice can be directed to 
 an useful end, if he can derive profit without abridging enjoyment, 
 his garden will have additional merit, and present a two-fold source 
 of delight to the eye of the statesman and the philosopher. 
 
 I have seen some few gardens possessed of this double faculty of 
 production ; whence, although the lime, horse-chestnut and sycamore 
 trees, and others of the ornamental kind, were by no means ex- 
 cluded, any more than the lawns and parterres ; yet at the same time 
 the fruit-trees, decked in the bloom of vernal promise, or weighed 
 down by the maturity of autumnal \vealth, added a variety and rich- 
 ness of colouring to the other local beauties. The advantages of dis- 
 tance and position were attended to without violating the conve- 
 nience of division and inclosure. The beds and borders, planted 
 with vegetables, were not provokingly straight, regular, or uniform, 
 
 * If it entail a further charge of 300 dollars for annual repairs and mainte- 
 nance, the public consumption of pleasure or utility may be set down at 10,200 
 dollars per annum. This is the only way of taking the account, with a view to 
 compare the advantage derived by the payers of public taxes, with the sacrifices 
 imposed on them for the acquisition of such conveniences. In the case put 
 above, the public will be a gainer, if the outlay of 10,200 dollars have effected 
 an annual saving in the charge of national production, or, what is the same 
 thing, an annual increase of the national product, of still larger amount. In the 
 contrary supposition, the national administration will have led the nation into a 
 losing concern. 
 11* 
 
12(3 ON PRODUCTION. BOOB I 
 
 but harmonised with the undulations of the surface, and of vegetation 
 of larger growth ; and the walks were so disposed as to serve both 
 for pleasure and cultivation. Every thing was arranged with a view 
 to ornament, even to the vine-trelliced well for filling the watering 
 pots. The whole, in short, was so ordered, as if designed to impress 
 the conviction, that utility and beauty are by no means incompatible, 
 and that pleasure may grow up by the side of wealth. 
 
 A whole country may, in like manner, grow rich even upon its 
 ornamental possessions. Were trees planted wherever they could 
 thrive without injury to other products,* besides the accession of 
 beauty and salubrity, and the additional moisture attracted by the 
 multiplication of timber-trees, the value of the timber alone would., 
 in a country of much extent, amount to something considerable. 
 
 There is this advantage, in the cultivation of timber-trees, that they 
 require no human industry beyond the first planting, after which 
 nature is the sole agent of their production. But it is not enough 
 merely to plant, we must check the desire of cutting down,, until the 
 weak and slender stalk, gradually imbibing the juices of the earth and 
 atmosphere, shall, without the hand of cultivation, have acquired 
 bulk and solidity, and spread its lofty foliage to the heavens.f The 
 best that man can do for it is, to forget it for some years ; and even 
 where it yields no annual product, it will recompense his forbearance 
 when arrived at maturity, by an ample supply of firing, and of tim- 
 ber for the carpenter, the joiner, and the wheel-wright. 
 
 In all ages, the love of trees and their cultivation has been strongly 
 recommended by the best writers. The historian of Cyrus records, 
 among his chief titles to renown, the merit of having planted all 
 Asia Minor. In the United States, upon the birth of a daughter, the 
 cultivator plants a little wood, to grow up with her, and to be her 
 portion on the day of marriage. (1) Sully, whose views of policy 
 were extremely enlightened, enriched most of the provinces of 
 France with the plantation he directed. I have seen several, to 
 which public gratitude still affixes his name ; and they remind me 
 of the saying of Addison, who was wont to exclaim, whenever he 
 saw a plantation, " A useful man has passed this way." 
 
 * In many countries, an exaggerated notion seems to prevail, of the damage 
 done by timber-trees, to other products of the soil ; yet it should seem, that they 
 rather enhance than diminish the revenue of the landholder; for we find those 
 countries most productive, that are the best clothed with timber : witness Nor 
 mandy, England, Belgium and Lombardy. 
 
 t The leaves of trees absorb the carbonic-acid gas floating in the atmosphere 
 we breathe, and which is so injurious to respiration. When this gas is super- 
 abundant, it brings on asphyxia, and occasions' death. On the contrary, vegeta- 
 tion increases the proportion of oxygen, which is the gas most favourable to re- 
 spiration and to health. Ceteris paribns, those towns are the healthiest, which 
 have the most open spaces covered with trees. It would be well to plant all 
 our spacious quays. 
 
 (i; The American cultivator might be said, with much greater semblance of 
 truth, on the birth of a daughter, to cut down " a little wood," instead of plant- 
 n ff onc AMERICAN EDITOR. 
 
CHAP. XIV. ON PRODUCTION. 127 
 
 As yet we have been taken up with the consideration of the agents 
 essential to production ; without whose agency mankind would have 
 no other subsistence or enjoyment, than the scanty and limited sup- 
 ply that nature affords spontaneously. We first investigated tlie 
 mode in which these agents, each in its respective department, and 
 all in concert, co-operate in the work of production, and have after- 
 wards examined in detail the individual action of each, for the fur- 
 ther elucidation of the subject. We must now proceed to examine 
 the intrinsic and accidental causes, which act upon production, and 
 ciog or facilitate the exertion of productive agents. 
 
 CHAPTER XIV. 
 
 OF THE RIGHT OF PROPERTY. 
 
 IT is the province of speculative philosophy to trace the origin of 
 the right of property ; of legislation to regulate its transfer ; and of 
 political science to devise the surest means of protecting that right. 
 Political economy recognises the right of property solely as the most j 
 powerful of all encouragements to the multiplication of wealth, and \ 
 is satisfied with its actual stability, without inquiring about its origin 1 
 or its safeguards. In fact, the legal inviolability of property is obvi- 
 ously a mere mockery, where the sovereign power is unable to make 
 the laws respected, where it either practises robbery itself,* or is 
 impotent to repress it in others; or where possession is rendered 
 perpetually insecure, by the intricacy of legislative enactments, and 
 the subtleties of technical nicety. Nor can property be said to exist, 
 where it is not matter of reality as well as of right. Then, and then 
 only, can the sources of production, namely, land, capital, and indus- 
 try, attain their utmost degree of fecundity. (1) 
 
 * The strength of an individual is so little, when opposed to that of the go- 
 vernment he lives under, that the subject can have no security against the exac- 
 tions and abuses of authority, except in those countries where the guardianship 
 of the laws is entrusted to the all-searching vigilance of a free press, and their 
 violation checked by an efficient national representation. 
 
 (1) Although, according to our author, it is the province of speculative philos- 
 ophy to trace the origin of property, the existence of which, in all politico-econo- 
 mical inquiries, is assumed as the foundation of national wealth, it may not here be 
 improper to introduce a few observations on the Right of Property, illustrating 
 its historical origin, and pointing out its true character. Most writers on natu- 
 ral law, among whom may be named Grotius, Ptiffendorff, Barbeyrac, and Locke, 
 ascribe, in general, the origin of property to priority of occupancy, and have much 
 perplexed themselves in attempting to prove how this act should give an exclu- 
 sive right of individual enjoyment to what was previously held in common 
 Bhiokstone, although he does not enter into the dispute about the manner, ad hsa 
 
12S ON PRODUCTION. BOOK I. 
 
 There are some truths so completely self-evident, that demonstra- 
 tion is quite superfluous. This i? one of that number. For who 
 will attempt to deny, that the certainty of enjoying the fruits of ono's 
 
 been remarked, in which occupancy conveys a right of property, expresses no 
 doubt about its having this effect, independent of positive institutions. 
 
 Later writers on jurisprudence have adopted other theories on the subject of pro- 
 perty, which being altogether unsatisfactory, we will not notice, except to remark 
 that the most refined and ingenious speculations, although equally inconclusive, 
 respecting the nature and origin of property", are those of Lord Kames, in the 
 Essay on Property, in his Historical Law Tracts. 
 
 DUGALD STEWART, however, is the first inquirer who has taught us to think 
 and reason with accuracy on this subject, and it is to his observations on the 
 Right of Property, contained in the supplement to the chapter, "Of Justice," in 
 his~work on the "Philosophy of the Active and Moral Powers of Man," that we 
 must refer the reader who is desirous of possessing just and unanswerable argu- 
 ments for the true foundations on which property rests. We must here content 
 ourselves with extracting a few passages, which will exhibit this illustrious phi- 
 losopher's views of the origin of the acquisition of property, which he traces to 
 two distinct sources. 
 
 " It is necessary," says Stewart, " to distinguish carefully the complete right 
 of property, which is founded on labour, from the transient right of possession 
 which is acquired by mere priority of occupancy ; thus, before the appropriation 
 of land, if any individual had occupied a particular spot, for repose or shade, it 
 would have been unjust to deprive him of possession of it. This, however, was 
 only a transient right. The spot of ground would again become common, the 
 moment the occupier had left it; that is, the right of possession would remain no 
 longer than the act of possession. Cicero illustrates this happily by the simili- 
 tude of a theatre. ' Quemadmodum theatrum, cum commune sit, recte tamen dici 
 potest ejus esse cum locum quern quisque occuparit.' The general conclusions 
 which I deduce are these : 1. That in every state of society labour, wherever it 
 is exerted, is understood to found a right of property. 2. That, according to 
 natural law, labour is the only original way of acquiring property. 3. That, 
 according to natural law, mere occupancy founds only a right of possession ; and 
 that, whenever it founds a complete right of property, it owes its force to positive 
 institutions." 
 
 After premising these leading propositions, he proceeds with what he terms a 
 blight historical sketch of the different systems respecting the origin of property, 
 from which we have only room to copy the following passage, which, however, 
 contains this eminent author's views of the right of property, as recognised by 
 the law of nature; and the right of property, as created by the municipal regu- 
 lations, and demonstrating the futility of the attempts hitherto made to resolve 
 all the different phenomena into one general principle. 
 
 " In such a state of things as that with which we are connected, the right of 
 property must be understood to derive its origin from two distinct sources; the 
 one is, that natural sentiment of the mind which establishes a moral connexion 
 between labour and an exclusive enjoyment of the fruits of it ; the other is the 
 municipal institutions of the country where we live. These institutions every- 
 where take rise partly from ideas of natural justice and partly (perhaps chiefly) 
 from ideas of supposed utility, two principles which, when properly under- 
 ^tood, are, I believe, always in harmony with each other, and which it ought to 
 be the great aim of every legislator to reconcile to the utmost of his power. Among 
 those questions, however, which fall under the cognizance of positive laws, there 
 are many on which natural justice is entirely silent, and which, of consequence, 
 may be discussed on principles of utility solely. Such are most of the questions 
 concerning the regulation of the succession to a man's property after his death ; 
 of some of which it perhaps may be found that the determination ought to vary 
 with the circumstances of the society, and which have certainly, in fact, beer> 
 frequently determined by the caprice of the legislator, or by some principle uiti 
 
CHM. XIV. ON PRODUCTION. 129 
 
 land, capital and labour, is the most powerful inducement to render 
 them productive? Or who is dull enough to doubt, that no one 
 knows so well as the proprietor how to make the best use of his 
 property? Yet how often in practice is that inviolability of pro- 
 perty disregarded, which, in theory, is allowed by all to be so 
 immensely advantageous? How often is it broken in upon for the 
 most insignificant purposes; and its violation, that should naturally 
 excite indignation, justified upon the most flimsy pretexts? So few 
 persons are there w r ho have a lively sense of any but a direct injury, 
 or, with the most lively feelings, have firmness enough to act up to 
 their sentiments! There is no security of property, where a despotic 
 authority can possess itself of the property of the subject against his 
 consent. Neither is there such security, where the consent is merely 
 nominal and delusive. In England, the taxes are imposed by the 
 National representation; if, then, the minister be in the possession of 
 an absolute majority, whether by means of electioneering influence, 
 or by the overwhelming patronage foolishly placed at his disposal, 
 taxation w r ould no longer be in reality imposed by the national repre- 
 sentatives ; the body bearing that name would, in effect, be the repre- 
 sentatives of the minister; and the people of England would be 
 forcibly subjected to the severest privations, to further projects that 
 possibly might be every way injurious to them.* 
 
 It is to be observed that the right of property is equally invaded, 
 by obstructing the free employment of the means of production, as ^ 
 by violently depriving the proprietor of the product of his land, 
 capital, or industry : for the right of property, as" defined by jurists, 
 is the right of use or even abuse. Thus, landed property is violated 
 by arbitrarily prescribing tillage or plantation ; or by interdicting 
 particular modes of cultivation ; the property of the capitalist is 
 violated, by prohibiting particular ways of employing it ; for instance, 
 by interdicting large purchases of corn, directing all bullion to be 
 carried to the mint, forbidding the proprietor to build on his own 
 soil, or prescribing the form and requisites of the building. It is a 
 further violation of the capitalist's property to prohibit any kind of 
 industry, or to load it with duties amounting to prohibition, after he 
 has once embarked his capital in that way. It is manifest, that a 
 prohibition upon sugar would annihilate most of the capital of the 
 sugar refiners, vested in furnaces, utensils, &c. &c. f 
 
 The property a man has in his own industry, is violated, whenever 
 
 mately resolvable into an accidental association of ideas. Indeed, various case* 1 
 may be supposed in which it is not only useful, but necessary, that a rule should 
 be fixed ; while, at the same time, neither justice nor utility seem to be much 
 interested in the particular decision." AMERICAN EDITOR. 
 
 * Adam Smith has asserted, that the security afforded to property by the law.* 
 of England has more than counteracted the repeated faults and blunders of its 
 government. It may be doubted, whether he would now adhere to that opinioD. 
 
 f It would be vain to say to him, why not employ your works in some other 
 way 1 ? Probably, neither the spot nor the works of a refinery could be othejwi>-o 
 employed without enormous loss. 
 
130 ON PRODUCTION. BOOK I 
 
 tie is forbidden the free exercise of his faculties ar i r.jlents, except 
 insomuch as they would interfere with the rights CA third parties. 
 A similar violation is committed when a man's labour is put in requi- 
 sition for one purpose, though designed by himself for another ; as 
 when an artisan or trader is forced into the military life, whether 
 
 permanently or merely for the occasion. 
 I am well 
 
 aware, that the importance of maintaining social order, 
 whereon the security of property depends, takes precedence of pro- 
 perty itself; for w r hich very reason, nothing short of the necessity of 
 defending that order from manifest danger can authorise these or 
 similar violations of individual right. And this it is which impresses 
 upon the proprietors the necessity of requiring, in the constitution of 
 the body politic, some guarantee or other, that the public service 
 shall never be made a mask to the passions and ambition of those in 
 power. 
 
 Thus taxation, when not intended as an engine of national depres- 
 sion and misery, must be proved indispensable to the existence of 
 social order; every step it takes beyond these limits, is an actual 
 spoliation ; for taxation, even where levied by national consent, is a 
 violation of property ; since no values can be levied, but upon the 
 produce of the land, capital, and industry of individuals. 
 
 But there are some extremely rare cases, where interference 
 between the owner and his property is even beneficial to production 
 itself. For example, in all countries that admit the detestable right 
 of slavery, a right standing in hostility to all others, it is found expe- 
 "dient to limit the master's power over his slave, (a) Thus also, if a 
 
 * The industrious faculties are, of all kinds of property, the least questiona- 
 ble ; being derived directly either from nature, or from personal assiduity. The 
 property in them is of higher pretensions than that of the land, which may 
 generally be traced up to an act of spoliation ; for it is hardly possible to show an 
 instance, in which its ownership has been legitimately transmitted from the first 
 occupancy. It ranks higher than the right of the capitalist also ; for even taking 
 it for granted, that this latter has been acquired without any spoliation whatever, 
 and by the gradual accumulations of ages,' yet the succession to it could not have 
 been established without the aid of legislation, which aid may have been granted 
 on conditions. Yet, sacred as the property in the faculties of industry is, it is 
 constantly infringed upon, not only in the flagrant abuse of personal slavery, but 
 in many other points of more frequent occurrence. 
 
 A government is guilty of an invasion upon it, when it appropriates to itself a 
 particular branch of industry, the business of exchange and brokerage for exam- 
 ple ; or when it sells the exclusive privilege of conducting it. It is still a greater 
 .violation to authorize a gendarme, commissary of police, or judge, to arrest and 
 detain individuals at discretion, on the plea of public safety or security to the 
 constituted authorities; thus depriving the individual of the fair and reasonable 
 certainty of having his time and faculties at his own disposal, and of being able 
 to complete what lie may begin upon. What robber or despoiler could commit 
 H more atrocious act of invasion upon the public security, certain as he is of being 
 put down, and counteracted by private as well as public opposition] 
 
 \a) This is merely an instance of the necessity of counteracting one poison 
 t>v anjt.her. T. 
 
CHAP. XIV. ON PRODUCTION. 131 
 
 society stand in urgent need of timber for the shipwright or carpen- 
 ter, it must reconcile itself to some regulations respecting the felling 
 of private woods ;* or the fear of losing the veins of mineral that 
 intersect the soil, may sometimes ohlige a government to work the 
 mines itself. It may be readily conceived, that, even if there were 
 no restraints upon mining, want of skill, the impatience of avarice, 
 or the insufficiency of capital, might induce a proprietor to exhaust 
 the superficial, which are commonly the poorest loads, and occasion 
 the loss of superior depth and quality. (1) Sometimes a vein of 
 mineral passes through the ground of many proprietors, but is acces- 
 sible only in one spot. In this case, the obstinacy of a refractory 
 proprietor must be disregarded, and the prosecution of the works be 
 compulsory ; though, after all, I will not undertake to affirm, that it 
 would not be more advisable on the whole to respect his rights, or 
 that the possession of a few additional mines is not too dearly pur- 
 chased by this infringement upon the inviolability of property. 
 
 Lastly, public safety sometimes imperiously requires the sacrifice 
 of private property ; but that sacrifice is a violation, notwithstanding 
 an indemnity given in such cases. For the right of property implies 
 the free disposition of one's own ; and its sacrifice, however fully 
 indemnified, is a forced disposition. 
 
 When public authority is not itself a spoliator, it procures to the 
 nation the greatest of all blessings, protection from spoliation by 
 others. Without this protection of each individual by the united 
 force of the whole community, it is impossible to conceive any con- 
 siderable development of the productive powers of man, of land, and 
 of capital ; or even to conceive the existence of capital at all ; for it 
 is nothing more than accumulated value, operating under the safe- 
 guard of authority. This is the reason why no nation has ever 
 arrived at any degree of opulence, that has not been subject to a 
 regular government. Civilized nations are indebted to political 
 organization for the innumerable and infinitely various productions, 
 that satisfy their infinite \vants, as well as for the fine arts and the 
 opportunities of leisure that accumulation affords, without which the 
 
 * Probably, also, were it not for maritime wars, originating 1 , sometimes in 
 puerile vanity, and sometimes in national errors of self-interest, commerce would 
 be the best purveyor of timber for ship-building ; so that, in reality, the abuse of 
 the interference of public authority, in respect to the growth of private timber, is 
 only a consequence of a previous abuse of a more destructive and less excusable 
 character. 
 
 (1) [If no one knows so well as the proprietor, how to make the best use of 
 his property, as our author has just remarked, what advantage can result to 
 society from the interference, in any case, of public authority, with the rights of 
 individuals in the business of production. Nothing but the absolute maintenance 
 of the social order should ever be permitted, for an instant, to violate the sacred 
 right of private property. Quite as specious, though equally unsound reasons 
 may be assigned lor imposing restraints upon a variety of other employmeua 
 besides mining.] AMERICAN EDITOR. 
 
132 ON PRODUCTION. BOOK L 
 
 faculties of the mind could never be cultivated, or man by their 
 means attain the full dignity, whereof his nature is susceptible. 
 
 The poor man, that can call nothing his own, is equally interested 
 with the rich in upholding the inviolability of property. His personal 
 services would not be available, without the aid of accumulations 
 previously made and protected. Every obstruction to, or dissipation 
 of these accumulations, is a material injury to his means of gaining 
 a livelihood ; and the ruin and spoliation of the higher is as certainly 
 followed by the misery and degradation of the lower classes: A 
 confused notion of the advantages of this right of property has been 
 equally conducive with the personal interest of the wealthy, to make 
 all civilized communities pursue and punish every invasion of pro- 
 perty as a crime. The study of political economy is admirably 
 calculated to justify and confirm this act of legislation; inasmuch 
 as it explains why the happy effects, resulting from the right of pro- 
 perty, are more striking in proportion as that right is well guarded 
 by political institutions. 
 
 CHAPTER XV. 
 
 OP THE DEMAND OR MARKET FOR PRODUCTS. 
 
 IT is common to hear adventurers in the different channels of 
 industry assert, that their difficulty lies not in the production, but in 
 the disposal of commodities; that products would always be abun- 
 dant, if there were but a ready demand, or market for them. When 
 the demand for their commodities is slow, difficult, and productive 
 of little advantage, they pronounce money to be scarce; the grand 
 object of their desire is, a consumption brisk enough to quicken sales 
 and keep up prices. But ask them what peculiar causes and circum- 
 stances facilitate the demand for their products, and you will soon 
 perceive that most of them have extremely vague notions of these 
 matters ; that their observation of facts is imperfect, and their ex- 
 planation still more so ; that they treat doubtful points as matter of 
 certainty, often pray for what is directly opposite to their interests, 
 and importunately solicit from authority a protection of the most 
 mischievous tendency. 
 
 To enable us to form clear and correct practical notions in regard 
 to markets for the products of industry, we must carefully analyse 
 the best established and most certain facts, and apply to them the 
 inferences we have already deduced from a similar way of proceed- 
 ing; and thus perhaps we may arrive at new and important truths, 
 that may serve to enlighten the views of the agents of industry, and 
 to give confidence to the measures of governments anxious to "afford 
 them encouragement. 
 
CHAP. XV. ON PRODUCTION. 133 
 
 A man who applies his labour to the investing of objects with 
 value by the creation of utility of some sort, can not expect such a 
 value to be appreciated and paid for, unless where other men have 
 the means of purchasing it. Now, of what do these means consist? 
 Of other values of other products, likewise the fruits of industry, 
 capital, and land. Which leads us to a conclusion that may at first 
 sight appear paradoxical, namely, that it is production which opens n 
 a demand for products. | 
 
 Should a tradesman say, " I do not want other products for my 
 woollens, I want money," there could be little difficulty in convinc- 
 ing him that his customers could not pay him in money, without 
 having first procured it by the sale of some other commodities of 
 their own. "Yonder farmer," he may be told, "will buy your 
 woollens, if his crops be good, and will buy more or less according 
 to their abundance or scantiness ; he can buy none at all, if his crops 
 fail altogether. Neither can you buy his wool nor his corn yourself, 
 unless you contrive to get woollens or some other article to buv 
 withal. You say, you only want money ; I say, you want other 
 commodities, and not money. For what, in point of fact, do you 
 want the money ? Is it not for the purchase of raw materials or 
 stock for your trade, or victuals for your support?* Wherefore, it 
 is products that you want, and not money. The silver coin you 
 will have received on the sale of your own products, and given in 
 the purchase of those of other people, will the next moment execute 
 the same office between other contracting parties, and so from one 
 to another to infinity; just as a public vehicle successively transports 
 objects one after another. If you can not find a ready sale for your 
 commodity, will you say, it is merely for want of a vehicle to trans- 
 port it? For, after all, money is but the agent of the transfer of 
 values. Its whole utility has consisted in conveying to your hands 
 the value of the commodities, which your customer has sold, for the 
 purpose of buying again from you ; and the very next purchase you 
 make, it will again convey to a third person the value of the pro- 
 ducts you may have sold to others. So that you will have bought, 
 and every body must buy, the objects of want or desire, each with 
 the value of his respective products transformed into money for the 
 moment only. Otherwise, how could it be possible that there 
 should now be bought and sold in France five or six times as many 
 commodities, as in the miserable reign of Charles VI.? Is it not 
 obvious, that five or six times as many commodities must have 
 been produced, and that they must have served to purchase one or 
 the other?" t 
 
 Thus, to say that sales are dull, owingjojhe^carcity of money, | 
 is to mistake the means for the cause: an error that proceeds fromf 
 the circumstance, that almost all produce is in the first instance 
 
 * Even when money is obtained with a view to hoard or bury it, the ultimate 
 object is always to employ it in a purchase of some kind. The heir of the lucky 
 finder uses it in that way, if the miser do not ; for money, as money, has no othe 
 use than to buy with. 
 
 12 
 
134 ON PRODUCTION. BOOK 1. 
 
 exchanged for money, before it is ultimately converted into other 
 produce: and the commodity, which recurs so repeatedly in use, 
 appears to vulgar apprehensions the most important of commodities, 
 and the end and object of all transactions, whereas it is only the 
 ' medium. Sales cannot be said to be dull because money is scarce, 
 [but becausFbther products are so. There is always money enough 
 to conduct the circulation and mutual interchange of other values, 
 jarben those values really exist. Should the increase of traffic require 
 more money to facilitate it, the want is easily supplied, and is a 
 strong indication of prosperity a proof that a great abundance of 
 values has been created, which it is wished to exchange for other 
 values. In such cases, merchants know well enough how to find 
 substitutes for the product serving as the medium of exchange or 
 money:* and money itself soon pours in, for this reason, that all 
 produce naturally gravitates to that place where it is most in demand. 
 It is a good sign when the business is too great for the money ; just 
 in the same way as it is a good sign when the goods are too plentiful 
 for the warehouses. 
 
 When a superabundant article can find no vent, the scarcity of 
 money has so little to do with the obstruction of its sale, that the 
 sellers would gladly receive its value in goods for their own con- 
 sumption at the current price of the day: they would not ask ,for 
 money, or have any occasion for that product, since the only use 
 they could make of it would be to convert it forthwith into articles 
 of their own consumption.! 
 
 This observation is applicable to all cases, where there is a supply 
 of commodities or of services in the market. They will universally 
 find the most extensive demand in those places, where the most of 
 values are produced ; because in no other places are the sole means 
 of purchase created, that is, values. Money performs but a moment- 
 ary function in this double exchange ; and when the transaction is 
 finally closed, it will always be found, that one kind of commodity 
 has been exchanged for another. 
 
 It is worth while to remark, that a product is no sooner created, 
 than it, from that instant, affords a market for other products to the 
 full extent of its own value. When the producer has put the finishing 
 hand to his product, he is most anxious to sell it immediately, lest 
 its value should diminish in his hands. Nor is he less anxious to 
 dispose of the money he may get for it ; for the value of money is 
 also perishable. But the only way of getting rid of money is in 
 the purchase of some product or 'other. Thus, the mere circum- 
 
 * By bills at sight, or after date, bank-notes, running-credits, write-offs, &c. 
 HS at London and Amsterdam. 
 
 1 1 speak here of their ajrcrregate consumption, whether unproductive and de- 
 signed to satisfy the personal wants of themselves and their families, or expended 
 in the sustenance of reproductive industry. The woollen or cotton manufacturer 
 operates a two-fold consumption of wool and cotton : 1. For his personal wear. 
 Vi. For the supply of his manufacture; but, be the purpose of his consumption 
 what it may, whether personal gratification or reproduction, he must needs birv 
 fcrhut he consumes with what ho produces. 
 
CHAP. XV. ON PRODUCTION. 135 
 
 stance of the creation of one product immediately opens a vent fur 
 other products. 
 
 For this reason, a good harvest is favourable, not only to the 
 agriculturist, but likewise to the dealers in all commodities generally. 
 The greater the crop, the larger are the purchases of the growers. 
 A bad harvest, on the contrary, hurts the sale of commodities at 
 large. And so it is also with the products of manufacture and com- 
 merce. The success of one branch of commerce supplies more 
 ample means of purchase, and consequently opens a market for the 
 products of all the other branches ; on the other hand, the stagnation 
 of one channel of manufacture, or of commerce, is felt in all the 
 rest. 
 
 But it may be asked, if this be so, how does it happen, that there 
 is at times so great a glut of commodities in the market, and so muci 
 difficulty in finding a vent for them ? Why cannot one of these super- 
 abundant commodities be exchanged for another? I answer that the 
 glut of a particular commodity arises from its having outrun the tota 
 demand for it in one or two ways ; either because it has been pro- 
 duced in excessive abundance, or because the production of othei 
 commodities has fallen short. 
 
 It is because the production of some commodities has declined, 
 that other commodities are superabundant. To use a more hackneyed 
 phrase, people have bought less, because they have made less profit?* 
 and they have made less profit for one or two causes; either they have 
 found difficulties in the employment of their productive means, or 
 these means have themselves been deficient. 
 
 It is observable, moreover, that precisely at the same time that one 
 commodity makes a loss, another commodity is making excessive 
 profit.f And, since such profits must operate as a powerful stimulus 
 to the cultivation of that particular kind of products, there must 
 needs be some violent means, or some extraordinary cause, a politi- 
 cal or natural convulsion, or the avarice or ignorance of authority, to 
 perpetuate this scarcity on the one hand, and consequent glut on the 
 other. No sooner is the cause of this political disease removed, than 
 the means of production feel a natural impulse towards the vacant 
 channels, the replenishment of which restores activity to all the 
 others. One kind of production would seldom outstrip every other, 
 and its products be disproportionately cheapened, were production 
 left entirely free.J 
 
 * Individual profits must, in every description of production, from the general 
 merchant to the common artisan, be derived from the participation in the values 
 produced. The ratio of that participation will form the subject of Book II., infra. 
 
 f The reader may easily apply these maxims to any time or country he is ac- 
 quainted with. We have had a striking instance in France during the years 
 1811, 1812, and 1813; when the high prices of colonial produce of wheat, and 
 other articles, went hand-in-hand with the low price of many others that could 
 find no advantageous market. 
 
 J These considerations have hitherto been almost wholly overlooked, thougn 
 forming the basis of correct conclusions in matters of commerce, and of its regu- 
 lation by the national authority. The right course where it has, by good luck 
 
136 ON PRODUCTION. BOOB L 
 
 Should a producer imagine, that many other classes, yielding no 
 material products, are his customers and consumers equally with the 
 classes that raise themselves a product of their own ; as, for example, 
 public functionaries, physicians, lawyers, churchmen, &c., and thence 
 infer, that there is a class of demand other than that of the actual 
 producers, he would but expose the shallowness and superficiality of 
 his ideas. A priest goes to a shop to buy a gown or a surplice ; he 
 takes the value, that is to make the purchase, in the form of money. 
 Whence had he that money ? From some tax-gatherer who has 
 taken it from a tax-payer. But whence did this latter derive it ? 
 From the value he has himself produced. This value, first produced 
 by the tax-payer, and afterwards turned into money, and given to 
 the priest for his salary, has enabled him to make the purchase. 
 The priest stands in the place of the producer, who might himself 
 
 been pursued, appears to have been selected by accident, or, at most, by a con- 
 fused idea of its propriety, without either self-conviction, or the ability to con- 
 vince other people. 
 
 Sismondi, who seems not to have very well understood the principles laid down 
 in this and the three first chapters of Book II. of this work, instances the im- 
 mense quantity of manufactured products with which England has of late inun- 
 dated the markets of other nations, as a proof, that it is jfrfpossible for industry 
 to be too productive. (Now. Prin. liv. iv. c. 4.) But the glut thus occasioned 
 proves nothing more than the feebleness of production in those countries that 
 have been thus glutted with English manufactures. Did Brazil produce where- 
 withal to purchase the English goods exported thither, those goods would not 
 glut her market. Were England to admit the import of the products of the 
 United States, she would find a better market for her own in those States. The 
 English government, by the exorbitance of its taxation upon import and consump- 
 tion, virtually interdicts to its subjects many kinds of importation, thus obliging 
 the merchant to offer to foreign countries a higher price for those articles, whose 
 import is practicable, as sugar, coffee, gold, silver, &c. for the price of the precious 
 metals to them is enhanced by the low price of their commodities, which accounts 
 for the ruinous returns of their commerce. 
 
 I would not be understood to maintain in this chapter, that one product can not 
 be raised in too great abundance, in relation to all others ; but merely that nothing 
 is more favourable to the demand of one product, than the supply of another; that 
 the import of English manufactures into Brazil would cease to be excessive and 
 be rapidly absorbed, did Brazil produce on her side returns sufficiently ample ; 
 to which end it would be necessary that the legislative bodies of either country 
 should consent, the one to free production, the other to free importation. In 
 Brazil every thing is grasped by monopoly, and property is not exempt from the 
 invasion of the government. In England, the heavy duties are a serious obstruc- 
 tion to the foreign commerce of the nation, inasmuch as they circumscribe the 
 choice of returns. I happen myself to know of a most valuable and scientific 
 collection of natural history, which could not be imported from Brazil into Eng- 
 land by reason of the exorbitant duties. () 
 
 (a) The views of Sismondi, in this particular, have been since adopted by our 
 own Malthus, and those of our author by Ricardo. This difference of opinion 
 has given rise to an interesting discussion between our author and Malthus, to 
 whom he has recently addressed a correspondence on this and other parts of the 
 science. Were any thing wanting to confirm the arguments of this chapter, it 
 would be supplied by a reference to his Lettre 1, a M. Malthus. Sismondi has 
 vainly attempted to answer Kicardo, but has made no mention of his original 
 antagonist Vide Annales de Legislation, No. 1. art. 3. Geneve, 1820. T. 
 
CHAP. XV. ON PRODUCTION. 
 
 have laid the value of his product on his own account, in the pur- 
 chase, perhaps, not of a gown or surplice, but of some other more 
 serviceable product. The consumption of the particular product, the 
 gown or surplice, has but supplanted that of some other product. It 
 is quite impossible that the purchase of one product can be affected, 
 otherwise than by the value of another.* 
 
 From this important truth may be deduced the following important 
 conclusions: 
 
 1. That, in every community the more numerous are the pro-/ 
 ducers, and the more various their productions, the more prompt^ 
 numerous, and extensive are the markets for those productions; and) 
 by a natural consequence, the more profitable are they to the pro- 
 ducers ; for price rises with the demand. But this advantage is to be 
 derived from real production alone, and not from a forced circulation 
 of products ; for a value once created is not augmented in its passage 
 from one hand to another, nor by being seized and expended by the 
 government, instead of by an individual. The man, that lives upon 
 the productions of other people, originates no demand for those pro- 
 ductions ; he merely puts himself in the place of the producer, to 
 the great injury of production, as we shall presently see. 
 
 2. That each individual is interested in the general prosperity of 
 all, and that the success of one branch of industry promotes that of 
 all the others. In fact, whatever profession or line of business a 
 man may devote himself to, he is the better paid and the more 
 readily finds employment, in proportion as he sees others thriving 
 equally around him. A man of talent, that scarcely vegetates in a 
 retrograde state of society, would find a thousand ways of turning 
 his faculties to account in a thriving community that could afford to 
 employ and reward his ability. A merchant established in a rich 
 and populous town, sells to a much larger amount than one who sets 
 up in a poor district, with a population sunk in indolence and apathy. 
 What could an active manufacturer, or an intelligent merchant, do 
 in a small deserted and semi-barbarous town in a remote corner of 
 Poland or Westphalia? Though in no fear of a competitor, he could 
 sell but little, because little was produced ; whilst at Paris, Amster- 
 dam, or London, in spite of the competition of a hundred dealers in 
 his own line, he might do business on the largest scale. The reason 
 is obvious: he is surrounded with people who produce largely in an 
 infinity of ways, and who make purchases, each with his respective 
 products, that is to say, with the money arising from the sale of 
 what he may have produced. 
 
 This is the true source of the gains made by the towns' people out 
 of the country people, and again by the latter out of the former; both 
 
 * The capitalist, in spending the interest of his capital, spends his portion of the 
 products raised by the employment of that capital. The general rules that, regu- 
 late the ratio he receives will be investigated in Book II., infra. Should he ever 
 spend the principal, still he consumes products only ; for capital consists of pro- 
 ducts, devoted indeed to reproductive, but susceptible of unproductive consump- 
 tion ; to which it is in fact consigned whenever it is wasted or dilapidated. 
 
138 ON PRODUCTION. BOOK I. 
 
 of them have wherewith to buy more largely, the more amply they 
 themselves produce. A city, standing in the centre of a rich sur- 
 rounding country, feels no want of rich and numerous customers ; 
 and, onthe other hand, the vicinity of an opulent city gives addi- 
 tional value to the produce of the country. The division of nations 
 into agricultural, manufacturing, and commercial, is idle enough. 
 For the success of a people in agriculture is a stimulus to its manu- < 
 facturing and commercial prosperity; and the flourishing condition 
 of its manufacture and commerce reflects a benefit upon its agri- 
 culture also.* 
 
 The position of a nation, in respect of its neighbours, is analogous 
 to the relation of one of its provinces to the others, or of the country 
 to the town ; it has an interest in their prosperity, being sure to profit 
 by their opulence. The government of the United States, therefore, 
 acted most wisely, in their attempt, about the year 1802, to civilize 
 their savage neighbours, the Creek Indians. The design was to 
 introduce habits of industry amongst them, and make them producers 
 capable of carrying on a barter trade with the States of the Union ; 
 for there is nothing to be got by dealing with a people that have 
 nothing to pay. It is useful and honourable to mankind, that one 
 nation among so many should conduct itself uniformly upon liberal 
 principles. The brilliant results of this enlightened policy will de- 
 monstrate, that the systems and theories really destructive and falla- 
 cious, are the exclusive and jealous maxims acted upon by the old 
 European governments, and by them most impudently styled prac- 
 tical truths, for no other reason, as it would seem, than because they 
 have the misfortune to put them in practice. The United States 
 will have the honour of, proving experimentally, that true policy goes 
 hand-iri-hand with moderation and humanity.f 
 
 * A productive establishment on a large scale is sure to animate the industry 
 of the whole neighbourhood. " In Mexico," says Humboldt, " the best culti- 
 vated tract, and that which brings to the recollection of the traveller the most 
 beautiful part of French scenery, is the level country extending from Salamanca 
 as far as Silao, Guanaxuato, and Villa de Leon, and encircling the richest mines 
 of the known world. Wherever the veins of precious metal have been discovered 
 and worked, even in the most desert part of the Cordilleras, and in the most 
 barren and insulated spots, the working of the mines, instead of interrupting the 
 business of superficial cultivation, has given it more than usual activity. The 
 opening of a considerable vein is sure to be followed by the immediate erection 
 of a town ; farming concerns are established in the vicinity; and the spot so lately 
 insulated in the midst of wild and desert mountains, is soon brought into contact 
 with the tracts before in tillage." Essai pol. sur. la Nouv. Espagne. 
 
 f It is only by the recent advances of political economy, that these most 
 important truths have been made manifest, not to vulgar apprehension alone, but 
 even to the most distinguished and enlightened observers. We read in Voltaire 
 that "such is the lot of humanity, that the patriotic desire for one's country's 
 
 grandeur, is but a wish for the humiliation of one's neighbours ; that it is 
 
 df-arly impossible for one country to gain, except by the loss of another." (Dr-t. 
 Phil. Art. Patrie.} By a continuation of the same false reasoning, he goes on to 
 dpclare, that a thorough citizen of the world cannot wish his country to ho 
 greater or less, richer or poorer. It is true, that he would not desire her to extend 
 ih<2 limits of her dominion, because, in so doing, she might endanger ber otvn 
 
CHAP. XV. ON PRODUCTION. 130 
 
 3. From this fruitful principle, we may draw this further conclu- 
 sion, that it is no injury to the internal or national industry and pro- 
 duction to buy and import commodities from abroad; for nothing 
 can be bought from strangers, except with native products, which 
 find a vent in this external traffic. Should it be objected, that this 
 foreign produce may have been bought with specie, I answer, specie 
 
 s not always a native product, but must have been bought itself 
 with the products of native industry ; so that, whether the foreign 
 articles be paid for in specie or in home products, the vent for 
 national industry is the same in both cases.* 
 
 4. The same principle leads to the conclusion, that the encourage- 
 ment of mere consumption is no benefit to commerce ; for the diffi- 
 culty lies in supplying the means, not in stimulating the desire of 
 consumption ; and we have seen that production alone, furnishes 
 those means. Thus, it is the aim of good government to stimulate 
 production, of bad government to encourage consumption. 
 
 For the same reason that the creation of a new product is the 
 opening of a new market for other products, the consumption or 
 destruction of a product is the stoppage of a vent for them. This is 
 no evil where the end of the product has been answered by its 
 destruction, which end is the satisfying of some human want, or the 
 creation of some new product designed for such a satisfaction. 
 Indeed, if the nation be in a thriving condition, the gross national 
 re-production exceeds the gross consumption. The consumed pro- 
 ducts have fulfilled their office, as it is natural and fitting they should ; 
 the consumption, however, has opened no new market, but just the 
 reverse.f 
 
 Having once arrived at the clear convictipn, that the general de- 
 mand for products is brisk in proportion to the activity of production, 
 we need not trouble ourselves much to inquire towards what chan- 
 nel of industry production may be most advantageously directed 
 The products created give rise to various degrees of demand, accord 
 ing to the wants, the manners, the comparative capital, industry, and 
 
 well-being ; but he will desire her to progress in wealth, for her progressive 
 prosperity promotes that of all other nations. 
 
 * This effect has been sensibly experienced in Brazil of late years. The large 
 imports of European commodities, which the freedom of navigation directed to 
 the markets of Brazil, has been so favourable to its native productions and 
 commerce, that Brazilian products never found so good a sale. So there is an 
 instance of a national benefit arising from importation. By the way, it might 
 have perhaps been better for Brazil if the prices of her products and the profits 
 of her producers had risen more slowly and gradually; for exorbitant prices 
 never lead to the establishment of a permanent commercial intercourse ; it is 
 better to gain by the multiplication of one's own products than by their increased 
 price. 
 
 f If the barren consumption of a product be of itself adverse to re-production, 
 and a diminution pro tanto of the existing demand or vent for produce, how shall 
 we designate that degree of insanity, which would induce a government dehbo- 
 rately to burn and destroy the imports of foreign products, and thus to annihilaitj 
 the sole advantage accruing from unproductive consumption, that is to s,pv vhc 
 gratification of the wants of the consumer * 
 
140 ON PRODUCTION. BOOK I. 
 
 natural resources of each country ; the article most in request, 
 owing to the competition of buyers, yields the best interest of money 
 to the capitalist, the largest pVofits to the adventurer, and the best 
 wages to the labourer ; and the agency of their respective services 
 is naturally attracted by these advantages towards those particular 
 channels. 
 
 r^In a community, city, province, or nation, that produces abun- 
 dantly, and adds every moment to the sum of its products, almost all 
 the branches of commerce, manufacture, and generally of industry, 
 yield handsome profits, because the demand is great, and because 
 there is always a large quantity of products in the market, ready to 
 bid for new productive services. And. vice versa, wherever, by 
 reason of the blunders of the nation or its government, production is 
 stationary, or^does not keep pace with consumption, the demand 
 gradually declines, the value of the product is less than the charges 
 of its production ; no productive exertion is properly rewarded ; pro- 
 fits and wages decrease ; the employment of capital becomes less 
 advantageous and more hazardous; it is consumed piecemeal, not 
 through extravagance, but through necessity, and because the sources 
 of profit are dried up.* The labouring classes experience a want of 
 work ; families before in tolerable circumstances, are more cramped 
 and confined ; and those before in difficulties are left altogether des- 
 titute. Depopulation, misery, and returning barbarism, occupy the 
 place of abundance and happiness. 
 
 Such are the concomitants of declining production, which are 
 only to be remedied by frugality, intelligence, activity, and freedom. 
 
 CHAPTER XVI. 
 
 Ujf THE BENEFITS RESULTING FROM THE QUICK MRCULATION OF 
 MONEY AND COMMODITIES. 
 
 Ii is common to hear people descant upon the benefits of an active 
 circulation ; that is to say, of numerous and rapid sales. It is mate- 
 rial to appreciate them correctly. 
 
 / The values engaged in actual production cannot be realized and 
 * employed in production again, until arrived at the last staqe of com- 
 pletion, and sold to the consumer. The sooner a product is finished 
 and sold, the sooner also can the portion of capital vested in it be 
 applied to the business of fresh production. The capital being 
 engaged a shorter time, there is less interest payable to the capi- 
 
 * Consumption of this kind gives no encouragement to future production, V-n 
 devouid products already in existence. No additional demand can be crea^l 
 jntil there be new products raised ; there is only an exchange of one product fcu 
 another. Neither can one branch of industry suffer without affecting the rest 
 
CHAP. XVI. ON PRODUCTION. 141 
 
 talist; there is a saving in the charges of production; it is, therefore, 
 an advantage, that the successive operations performed in the course 
 of production should be rapidly executed. 
 
 By way of illustrating the effects of this activity of circulation, let 
 us trace them in the instance of a piece of printed calico.* 
 
 A Lisbon trader imports the cotton from Brazil. It is his interest 
 that his factors in America be expeditious in making purchases and 
 remitting cargoes, and likewise, that he meet no delay in selling his 
 cotton to a French merchant ; because he thereby gets his returns 
 the sooner, and can sooner recommence a new and equally lucrative 
 operation. So far, it is Portugal that benefits by the increased 
 activity of circulation ; the subsequent advantage is on the side of 
 France. If the French merchant keep the Brazil cotton but a short 
 time in his warehouse, before he sells it to the cotton-spinner, if the 
 spinner after spinning sell it immediately to the weaver, if the 
 weaver dispose of it forthwith to the calico printer, and he in his turn 
 sell it without much delay to the retail dealer, from whom it quickly 
 passes to the consumer, this rapid circulation will have occupied for 
 a shorter period the capital embarked by these respective producers ; 
 less interest of capital will have been incurred ; consequently the 
 prime cost of the article will be lower, and the capital will have* been 
 the sooner disengaged and applicable to fresh operations. 
 
 All these different purchases and sales, with many others that, for 
 brevity's sake, I have not noticed, were indispensable before the 
 Brazil cotton could be worn in the shape of printed calicoes. They 
 are so many productive fashions given to this product ; and the more 
 rapidly they may have been given, the more benefit will have been 
 derived from the production. But, if the same commodity be merely 
 sold several times over in a year in the same place, without under- 
 going any fresh modification, this circulation would be a loss instead 
 of a gain, and would increase instead of reducing the prime cost to 
 the consumer. A capital must be employed in buying and re-selling, 
 and interest paid for its use, to say nothing of the probable wear 
 and tear of the commodity. 
 
 Thus, jobbing in merchandise necessarily causes a loss, either to 
 the jobber, if the price be not raised by the transaction, or to the 
 consumer, if it be raised.f 
 
 The activity of circulation is at the utmost pitch to which it can 
 be carried with advantage, when the product passes into the hands 
 
 * The term circulation, as well as many others employed in the science of 
 political economy, is daily made use of at random, even by persons that pride 
 themselves upon their precision. " The more equally circulation is diffused," 
 says La Harpe, in one of his works, " the less indigence is to be found in the 
 community." With great deference to the learned academician, what possible 
 meaning can the word circulation have in this passage 1 
 
 f The trade of speculation, as we have before observed, (supra, Chap. IX.) is 
 sometimes of use in withdrawing an article from circulation, when its price a 
 so low as to discourage the producer, and restoring it to circulation, when ihal 
 price is unnaturally raised upon the consumer. 
 
142 ON PRODUCTION. BOOR 1. 
 
 of a new productive agent the instant it is fit to receive a new modi- 
 fication, and is ultimately handed over to the consumer, the instant 
 it has received the last finish. All kind of activity and bustle not 
 tending to this end, far from giving additional activity to circulation, 
 is an impediment to the course of production an obstacle "to circu- 
 lation by all means to be avoided. 
 
 With respect to the rapidity of production arising from the more 
 skilful direction of industry, it is an increase of rapidity not in cir- 
 culation, but in productive energy. The advantage is analogous ; it 
 abridges the amount of capital employed 
 
 I have made no distinction between the circulation of goods and 
 of money, because there really is none. While a sum of money lies 
 idle in a merchant's coffers, it is an inactive portion of his capital, 
 precisely of the same nature as that part of his capital which is 
 lying in his warehouse in the shape of goods ready for sale. 
 
 The best stimulus of useful circulation is, the natural wish of all 
 classes, especially the producers themselves, to incur the least possi- 
 ble amount of interest upon the capital embarked in their respective 
 undertakings. Circulation is much more apt to be interrupted by 
 the obstacles thrown in its way, than by the want of proper encour- 
 agement. Its greatest obstructions are, wars, embargoes, oppressive 
 duties, the dangers and difficulties of transportation. It flags in 
 times of alarm and uncertainty, when social order is threatened, and 
 all undertakings are hazardous. It flags, too, under the general dread 
 of arbitrary exactions, when every one tries to conceal the extent of 
 his ability. Finally, it flags in times of jobbing and speculation, 
 when the sudden fluctuations caused by gambling in produce, make 
 people look for a profit from every variation of mere relative price: 
 goods are then held back in expectation of a rise, and money in the 
 prospect of a fall ; and, in the interim, both these capitals remain 
 inactive and useless to production. Under such circumstances, 
 there is no circulation, but of such products as cannot be kept with- 
 out danger of deterioration ; as fruits, vegetables, grain, and all arti- 
 cles that spoil in the keeping. With regard to them, it is thought 
 wiser to incur the loss of present sale, whatever it be, than to risk 
 considerable or total loss. If the national money be deteriorated, it 
 becomes an object to get rid of it in any way, and exchange it for 
 commodities. This was one of the causes of the prodigious circu- 
 lation that took place during the progressive depreciation of the 
 French assignats. Everybody was anxious to find some employ- 
 ment for a paper currency, whose value was hourly depreciating ;"it 
 was only taken to be re-invested immediately, and* one might have 
 supposed it burnt the fingers it passed through. On that occasion, 
 men plunged into business, of which they were utterly ignorant ; 
 manufactures were established, houses repaired and furnished, no 
 expense was spared even in pleasure; until at length all the value 
 each individual possessed in assignats was finally consumed, invest 
 eo or lost altogether. 
 
CHAP- XVIL ON PRODUCTION. 143 
 
 CHAPTER XVII. 
 
 OF THE EFFECT OF GOVERNMENT REGULATIONS INTENDED TO INFLUENCE 
 
 PRODUCTION. 
 
 STRICTLY speaking, there is no act of government but what has 
 some influence upon production. I shall confine myself in this 
 chapter to such as are avowedly aimed at the exertion of such in- 
 fluence ; reserving the effects of the monetary system, of loans, and 
 of taxes, to be treated of in distinct chapters. 
 
 The object of governments, in their attempts to influence produc- 
 tion, is, either to prescribe the raising of particular kinds of produce 
 which they judge more advantageous than others, or to prescribe 
 methods of production, which they imagine preferable to other 
 methods. The effects of this two-fold attempt upon national wealth 
 will be investigated in the two first sections of this chapter; in the 
 remaining two, I shall apply the same principles to the particular 
 cases of privileged companies, and of the corn-trade, both on account 
 of their vast importance, and for the purpose of further explaining 
 and illustrating the principles. We shall see, by the way, what 
 reasons and circumstances will require or justify a deviation from 
 general principles. The grand mischiefs of authoritative interference 
 proceed not from occasional exceptions to established maxims, but 
 from false ideas of the nature of things, and the false maxims built 
 upon them. It is then that mischief is done by wholesale, and evil 
 pursued upon system ; for it is well to beware, that no set of men 
 are more bigoted to system, than those who boast that they go upon 
 none.* 
 
 SECTION I. 
 
 Effect of Regulations prescribing the Nature of Products. 
 
 The natural wants of society, and its circumstances for the time 
 being, occasion a more or less lively demand for particular kinds of 
 products. Consequently, in these branches of production, produc- 
 tive services are somewhat better paid than in the rest; that is to say, 
 the profits upon land, capital and labour, devoted to those branches 
 of production, are somewhat larger. This additional profit naturally 
 
 * The greatest sticklers for adhering to practical notions, set out with the 
 assertion of general principles : they begin, for instance, with saying, that no 
 one can dispute the position, that one individual can gain only what another 
 loses, and one nation profit only by the sacrifices of another. What is this but 
 system 1 and one so unsound, that its abettors, instead of possessing more prac 
 tical knowledge than other people, show their utter ignorance of many facts, the 
 acquaintance with which is indispensable to the formation of a correct judgment. 
 No man, who understands the real nature of production, and sees how new wealth 
 uiay be, and is daily created, would attempt to advance so gross an absurdity 
 
114 
 
 ON PRODUCTION. BOOK L 
 
 attracts producers, and thus the nature of the products is always 
 regulated by the wants of society. We have seerf in a preceding 
 chapter (XV.,) that these wants are more ample in proportion to the 
 sum of gross production, and that society in the aggregate is a larger 
 purchaser, in proportion to its means of purchasing. 
 
 When authority throws itself in the way of this natural course of 
 ..hings, and says, the product you are about to create, that which 
 vields the greatest profit, and is consequently the most in request, is 
 Oy no means the most suitable to your circumstances, you must 
 undertake some other, it evidently directs a portion of the produc- 
 tive energies of the nation towards an object of less desire, at the 
 expense of another of more urgent desire. 
 
 In France, about the year 1794, there were some persons perse- 
 cuted, and even brought to the scaffold, for having converted corn- 
 land into pasturage. Yet the moment these unhappy people found 
 it more profitable to feed cattle than to grow corn, one might have 
 been sure that society stood more in need of cattle than of corn, 
 and that greater value could be produced in one way than in the 
 other. 
 
 But, said the public authorities, the value produced is of less 
 importance than the nature of the product, and we would rather 
 have you raise 10 dollars worth of grain than 20 dollars worth of 
 butcher's meat. In this they betrayed their ignorance of this sim- 
 ple truth, that the greatest product is always the best; and that an 
 estate, which should produce in butcher's meat wherewith to pur- 
 chase twice as much wheat as could have been raised upon it, pro- 
 duces, in reality, twice as much wheat as if it had been sowed with 
 Cjrain ; since wheat to twice the amount is to be got for its product. 
 This way of getting wheat, they will tell you, does not increase its 
 total quantity. True, unless it be introduced from abroad; but 
 nevertheless, this article must at the time be relatively more plenti- 
 ful than butcher's meat, because the product of two acres of wheat 
 is given for that of one acre of pasture.* And, if wheat be suffi- 
 ciently scarce, and in sufficient request to make tillage more profita- 
 ble than grazing, legislative interference is superfluous altogether; 
 for self-interest will make the producer turn his attention to the 
 former. 
 
 The only question then is, which is the most likely to know what 
 kind of cultivation yields the largest returns, the cultivator or the 
 government , and we may fairly take it for granted, that the culti- 
 vator, residing on the spot, making it the object of constant study 
 and inquiry, and more interested in success than anybody, is better 
 informed in this respect than the government. 
 
 * At the disastrous period in question, there was no actual want of wheat; 
 the growers merely felt a disinclination to sell for paper money. Wheat was 
 sold for real value at a very reasonable rate ; and, though a hundred thousand 
 acres of pasture land had been converted into arable, the disinclination to 
 wheat for a discredited paper-money would not have been a jot 
 
CHAP. XVII. ON PRODUCTION. 145 
 
 Should it be insisted upon in argument, that the cultivator knows 
 only the price-current of the day, and does not, like the government, 
 provide for the future wants of the people, it may be answered, that 
 one of the talents of a producer, and a talent his own interest obliges 
 Him assiduously to cultivate, is not the mere knowledge, but the fore- 
 knowledge, of human wants.* 
 
 An evil of the same description was occasioned, when, at another 
 period, the proprietors were compelled to cultivate beet-root, or 
 woad in lieu of grain: indeed, we may observe, en passant, that it 
 is always a bad speculation to attempt raising the products of the 
 torrid, under the sun of the temperate latitudes. The saccharine and 
 colouring juices, raised on the European soils, with all the forcing in 
 the world, are very inferior in quantity and quality to those that 
 grow in profusion in other climates ;f while, on the other hand, those 
 soils yield abundance of grain and fruits too bulky and heavy to be 
 imported from a distance. In condemning our lands to the growth 
 of products ill suited to them, instead of those they are better calcu- 
 lated for, and, consequently, buying very dear what we might have 
 cheap enough, if we would consent to receive them from places 
 where they are produced with advantage, we are ourselves the 
 victims of our own absurdity. It is the very acme of skill, to turn 
 the powers of nature to best account, and the height of madness to 
 contend against them; which is in fact wasting part of our strength, 
 in destroying those powers she designed for our aid. 
 
 Again, it is laid down as a maxim, that it is better to buy products 
 dear, when the price remains in the country, than to get them cheap 
 from foieign growers. On this point I must refer my readers to that 
 analysis of production which we have just gone through. It will 
 there be seen, that products are not to be obtained without some 
 sacrifice, without the consumption of commodities and productive 
 services in some ratio or other, the value of which is in this way 
 as completely lost to the community, as if it were to be exported.;); 
 
 * Of course, in extraordinary cases, like that of a siege or a blockade, ordinary 
 rules of conduct must be disregarded. However irksome the necessity, violent 
 obstructions to the natural course of human affairs must be removed by counter- 
 acting violence; poison is in dangerous cases resorted to as a medicine; but these 
 remedies require extreme care and skill in the application. 
 
 f M. de Humboldt has remarked, that seven square leagues of land in a 
 tropical climate, can furnish as much sugar as the utmost consumption of France, 
 in its best days, has ever required. 
 
 J In the sequel of this chapter, it will be shown, that values exported give 
 precisely the same encouragement to domestic industry, as if they are consumed 
 at home. In the instance just cited, suppose that wine had been grown instead 
 of the sugar of beet-root, or the blue dye of woad, the domestic and agricultural 
 industry of the nation would have been quite as much encouraged. And, since 
 the product would have been more congenial to the climate, the wine produced 
 from the same land would have procured a larger quantity of colonial sugar 
 and indigo through the channel of commerce, even if conducted by neutral" or 
 enemies. The colonial sugar and indigo would have been equally the product 
 of our own land, though first assuming the shape of wine; only the same space 
 of land would have produced them in superior quantity and quality. And the 
 encouragement to domestic industry would be the same, or rather would b* 
 
140 ON PRODUCTION. BOOK L 
 
 I can hardly suppose any government will be bold enough to 
 object, that it is indifferent about the profit, which might be derived 
 from a more advantageous production, because it would fall to the 
 lot of individuals. The worst governments, those which set up their 
 own interest in the most direct opposition to that of their subjects, 
 have by this time learnt, that the revenues of individuals are the 
 regenerating source of public revenue ; and that, even under despotic 
 and military sway, where taxation is mere organized spoliation, the 
 subjects can pay only what they have themselves acquired. 
 
 The maxims we have been applying to agriculture are equally 
 applicable to manufacture. Sometimes a government entertains a 
 notion, that the manufacture of a native raw material is better for 
 the national industry, than the manufacture of a foreign raw material- 
 It is in conformity to this notion, that we have seen instances of 
 preference given to the woollen and linen above the cotton manufac- 
 ture. By this conduct we contrive, as far as in us lies, to limit the 
 bounty of nature, which pours forth in different climates a variety 
 of materials adapted to our innumerable wants. Whenever humaii 
 efforts succeed in attaching to these gifts of nature a value, that is to 
 say, a degree of utility, whether by their import, or by any modifi- 
 cation we may subject them to, a useful act is performed, and an 
 item added to national wealth. The sacrifice we make to foreigners 
 in procuring the raw material is not a whit more to be regretted, 
 than the sacrifice of advances and consumption, that must be made 
 in every branch of production, before we can get a new product. 
 Personal interest is, in all cases, the best judge of the extent of the 
 sacrifice, and of the indemnity we may expect for it ; and, although 
 this guide may sometimes mislead us, it is the safest in the long-run, 
 as well as the least costly.* 
 
 But personal interest is no longer a safe criterion, if individual 
 
 greater ; because a product of superior value would reward more amply the 
 agency of the land, capital, and industry, engaged in the production. 
 
 * One is obliged every moment to turn round and combat objections, that 
 never could have been started, if the science of political economy had been more 
 widely diffused. It will here, for instance, in all probability, be said, granting 
 that the sacrifice made in the purchase of the raw flax for manufacture, and that 
 made in the purchase of cotton, is to the manufacturer or merchant equal in the 
 one case and the other, still, in the one case, the amount of the sacrifice is ex 
 pended and consumed in the nation itself, and conduces to the national advan- 
 tage ; in the other, the whole advantage goes to the foreign grower. I answer, 
 the advantage goes to the nation in either case ; for the foreign raw material, 
 cotton, cannot be purchased, except with a domestic product, which must be 
 bought of the national grower before the merchant can go to market; whether 
 Max or any thing else, it must be some value of domestic creation. Why may 
 he no* buy with money 1 Money itself must have been originally purchased 
 with some other product, which must have employed domestic industry, as much 
 as the growth of flax. Turn it which way you will, it comes to the same thing 
 in the end. Wealth can only be acquired by the production of value, or lost 
 liy its consumption ; and, putting absolute robbery out of the question, the whole 
 consumption of a naiion must always be supplied from its internal resources, its 
 land, capital, and industry, even that portion of it which falls upon external 
 "bjects. 
 
CHAP XVII. ON PRODUCTION. 147 
 
 interests are not left to counteract and control each other. If one 
 individual, or one class, can call in the aid of authority to ward off 
 the effects of competition, it acquires a privilege to the prejudice and 
 at the cost of the whole community ; it can then make sure of profits 
 not altogether due to the productive services rendered, but composed 
 in part of an actual tax upon consumers for its private profit ; which 
 tax it commonly shares with the authority that thus unjustly lends 
 its support. 
 
 The legislative body has great difficulty in resisting the importu- 
 nate demands for this kind of privileges ; the applicants are the pro- 
 ducers that are to benefit thereby, who can represent, with much 
 plausibility, that their own gains are a gain to the industrious classes, 
 and to the nation at large, their workmen and themselves being 
 members of the industrious classes, and of the nation.* 
 
 When the cotton manufacture was first introduced in France, all 
 the merchants of Amiens, Rheims, Beauvais, &c. joined in loud 
 remonstrances, and represented, that the industry of these towns 
 was annihilated. Yet they do not appear less industrious or rich 
 than they were fifty years ago ; while the opulence of Rouen and 
 all Normandy has been wonderfully increased by the new fabric. 
 
 The outcry was infinitely greater, when printed calicoes first 
 came into fashion ; all the chambers of commerce w r ere up in arms ; 
 meetings, discussions everywhere took place ; memorials and depu- 
 tations poured in from every quarter, and great sums were spent in 
 the opposition. Rouen now stood forward to represent the misery 
 about to assail her, and painted, in moving colours, "old men, 
 women, and children, rendered destitute; the best cultivated lands 
 in the kingdom lying waste, and the whole of a rich and beautiful 
 province depopulated." The city of Tours urged the lamentations 
 of the deputies of the whole kingdom, and foretold " a commotion 
 that would shake the frame of social order itself." Lyons could not 
 view in silence a project " which filled all her manufactories with 
 alarm." Never on so important an occasion had Paris presented 
 itself at the foot of a throne, " watered with the tears of commerce." 
 Amiens viewed the introduction of printed calicoes as the gulf that 
 must inevitably swallow up all the manufactures of the kingdom. 
 The memorial of that city, drawn up at a joint meeting of the three 
 corporations, and signed unanimously, ended in these terms: "To 
 conclude, it is enough for the eternal prohibition of the use of printed 
 calicoes, that the whole kingdom is chilled with horror at the news 
 of their proposed toleration. Vox populi vox dei." 
 
 Hear what Roland de la Platiere, who had the presentation of 
 these remonstrances in quality of inspector-general of manufactures, 
 says on this subject, "Is there a single individual at the present 
 
 * No one cries out against them, because very few know r/ho it is that pays 
 >.he gains of the monopolist. The real sufferers, the consumers themselves, often 
 ffel the pressure, without being aware of the cause of it, and are the first u: 
 abuse the enlightened individuals, who are really advocating their interests. 
 
14 8 ON PRODUCTION. BOOK I. 
 
 moment, who is mad enough to deny, that the fabric of printed cali- 
 coes employs an immense number of hands, what with the dressing 
 of cotton, the spinning, weaving, bleaching, and printing? This 
 article has improved the art of dyeing in a few years, more than all 
 the other manufactures together have done in a century." 
 
 I must beg my readers to pause a moment, and reflect, what firm- 
 ness and extensive information respecting the sources of public pros- 
 perity were necessary to uphold an administration against so general 
 a clamour, supported, amongst the principal agents of authority, by 
 other motives, besides that of public utility. 
 
 Though governments have too often presumed upon their power 
 to benefit the general wealth, by prescribing to agriculture and 
 manufacture the raising of particular products, they have interfered 
 much more particularly in the concerns of commerce, especially of 
 external commerce. These bad consequences have resulted from a 
 general system, distinguished by the name of the exclusive or mer- 
 cantile system, which attributes the profits of a nation to what is 
 technically called a favourable balance of trade. Before we enter 
 upon the investigation of the real effect of regulations, intended to 
 secure to a nation this balance in its favour, it may be as well to 
 form some notion of what it really is, and what is its professed 
 object ; which I shall attempt in the following 
 
 DIGRESSION, 
 UPON WHAT IS CALLED THE BALANCE OF TRADE. 
 
 The comparison a nation makes between the value of its exports 
 to, and that of its imports from, foreign countries, forms what is 
 called the balance of its trade. If it have exported more commodi- 
 ties than it has imported, it is taken for granted that the nation has 
 to receive the difference in gold and silver; and the balance of trade 
 is then said to be in its favour; and when the case is reversed, the 
 balance is said to be against it. 
 
 The exclusive system proceeds upon these maxims: 1. That the 
 commerce of a nation is advantageous, in proportion as its exports 
 exceed its imports, and as there is a larger cash balance receivable 
 in specie, or in the precious metals : 2. That by means of duties, 
 prohibitions, and bounties, the government can make that balance 
 more in favour of, or less against, the nation. 
 
 These two maxims must be analysed minutely in the first place; 
 then, let us see what is the course oif practice. 
 
 When a merchant sends goods abroad, he causes them to be there 
 sold, and receives, by the hands of his foreign correspondents, the 
 price of his goods, in the money of the country. If he expects to 
 make a profit upon the return cargo, he causes that price to be laid 
 out in foreign produce, and remitted home to him. The operation 
 i.s With little variation the same, when he begins at the other end ; 
 that is to saj, by making purchases abroad, which he pays for by 
 
CHAP. XVIL ON PRODUCTION. 149 
 
 remitting domestic products thither. These operations are not 
 always executed on account of the same merchant. It sometimes 
 happens that the trader, who undertakes the outward, will not under- 
 take the homeward adventure. In that case he draws bills payable 
 after date, or upon sight, upon his correspondents, by whom the 
 goods have been sold; these bills he sells or negotiates, to somebody, 
 who sends them to the place they are drawn upon, where they are 
 made use of in the purchase of fresh goods, which the last mention- 
 ed person imports himself.* 
 
 In both cases, one value is exported, another value is imported in 
 return ; but we have not to stop to inquire, if any part of the value 
 either exported or imported consisted of the precious metals. It 
 may reasonably be assumed, that merchants, when left the free 
 choice of what goods they will speculate in, will prefer those that 
 offer the largest profit ; that is to say, those which will bear the 
 greatest value when they arrive at the place of destination. For 
 example, a French merchant has consigned brandies to England, 
 and has to receive from England for such his consignment, WOOL 
 sterling : he naturally sits down to calculate the difference between 
 what he will receive, if he import his 1000/. in the shape of the 
 precious metals, and what he will receive, if he import that sum in 
 the shape of cotton manufactures.! 
 
 * What has been said of one trader, may be said equally of two three, in 
 short, of all the traders in the nation. As far as concerns the balance of com- 
 merce, the operations of the whole will resolve themselves into what I have 
 just stated. Individual losses may occur on either side, from the folly or knavery 
 of some few of the traders engaged ; but we may take it for granted, that they 
 will, on the average, be inconsiderable, in comparison with the total of business 
 done ; at all events, the losses on the one side will commonly balance those on 
 the other. 
 
 It is of very little importance to our purpose to inquire, by whom the charge 
 Df transport is borne : usually, the English trader pays the freight of the goods 
 he buys, and imports from France, and the French trader does the same upon his 
 purchases from England; both of them look for the reimbursement of this outlay 
 to the value added to the articles by the circumstance of transport. 
 
 fit may be well here to point out a manifest blunder of some partisans of the 
 exclusive system. They look upon nothing that a nation receives from a.broad as 
 a national gain, except what is received in the form of specie; which is in effect, 
 to maintain, that a hatter who sells a hat for 5 dollars gains the whole 5 dollars, 
 because he receives it in specie. But this cannot be ; money, like other things, 
 is itself a commodity. A French merchant consigns to England, brandies to 
 the amount of 20,000 fr. : his commodity was equivalent in France to that sum in 
 specie ; if it sell in England for 1000/. sterling, and that sum remitted in gold or 
 silver be worth 24,000 /r. there is a gain of 4000 fr. only, although France has 
 received 24,000 fr. in specie. And, should the merchant lay out his 1000Z. 
 sterling in cotton goods, and be able to sell them in France for 28,000 fr. there 
 would then be a gain to the importer and to the nation of 8000 fr., although no 
 specie whatever had been brought into the country. In short, the gain is pre- 
 cisely the excess of the value received above the value given for it, whatever be 
 the form in which the import is made. 
 
 It is curious enough, that the more lucrative external commerce is, the greater 
 must be the excess of the import above the export ; and that the very thmg, 
 which the partisans of the exclusive system deprecate as a calamity, is of ai! 
 13* 
 
150 
 
 ON PRODUCTION. BOOK I, 
 
 If the merchant find it more advantageous to get his returns in 
 goods than in specie, and if it be admitted, that he knows his own 
 Interest better than anybody else, the sole point left for discussion 
 is, whether returns in specie, though less advantageous to the mer- 
 chant, may not be better for the nation, than returns of any other 
 article : whether, in short, it be desirable in a national point of view, 
 that the precious metals should abound, in preference to any othei 
 commodity. 
 
 What are the functions of the precious metals in the community 1 
 If shaped into trinkets or plate, they serve for personal ornament, for 
 the splendour of our domestic establishments, or for a variety of 
 domestic purposes; they are converted into watch-cases, spoons, 
 forks, dishes, coffee-pots ; or rolled out into leaves for the embellish- 
 ment of picture frames, book-binding, and the like ; in which case, 
 they form part of that portion of the capital of the community, which 
 yields no interest, but is devoted to the production of utility or plea- 
 sure. It is doubtless an advantage to the nation, that the material, 
 whereof this portion of its capital consists, should be cheap, and abun- 
 dant. The enjoyment they afford in these various ways is then 
 obtained at a lo'wer rate, and is more widely diffused. There are 
 many establishments on a moderate scale, which, but for the disco- 
 very of America, would have been unable to make the show of plate 
 that is now seen upon their tables. But this advantage must not be 
 over-rated ; there are other utilities of a much higher order. The 
 
 things to be desired. I will explain why. When there has been an export of 
 10, and an import in return of 11 millions, there is in the nation a value of 1 mil- 
 lion more than before the interchange. And, in spite of the specious statements 
 of the balance of commerce, this must almost always be so, otherwise the traders 
 would gain nothing. In fact, the value of the export is estimated at its value 
 before shipment, which is increased by the time it reaches its destination : with 
 this augmented value the return is purchased, which also receives a like acces- 
 sion of value by the transport. The value of this import is estimated at the time 
 of entry. Thus, the result is the presence of a value equal to that exported, plus 
 the gains outward and homeward. Wherefore, in a thriving country, the value 
 of the total imports should always exceed that of the exports. What then are 
 we to think of the Report of the French Minister of the Interior of 1813, who 
 makes the total exports to have been 383 millions of francs, and the total imports, 
 exclusive of specie, but 350 millions ; a statement upon which he felicitates a 
 nation, as the most favourable that had ever been presented. Whereas, thin 
 balance shows, on the contrary, what everybody felt and knew, that the com- 
 merce of France was then making immense losses, in consequence of the blun- 
 ders of her administration, and the total ignorance of the first principles of poli- 
 tical economy. 
 
 In a tract upon the kingdom of Navarre in Spain, (Annales des Voyages, torn. 
 i. p. 312,) I find it stated, that, on the comparison of the value of the exports with 
 that of the imports of that kingdom, there is found to be an annual excess of the 
 brmer above the latter of 120,000 dollars. Upon which the author very sagely 
 >bserves, "that if there be one truth more indisputable than another, it is this, 
 'hat a nation which is growing rich cannot be importing more than it is export- 
 ing, for then its capital must diminish perceptibly. And, since Navarre is in a 
 ^tate of gradual improvement, as appears from the advance of population and 
 Comfort, it is clear," that I know nothing about the matter, he might, have 
 tdded; " for I am citing an established fact to give the lie to an indisputable 
 
CHAP. XVII. ON PRODUCTION. 151 
 
 window-glass, that keeps out the inclemency of the weather, is of 
 much more importance to our comfort, than any species of plate 
 whatsoever; yet no one has ever thought of encouraging its import 
 or production by special favour or exemptions. 
 
 The other utility of the precious metals is, to act as the material 
 of money, that is to say, of that portion of the national capital, 
 which is employed in facilitating the interchange of existing values 
 between one individual and another. For this purpose, is it any 
 advantage that the material selected should be abundant and cheap? 
 Is a nation, that is more amply provided with that material, richer 
 than one which is more scantily supplied ? 
 
 I must here take leave to anticipate a position, established in 
 Chap. XXI. of this book, wherein the subject of money is considered, 
 namely, that the total business of national exchange and circulation, 
 requires a given quantity of the commodity, money, of some amount 
 or other. There is in France a daily sale of so much wheat, cattle, 
 fuel, property movable and immovable, which sale requires the 
 daily intervention of a given value in the form of money, because 
 every commodity is first converted into money, as a step towards its 
 further conversion into other objects of desire. Now, whatever be 
 the relative abundance or scarcity of the article money, since a given 
 quantum is requisite for the business of circulation, the money must 
 of course advance in value, as it declines in quantity, and decline 
 in value as it advances in quantity. Suppose the money of France 
 to amount now to 3000 millions of francs,* and that by some event, 
 no matter what, it be reduced to 1500 millions; the 1500 millions 
 will be quite as valuable as the 3000 millions. The demands of 
 circulation require the agency of an actual value of 3000 millions ; 
 that is to say, a value equivalent to 2000 millions of pounds of sugar, 
 (taking sugar at 30 sous per Ib.) or to 180 millions of hectolitres of 
 wheat (taking wheat at 20 fr. the hectolitre). Whatever be the 
 weight or bulk of the material, whereof it is made, the total value of 
 the national money will still remain at that point; though in the latter 
 case, that material will be twice as valuable as in the former. An 
 ounce of silver will buy eight instead of four Ibs. of sugar, and so 
 of all other commodities; and the 1500 millions of coin will be equiva- 
 lent to the former 3000. But the nation will be neither richer nor 
 poorer than before. A man who goes to market with a less quantity 
 of coin, will be" able to buy with it the same quantity of commodities. 
 A nation that has chosen gold for the material of its money, is equally 
 rich with one that has made choice of silver, though the volume of 
 its money be much less. Should silver become fifteen times as 
 scarce as at present, that is to say, as scarce as gold now is, an ounce 
 of silver would perform the same functions, in the character of money. 
 as an ounce of gold now does; and we should be equally rich in 
 money. Or, should it fall to a par with copper, we should not be :t 
 
 *564 millions of dollars. 
 
15 2 ON PRODUCTION. BOOK L 
 
 iot the richer in the article of money ; we should merely be encum- 
 bered with a more bulky medium of circulation. 
 
 On the score, then, of the other utilities of the precious metals, and 
 on that score only, their abundance makes a nation richer, because it 
 extends the sphere of those utilities, and diffuses their use. In the 
 cnaracter of money, that abundance no wise contributes to national 
 enrichment;* but the habits of the vulgar lead them to pronounce an 
 individual rich, in proportion to the quantity of money he is possess- 
 ed of; and this notion has been extended to national wealth, which 
 is made up of the aggregate of individuals' wealth. Wealth, how- 
 ever, as before observed, consists, not in the matter or substance, but 
 in the value of that matter or substance. A money of large, is worth 
 no more than a money of small volume ; neither is a money of small, 
 of less value than one of large volume. Value, in the form of com- 
 modities, is equivalent to value to the same amount in the form of 
 money. 
 
 It may be asked, why, then, is money so generally preferred to 
 commodities, when the value on both sides is equal ? This requires 
 a little explanation. When I come to treat_of money, it will be 
 shown, that the coined metal of equal value commands a preference, 
 because it insures to the holder the attainment of the objects of desire 
 by means of one exchange instead of two. He is not, like the holder 
 of any other commodity, obliged, in the first instance, to exchange 
 his own commodity, money, for the purpose of obtaining, by a 
 second exchange, the object of his desire ; one act of exchange suf- 
 fices ; and this it is, combined with the extreme facility of apportion- 
 ment, afforded by graduated denominations of the coin, which ren- 
 ders it so useful in exchanges of value. Every individual, who has 
 an exchange to make, becomes a consumer of the commodity, 
 money; that is to say, every individual in the community; which 
 accounts for the universal preference of money to commodities at 
 large, where the value is equal. 
 
 * It is a necessary inference from these positions, tjiat a nation gains in wealth 
 by the partial export of its specie, because the residue is of equal value to the 
 total previous amount, and the nation receives an equivalent for the portion ex- 
 ported. How is this to He accounted forl By the peculiar property of money 
 to exhibit its utility in the exercise, not of its physical or material qualities, but 
 those of its value alone. A less quantity of bread will less satisfy the cravings 
 of hunger ; but a less quantity of money may possess an equal amount of utility; 
 for its value augments with the diminution of its volume, and its value is the 
 hole ground of its employment. 
 
 Whence it is evident, that governments should shape their course in the 'op- 
 posite direction to that pursued at present, and encourage, instead of discouraging, 
 the export of specie. And so they assuredly will, when they shall understand 
 their business better: or rather, they will attempt neither the one nor the other, 
 lor it is impossible that any considerable portion of the national specie can leave 
 I he country, without raising the value of the residue. And when it is raised, 
 less of it is given in exchange for commodities, which are then low in price, so 
 > to make it advantageous again to import specie and export commodities, by 
 hich action and reaction the quantity of the precious metals is, in spite of all 
 filiations, kept pretty nearly at the amount required by the wants of the nation. 
 
CHAP. XVII. ON PRODUCTION. 153 
 
 But this superiority of money, in the interchange between indi- 
 viduals, does not extend to that between nation and nation. In the 
 latter, money, and, a fortiori, bullion, lose all the advantage of their 
 peculiar character, as money, and are dealt with as mere commodi- 
 ties. The merchant, who has remittances to make from abroad, 
 looks- at nothing but the gain to be made on those remittances, and 
 treats the precious metals as a commodity he can dispose of with 
 more or less benefit. In his eyes, an exchange more or less is no 
 object ; for it is his business to negotiate exchanges, so as to get a 
 profit upon them. An ordinary person might prefer to receive 
 money instead of goods, because it is an article, whose value he is 
 better acquainted with : but a merchant, who is apprised of the 
 prices current in most of the markets of the world, knows how to 
 appreciate the value he receives in return, whatever shape it may 
 appear under. 
 
 An individual may be under the necessity of liquidating, for the 
 purpose of giving a new direction to his capital, or of partition, lor the 
 like. A nation is never obliged to do so. This liquidation is effected 
 with the circulating money of the nation, which it occupies only for 
 the time; the same money going almost immediately to operate 
 another act of liquidation or of exchange. 
 
 We have seen above (Chap. XV.) that the abundance of specie is 
 not even necessary for the national facilitation of exchanges and 
 sales ; for that buyers really buy with products, each with his 
 respective portion of the products he has concurred in creating : that / 
 with this he buys money, which serves but to buy some further pro- 
 duct; and that, in this operation, money affords but a temporary 
 convenience ; like the vehicles employed to convey to market the 
 produce of a farm, and to bring back the articles that have been pur- 
 chased with the produce. Whatever amount of money may have 
 been employed in the purchase of liquidation, it has passed for as 
 much as it was taken for : and, at the close of the transaction, the 
 individual is neither richer nor poorer. The loss or profit arises out 
 of the nature of the transaction itself, and has no reference to the 
 medium employed in the course of it. 
 
 In no one way do the causes, that influence individual preference 
 of money to commodities, operate upon international commerte. 
 When the nation has a smaller stock than its necessities require, its 
 value within the nation is raised, and foreign and native merchants 
 are equally interested in the importation of more: when it is redundant, 
 its relative value to commodities at large is reduced, and it becomes 
 advantageous to export to that spot, where its command of commo- 
 dities may be greater than at home. To retain it by compulsory 
 measures, is to force individuals to keep what is a burthen to them.* 
 
 * No one but an entire stranger to these matters would here be inclined to 
 object, that money can never be burthensome, and is always disposed of easily 
 enough. So it may be, indeed, by such as are content to throw its value away 
 altogether, or at least, to make a disadvantageous exchange. A confectioner 
 
154 ON PRODUCTION. BOOK 1. 
 
 And here 1 might, perhaps, now dismiss the subject of the balance 
 of trade; but such is the prevailing ignorance on this topic, and so 
 novel are the views I have been taking, even to persons of the bet- 
 ter classes, to writers and statesmen of the purest intentions and well 
 informed on other points, that it may be worth while to put the 
 reader on his guard against some fallacies which are often set up in 
 opposition to liberal principles, and are unfortunately the ground- 
 work of the prevailing policy of most of the European States. I 
 shall uniformly reduce the objections to the simplest terms possible, 
 that their weight may be the more easily estimated. 
 
 It is said, that, by increasing the currency through the means of a 
 favourable balance of trade, the total capital of a nation is augmented, 
 and, on the contrary, by diminishing it, that capital is reduced. But 
 it must be always kept in mind, that capital consists, not of so much 
 silver or gold, but of the values devoted to reproductive consump- 
 tion, which values necessarily assume an infinite variety of succes- 
 sive forms. When it is intended to vest a given capital in any 
 concern, or to place it out at interest, the first step is undoubtedly to 
 realize the amount, by converting * into ready money the different 
 
 may give away his sugar-plums, or eat them himself; but in that case he losea 
 he value of them. It should be observed, that the abundance of specie is com- 
 oatible with national misery ; for the money, that goes to buy bread, must have 
 oeen bought itself with other products. And, when production has to contend 
 with adverse circumstances, individuals are in great distress for money, not 
 because that article is scarce, which oftentimes it is not, but because the creation 
 of the products, wherewith it is procurable, can not be effected with advantage. 
 * A merchant's leger for two successive years may show him richer in the 
 end of the second, than at the end of the first, although possessed of a smaller 
 amount of specie. Suppose the first year's amount to stand thus : 
 
 Ground and buildings -----------... 8000 
 
 Machinery and m'. Cables 4000 
 
 Stock in hand 3000 
 
 Balance of good credits --------.... l()00 
 
 Cash - - - 4000 
 
 Total 20,000 
 
 And the second year's thus : 
 
 Ground and buildings -----------.._ 8000 
 
 Machinery and movables ...... 5000 
 
 Stock in hand 6000 
 
 Balance of good credits 2000 
 
 Cash 1000 
 
 Total 22,000 
 
 Exhibiting an increase of 2000 dollars, although his cash be reduced to uus 
 quarter of the former amount. 
 
 A similar account, differing only in the ratios of the different items, might be 
 made out for the whole of the individuals in the community, who would then be 
 evidently richer, though possessed of much less specie or cash. 
 
CHAP. XVH. ON PRODUCTION. 155 
 
 values one has at command. The value of the capital, thus assuming 
 the transient form of money, is quickly transmuted by one exchange 
 after another into buildings, works, and perishable substances requi- 
 site for the projected enterprise. The ready money employed for 
 the occasion passes again into other hands, for the purpose of facili- 
 tating fresh exchanges, as soon as it has accomplished its momentary 
 duty ; in like manner as do many other substances, the shape of 
 which this capital successively assumes. So that the value of capi- 
 tal is neither lost nor impaired by parting with its value, whatever 
 material shape it happens to be under, provided that we part with it 
 in a way that ensures its renovation. 
 
 Suppose a French dealer in foreign commodities to consign to a 
 foreign country a capital of 10,000 dollars in specie for the purchase 
 of cotton ; when his cotton arrives, he possesses 20,000 dollars value 
 in cotton instead of specie, putting his profit out of the question for 
 the moment. Has anybody lost this amount of specie? Certainly 
 not : the adventurer has^ come honestly by it. A cotton manufac- 
 turer gives cash for the cargo; is he the loser of the price? No, 
 surely: on the contrary, the article in his hands will increase to twice 
 its value, so as to leave him a profit, after repaying all his advances. 
 If no individual capitalist has lost the 20,000 dollars exported, how 
 can the nation have lost them ? The loss will fall on the consumer, 
 they will tell you : in fact, all the cotton goods bought and consumed 
 will be so much positive loss ; but the same consumers might have 
 consumed linens or woollens of exactly the same value, without one 
 dollar of the 20,000 being sent out of the country, and yet there 
 would equally be a loss or consumption to that amount of value. 
 The loss of value we are now speaking of is not occasioned by the 
 export, but by the consumption, which might have taken place without 
 any export whatever. I may, therefore, say, with the strictest truth, 
 that the export of the specie has caused no loss at all to the nation. 
 
 It has been urged, with much confidence, that, had the export of 
 20,000 dollars never been made, France would remain in possession 
 of that additional value ; in fact, that the nation has lost the amount 
 twice over ; first, by the act of export ; secondly, by that of con- 
 sumption : whereas, the consumption of an indigenous product would 
 have entailed a single loss only. But I answer as before, that the 
 export of specie has occasioned no loss ; that it was balanced by 
 equivalent value imported ; and that it is so certain, that nothing has 
 been lost except the 20,000 dollars worth of imported commodities, 
 that I defy any one to point out any other losers than the consumers 
 of those commodities. If there has been no loser, it is clear there 
 can have been no loss. 
 
 Would you put a stop to the emigration of capital? It is not to 
 be prevented by keeping the specie in the country. A man resolved to 
 transfer his capital elsewhere can do it just as effectually by the con- 
 signment of goods, whose export is permitted.* So much the het 
 
 * The transfer of capital by bills on foreign countries, comes precisely to U>o 
 
150 ON PRODUCTION. BOOK I. 
 
 ter, we may be told; for our manufacturers will benefit by the 
 exports. True ; but their value exists no longer in the nation, since 
 they bring back no return wherewith to make new purchases ; there 
 has been a transfer of so much capital from amongst you, to give 
 activity not to your own, but to some other nation's industry. This 
 is a real ground of apprehension. Capital naturally flows to those 
 places that hold out security and lucrative employment, and gradu- 
 ally retires from countries offering no such advantages: but it may 
 easily enough retire, without being ever converted ^into specie. 
 
 If the export of specie causes no diminution of national capital, 
 provided it be followed by a corresponding return, on the other 
 nand, its import brings no accession of capital. For, in reality, 
 before specie can be imported, it must have been purchased by an 
 equivalent value exported for that purpose. 
 
 On this point it has been alleged, that by sending abroad goods 
 Instead of specie, a demand is created for goods, and the producers 
 enabled to make a profit upon their production. I answer, that, 
 even when specie is sent abroad, that specie must have been first 
 obtained by the export of some indigenous product; for, we may 
 rest assured, that the foreign owner of it did not give it to the French 
 importer for nothing ; and France had nothing to offer in the first 
 instance but her domestic products. If the supply of the precious 
 metals in the country be more than sufficient for the wants of the 
 country, it is a fitter object of export than another commodity ; and, 
 if more of the specie be exported than the excess of the supply above 
 the demand for the purposes of circulation, we may calculate with 
 certainty, that, since the value of specie must have been necessarily 
 raised by the exportation, other specie will be imported to replace 
 what has been withdrawn; for the purchase of which last, home 
 products must have been sent abroad, which will have yielded a 
 profit to the home producers. In a word, every value sent out of 
 France, for the purchase of foreign returns for the French market, 
 may be resolved into a product of domestic industry, given either 
 first or last, for France has nothing else to procure them with. 
 
 Again, it has been argued, that it is better to export consumable 
 articles, as, for instance, manufactures, and to keep at home those 
 products not liable to consumption, or, at least, not to quick con- 
 sumption, such as specie. Yet objects of quick consumption, if more 
 in demand, are more profitable to keep than objects of slower con- 
 sumption. It would often be doing a producer a very poor service, 
 to make him substitute a quantity of commodities of slow consump- 
 tion, for an equal portion of his capital of more rapid consumption. 
 If an ironmaster- were to contract for the delivery to him of a 
 quantity of coal at a day certain, and when the day'came the coal 
 could not be procurable, and he should be offered the value in money 
 fl its stead, it would be somewhat difficult to convince him of the 
 
 same thin?. It is a mere substitute in the place of the individual making the 
 export of commodities, who transfers his right to receive their proceeds, the 
 value of which remains abroad. 
 
CHAP. XVII. ON PRODUCTION. 157 
 
 service done him by the delivery of money ; which is an object of 
 much slower consumption than the coal he contracted for. Should 
 a dyer send an order for dying woods from abroad, it would be a 
 positive injury to send him gold, on the plea, that, with equal value, 
 it has the advantage of greater durability. He had no occasion for 
 a durable article whatever ; what he wanted was a substance, which, 
 though decomposed in his vats, would quickly re-appear in the 
 colours of his stuffs.* 
 
 If it were no advantage to import any but the most durable items 
 of productive capital, there are other very durable objects, such as 
 stone or iron, that ought to share in our partiality with silver and 
 gold. But the point of real importance is, the durability, not of any_ 
 particular substance, but of the value of capital. Now the value of j 
 capital is perpetuated, notwithstanding the repeated change of the * 
 material shape in which it is vested. Nay, it cannot yield either 
 interest or profit, unless that shape be continually varied. To con- 
 fine it to the single shape of money would be to condemn it to re- 
 main unproductive. 
 
 But I will go a step further, and, having shown that there is no 
 advantage in importing gold and silver more than any other article 
 of merchandise, I will assert, that, supposing it were desirable to 
 have the balance of trade always in our favour, yet it is morally 
 impossible it should be so. 
 
 Gold and silver are like all the other substances that, in the aggre- 
 gate, compose national wealth ; they are useful to the community no 
 longer than while they do not exceed the national demand for them. 
 Any such excess must make the sellers more numerous than the 
 ouyers ; consequently must depress the price in proportion, and thus 
 create a powerful inducement to buy in the home market, in the 
 expectation of making a profit upon the export. This may be 
 illustrated by an example. 
 
 Suppose for a moment the internal traffic and national wealth of a 
 given country to be such as to require the constant employ of a 
 thousand carriages of different kinds. Suppose, too, that, by some 
 peculiar system of commerce, we should succeed in getting more 
 carriages annually imported, than were annually destroyed by wear 
 and tear; so that, at the year's end, there should be 1500 instead of 
 1000; is it not obvious, that there would be in that case 500 lying 
 by in the repositories quite useless, and that the owners of them, 
 rather than suffer their value to lie dormant, would undersell each 
 other, and even smuggle them abroad if it were practicable, in the 
 hope of turning them to better account I In vain would the guvern- 
 
 * In Book III., which treats of consumption, it will be seen, that the slowei 
 kinds of unproductive consumption are preferable to the more rapid ones. But, 
 in the reproductive branch, the more rapid are the better; because, the more 
 quickly the reproduction is effected, the less charge of interest is incurred, and 
 the oflener the same capital can repeat its productive agency. The rapidity of 
 consumption, moreover, does not affect external products in particular; its d^- 
 advantages are equal, whether the product be of home or foreign growth, 
 14 
 
J58 ON PRODUCTION. BOOK I. 
 
 inent conclude commercial treaties for the encouragement of their 
 import : in vain would it expend its efforts in stimulating the export 
 of other commodities, for the purpose of getting returns in the shape 
 of carriages; the more the public authorities favoured the import, 
 the more anxious would individuals be to export. 
 
 As it is with carriages, so is it with specie likewise. The de- 
 mand is limited ; it can form but a part of the aggregate wealth of 
 the nation. That wealth can not possibly consist entirely of specie ; 
 for other things are requisite besides specie. The extent of the de- 
 mand for that peculiar article is proportionate to the general wealth; 
 in the same manner, as a greater number of carriages is wanted in a 
 rich than in a poor country. Whatever brilliant or solid qualities 
 the precious metals may possess, their value depends upon the use 
 made of them, and that "use is limited. Like carriages, they have a 
 value peculiar to them ; a value that diminishes in proportion to the 
 increase of their relative plenty, in comparison with the objects of 
 exchange, and increases in proportion to their relative scarcity. 
 
 One is told, that every thing may be procured with gold or silver. 
 True ; but upon what terms? The terms are less advantageous, when 
 these metals are forcibly multiplied beyond the demand ; hence their 
 strong tendency to emigration under such circumstances. The ex- 
 port of silver from Spain was prohibited ; yet Spain supplied all 
 Europe with it. In 1812, the paper money of England having 
 rendered superfluous all the gold money of that country, and made 
 that metal too abundant for its other remaining uses, its relative 
 value fell, and her guineas emigrated to France, in spite of the ease 
 with which tine coasts of an island may be guarded, and of the de- 
 nunciation of capital punishment against the exporters. 
 
 To what good purpose, then, do governments labour to turn the 
 balance of commerce in favour of their respective nations? To 
 none whatever ; unless, perhaps, to exhibit the show of financial 
 advantages, unsupported by fact or experience.* How can maxims 
 so clear, so agreeable to plain common sense, and to facts attested by 
 all who have made commerce their study, have yet been rejected in 
 practice by all the ruling powers of Europe,f nay, even have been 
 
 * The returns of British commerce from the commencement of the 18th cen- 
 tury down to the establishment of the existing paper money of that nation, show 
 a regular annual excess, more or less received by Great Britain in the shape of 
 specie, amounting altogether to the enormous total of 347 millions sterling 
 (more than 1600 millions of dollars.) If to this be added the specie already in 
 Great Britain at the outset, England ought to have possessed a circulating me- 
 dium of very near 400 millions sterling. How happens it, then, that the most 
 exaggerated ministerial calculations have never given a larger total of specie 
 than 47 millions, even at the period of its greatest abundance 1 Vide Supra, 
 Chap. III. 
 
 j All of them have acted under the conviction, 1. That the precious metals 
 are the only desirable kind of wealth, whereas they perform hut a secondary 
 part in its production : 2. That they have it in their power to cause their regular 
 'nflux by compulsory measures. The example of England (Vide note pre- 
 ceding^ will show the little success of the experiment. The pre-eminent wealth 
 cf that nation, then, is derived from some other cause than the favourable bal- 
 
CHAP. XVII. ON PRODUCTION. 159 
 
 attacked by a number of writers, that have evinced both genius 
 and information on other subjects 1 To speak the truth, it is because 
 the first principles of political economy are as yet but little known ; 
 because ingenious systems and reasonings have been built upon hol- 
 low foundations, and taken advantage of, on the one hand, by in- 
 terested rulers, who employ prohibition as. a weapon of offence 01 
 an instrument of revenue ; and, on the other, by the personal avarice 
 of merchants and manufacturers, who have a private interest in ex- 
 clusive measures, and take but little pains to inquire, whether their 
 profits arise from actual production, or from a simultaneous loss 
 thrown upon other classes of the community. 
 
 A determination to maintain a favourable balance of trade, that is 
 to say, to export goods and receive returns of specie, is, in fact, a 
 determination to have no foreign trade at all ; for the nation, with 
 whom the trade is to be carried on, can only give in exchange what 
 it has to give. If one party will receive nothing but the precious 
 metals, the other party may come to a similar resolution ; and, when 
 both parties require the same commodity, there is no possibility of 
 any exchange. Were it practicable to monopolize the precious 
 metals, there are few nations in the world that would not be cut off 
 from all hope of mutual commercial relations. If one country afford 
 to another what the latter wants in exchange, what more would she 
 have ? or in what respect would gold be preferable ? for what else 
 can it be wanted, than as the means of subsequently purchasing the 
 objects of desire ? 
 
 The day will come, sooner or later, when people will wonder at 
 the necessity of taking all this trouble to expose the folly of a 
 system, so childish and absurd, and yet so often enforced at the 
 point of the bayonet(l) 
 
 [END OF THE DIGRESSION UPON THE BALANCE OF TRADE.] 
 
 ance of her commerce. But what other cause ? Why from the immensity of 
 her production. But to what does she owe that immensity ] To the frugality 
 exerted in the accumulation of individual capital ; to the national turn for in- 
 dustry and practical application ; to the security of person and property, the 
 facility of internal circulation, and freedom of individual agency, which, limited 
 and fettered as it is, is yet, on the whole, superior to that of the other European 
 states. 
 
 (1) In a note, here inserted, in the earlier editions of this work, the American 
 editor referred to the laudable exertions made by Mr. Huskisson, with the sup- 
 port of Mr. Canning and other then prominent members of the British govern- 
 ment, to expose the impolicy and injustice of restrictions and prohibitions on 
 commerce, and to the success of some of their measures to relieve the industry 
 of the country from the shackles imposed in a less enlightened age. We also 
 then quoted the observations of the Edinburgh Review, " that Mr. Huskisson, 
 in particular, against whom every species of ribald abuse had been cast, had 
 done more to improve the commercial policy of England during the short period 
 Jhat he was President of the Board of Trade, than all the ministers who had 
 preceded him for the last hundred years. And it ought to be remembered to his 
 honour, that the measures he suggested, and the odium thence arising, were not 
 proposed and incurred by him in the view of serving any party purpose, but solely 
 
160 ON PRODUCTION. BOOK L 
 
 To resume our subject. We have seen, that the very advantages 
 aimed at by the means of a favourable balance of trade, are altogether 
 illusory; and that, supposing them real, it is impossible for a nation 
 permanently to enjoy them. It remains to be shown, what is the 
 actual operation of regulations framed with this object in view. 
 
 By the absolute exclusion of specific manufactures of foreign 
 fabric, a government establishes a monopoly in favour of the home 
 producers of these articles, and in prejudice of the home consumers ; 
 that is to say, those classes of the nation which produce them, being 
 entitled to their exclusive sale, can raise their prices above the natu- 
 ral rate; while the home consumers, being unable to purchase else- 
 where, are compelled to pay for them unnaturally dear.* If the 
 
 * Ricardo, in his Essay on the Principles of Political Economy and Taxation, 
 published in 1817, has justly remarked on this passage, that a government can 
 not, by prohibition, elevate a product beyond its natural rate of price: for in that 
 case, 'the home producers would betake themselves in greater numbers to its pro- 
 duction, and, by competition, reduce the profits upon it to the general level. To 
 make myself better understood, I must therefore explain, that, by natural_rate 
 of price, I mean the lowest rate at which a commodity is procurable, whether 
 by commerce or other branch of industry. If commerical can procure it cheaper 
 than manufacturing industry, and the government take upon itself to compel its 
 production by the way of manufacture, it then imposes upon the nation a more 
 chargeable mode of procurement. Thus, it wrongs the consumer, without giving 
 to the domestic producer a profit, equivalent to the extra charge upon the con- 
 sumer ; for competition soon brings that profit down to the ordinary level of profit, 
 and the monopoly is thereby rendered nugatory. So that, although Ricardo is 
 thus far correct in his criticism, he only shows the measure I am reprobating to 
 be more mischievous ; inasmuch as it augments the natural difficulties in the 
 way of the satisfaction of human wants, without any counteracting benefit to 
 . any class or any individual whatever. 
 
 because he believed, and most justly, that these measures were sound in prin- 
 ciple, and calculated to promote the real and lasting interests of his country." 
 
 Since that time all the successive administrations in England, both Tory and 
 Whig, have at least uniformly recognized the soundness of the doctrines of free 
 trade, and some of them, by various important commercial enactments, have given 
 a still wider application to these beneficial truths; and such, too, has been the 
 effect of their liberal measures upon the state of opinion and of legislation 
 throughout Great Britain, that both in and out of parliament, a most gratifying 
 change has taken place. Commercial questions everywhere now occupy a 
 large share of attention, are discussed with the greatest ability and acuteness in 
 almost all the public journals, and must therefore lead to the emancipation of 
 commerce from the fetters which have so long and so perniciously bound it. 
 
 In France, however, and other countries which might be named, the state of 
 knowledge, and the state of opinion, are not yet in favour of liberal commercial 
 4 For thirty years," we are told by the English Commissioners, Messrs. 
 Villiers and Bowring, " nearly every law passed on Custom House matters had 
 been intended either to establish or to consolidate the system of protection and 
 prohibition. Under the encouragement of the legislature, much capital has been 
 invested in the establishment and extension of protected manufactures, whose? 
 now tottering and uncertain position (the natural and necessary consequence of 
 'he system itself) has made their proprietors most feelingly alive to any chano-o 
 wnich might affect them." 
 
 AMERICAN EDITOR. 
 
CHAP. XVII. ON PRODUCTION. 161 
 
 articles be not wholly prohibited, but merely saddled with an import 
 duty, the home producer can then increase their price by the whole 
 amount of the duty, and the consumer will have to pay the differ- 
 ence. For example, if an import duty of 20 cents per dozen be laid 
 upon earthenware plates worth 60 cents per dozen, the importer 
 whatever country he may belong to, must charge the consumer 30 
 cents; and the home manufacturer of that commodity is enabled to 
 ask 80 cents per dozen of his customers for plates of the same qual- 
 ity ; which he could not do without the intervention of the duty 
 because the consumer could get the same article for 60 cents : thus, 
 a premium to the whole extent of the duty is given to the home 
 manufacturer out of the consumer's pocket. 
 
 Should any one maintain, that the advantage of producing at home 
 counterbalances the hardship of paying dearer for almost every arti- 
 cle ; that our own capital and labour are engaged in the production, 
 and the profits pocketed by our own fellow-citizens; my answer is, 
 that the foreign commodities we might import are not to be had 
 gratis : that we must purchase them with values of home production, 
 which would have given equal employment to our industry and 
 capital ; for we must never lose sight of this maxim, that products 
 are always bought ultimately with products. It is most for our ad- 
 vantage to employ our productive powers^not in those branches in 
 which foreigners excel us, but in those which we excel in ourselves ; 
 and with the product to purchase of others. The opposite course 
 would be just as absurd, as if a man should wish to make his own 
 coats and shoes. What would the world say, if, at the door of every 
 house an import duty were laid upon coats and shoes, for the lauda- 
 ble purpose of compelling the inmates to make them for themselves ? 
 Would not people say with justice, Let us follow each his own pur- 
 suits, and buy what \ve want with what we produce, or, which comes 
 to f he same thing, with what we get for our products. The system 
 would be precisely the same, only carried to a ridiculous extreme. 
 
 Well may it be a matter of wonder, that every nation should 
 manifest such anxiety to obtain prohibitory regulations, if it be true 
 that it can profit nothing by them ; and lead one to suppose the two 
 cases not parallel, because we do not find individual householders 
 solicitous to obtain the same privilege. But the sole difference is 
 this, that individuals are independent and consistent beings, actuated 
 by no contrariety of will, and more interested in their character of 
 consumers of coats and shoes to buy them cheap, than as manufac- 
 turers to sell unnaturally dear. 
 
 Who, then, are the classes of the community so importunate for 
 prohibitions or heavy import duties ? The producers of the par- 
 ticular commodity, that applies for protection from competition, not 
 the consumers of that commodity. The public interest is their plea , 
 but self-interest is evidently their object. Well, but, say tnesu 
 gentry, are they not the same thing ? are not our gains national gams ? 
 By no means: whatever profit is acquired in this manner >s so 
 14* V 
 
102 
 
 ON PRODUCTION. BOOK I 
 
 much taken out of the pockets of a neighbour and fellow-citizen . 
 and, if the excess of charge thrown upon consumers by the mono- 
 poly could be correctly computed, it would be found, that the loss of 
 the consumer exceeds the gain of the monopolist. Here, then, 
 individual and public interest are in direct opposition to each other; 
 and, since public interest is understood by the enlightened few alone, 
 is it at all surprising, that the prohibitive system should find so 
 many partisans and so few opponents ? 
 
 There is in general far too little attention paid to the serious mis- 
 chief of raising prices upon the consumers. The evil is not apparent 
 to cursory observation, because it operates piecemeal, and is felt in a 
 very slight degree on every purchase or act of consumption : but it 
 is really most serious, on account of its constant recurrence and 
 universal pressure. The whole fortune of every consumer is affect- 
 ed by every fluctuation of price in the articles of his consumption ; 
 the cheaper they are, the richer he is, and vice versa. If a single 
 article rise in price, he is so much the more poor in respect of that 
 article; if all rise together, he is poorer in respect to the whole. 
 And, since the whole nation is comprehended in the class of the 
 consumers, the whole nation must in that case be the poorer. Be- 
 sides which, it is crippled in the extension of the variety of its en- 
 joyments, and prevented from obtaining products whereof it stands 
 
 jn need, in exchange for those wherewith it might procure them. 
 
 j It is of no use to assert, that, when prices are raised, what one gains 
 
 I another loses. For the position is not true, except in the case ol 
 monopolies ; nor even to the full extent with regard to them ; foi 
 the monopolist never profits to the full amount of the loss to the 
 consumers. If the rise be occasioned by taxation or import-duty 
 under any shape whatever, the producer gains nothing by the in 
 crease of price, but just the reverse, as we shall see by and by (Book 
 III. Chapter VII. :) so that, in fact, he is no richer in his capacity of 
 producer, though poorer in his quality of consumer. This is one 
 of the most effective causes of national impoverishment, or at least 
 one of the most powerful checks to the progress of national wealth. 
 For this reason, it may be perceived, that it is an absurd distinction 
 to view with more jealousy the import of foreign objects of barren 
 consumption, than that of raw materials for home manufacture. 
 
 JXVhether the products consumed be of domestic or of foreign 
 jgrowth, a portion of wealth is destroyed in the act of consumption, 
 'and a proportionate inroad made into the wealth of the community. 
 But that inroad is the result of the act of consumption, not of the 
 act of dealing with the foreigner; and the resulting stimulus to 
 national production, is the same in either case. For, wherewith 
 was the purchase of the foreign product made ? either with a do- 
 mestic product or with money, which must itself have been pro- 
 cured with a domestic product. In buying of a foreigner, the nation 
 really does no more than send abroad a domestic product in lieu of 
 ronsuming it at home, and consume in its place the foreign product 
 received in exchange. The individual consumer himself, probably, 
 
CHAP. XVII. ON PRODUCTION. 163 
 
 does not conduct this operation; commerce conducts it for him. 
 No one country can buy of another, except with its own domestic 
 products. 
 
 In defence of import duties it is often urged, " that when the inte- 
 rest of money is lower abroad than at home, the foreign has an ad- 
 vantage over the home producer, which must be met by a counter- 
 vailing duty." The low rate of interest is, to the foreign producer, 
 an advantage, analogous to that of the superior quality of his land. It 
 tends to cheapen the products he raises; and it is reasonable enough 
 that our domestic consumers should take the benefit of that cheap- 
 ness. The same motive will operate here, that leads us rather to 
 import sugar and indigo from tropical climates, than to raise them 
 in our own. 
 
 " But capital is necessary in every branch of production : so that 
 the foreigner, who can procure it at a lower rate of interest, has 
 the same advantage in respect to every product ; and, if the free im- 
 portation be permitted, he will have an advantage over all classes of 
 home producers." Tell me, then, how his products are to be paid 
 for. " Why, in specie, and there lies the mischief." And how is 
 the specie to be got to pay for them ? " All the nation has, will go 
 in that way ; and when it is exhausted national misery will be com- 
 plete." So then it is admitted, that before arriving at this extremity, 
 the constant efflux of specie will gradually render it more scarce at 
 home, and more abundant abroad ; wherefore, it will gradually rise 
 1, 2, 3, per cent higher in value at home than abroad; which is fully 
 sufficient to turn the tide, and make specie flow inwards faster than 
 i* flowed outwards. But it will not do so without some returns ; and 
 of what can the returns be made, but of products of the land, or the 
 commerce of the nation ? For there is no possible means of pur- 
 chasing from foreign nations, otherwise than with the products ol 
 the national land and commerce ; and it is better to buy of them 
 what they can produce cheaper than ourselves, because we may rest 
 assured, that they must take in payment what we can produce 
 cheaper than they. This they must do, else there must be an end of 
 all interchange. 
 
 Again, it is affirmed, and what absurd positions have not been 
 advanced to involve these questions in obscurity? that, since almost 
 all the nation are at the same time consumers and producers, they 
 gain by prohibition and monopoly as much in the one capacity as 
 they lose in the other ; that the producer, who gets a monopoly-pro- 
 fit upon the object of his own production, is, on the other hand, the 
 sufferer by a similar profit upon the objects of his consumption ; and 
 thus that the nation is made up of rogues and fools, who are a match 
 for each other. It is worth remarking, that every body thinks him- 
 self more rogue than fool ; for, although all are consumers as well 
 as producers, the enormous profits made upon a single article are 
 much more striking, than reiterated minute losses upon the number- 
 less items of consumption. If an import duty be laid upon calicoes 
 the additional annual charge to each person of moderate fortune, may. 
 
164 ON PRODUCTION. BOOK I. 
 
 perhaps, not exceed 2j dollars or 3 dollars at most ; and probably he 
 does not very well comprehend the nature of the loss, or feel it 
 much, though repeated in some degree or other upon every thing he 
 consumes; whereas, possibly, this consumer is himself a manufac- 
 turer, say a hat-maker ; and should a duty be laid upon the import 
 of foreign hats, he will immediately see that it will raise the price 
 of his own hats, and probably increase his annual profits by several 
 thousand dollars. It is this delusion that makes private interest so 
 warm an advocate for prohibitory measures, even where the whole 
 community loses more by them as consumers, than it gains as 
 producers. 
 
 But, even in this point of view, the exclusive system is pregnant 
 with injustice. It is impossible that every class of production should 
 profit by the exclusive system, supposing it to be universal, which, 
 in point of fact, it never is in practice, though possibly it may be in 
 law or intention. Some articles can never, from the nature of things, 
 be derived from abroad; fresh fish, for instance, or horned cattle; 
 as to them, therefore, import duties would be inoperative in raising 
 the price. The same may be said of masons and carpenters* work, 
 and of the numberless callings necessarily carried on within the 
 community; as those of shopmen, clerks, carriers, retail dealers, 
 and many others. The producers of immaterial products, public 
 functionaries, and fundholders, lie under the same disability. These 
 classes can none of them be invested with a monopoly by means of 
 import duties, though they are subjected to the hardship of many 
 monopolies granted in that way to other classes of producers.* 
 
 Besides, the profits of monopoly are not equitably divided amongst 
 the different classes even of those that concur in the production of 
 the commodity, which is the subject of monopoly. If the master- 
 adventurers, whether in agriculture, manufacture, or commerce, have 
 the consumers at their mercy, their labourers and subordinate pro- 
 ductive agents are still more exposed to their extortion, for reasons 
 that will be explained in Book II. So that these latter classes par- 
 ticipate in the loss with consumers at large, but get no share of the 
 unnatural gains of their superiors. 
 
 Prohibitory measures, besides affecting the pockets of the con- 
 sumers, often subject them to severe privations. I am ashamed to 
 
 * There is a sort of malicious satisfaction in the discovery, that those who 
 impose these restrictions are usually among the severest sufferers. Sometimes 
 they attempt to indemnify themselves by a further act of injustice ; the public 
 functionaries augment their own salaries, if they have the keeping of the public 
 purse. At other times they abolish a monopoly, when they find it press pecu- 
 liarly on themselves. In 1599, the manufacturers of Tours petitioned Henry IV. 
 to prohibit the import of gold and silver silk stuffs, which had previously been 
 entirely of foreign fabric. They cajoled the government by the statement/that 
 'Jiey could furnish the whole consumption of France with that article. The king 
 granted their request, with his characteristic facility; bit the consumers, who 
 were chiefly the courtiers and people of condition, were loud in their remon- 
 strances at the consequent advance of price ; and the edict was revoked in sia 
 months. Memoires de Sully, liv. ii. 
 
CHAP. XVII. ON PRODUCTION. 165 
 
 say, that, within these few years, we have had the hat-makers of 
 Marseilles petitioning for the prohibition of the import of foreign 
 straw or chip hats, on the plea that they injured the sale of their own 
 felt hats ;* a measure that would have deprived the country people 
 and labourers in husbandry, who are so much exposed to the sun, of a 
 light, a cool, and cheap covering, admirably adapted to their wants, 
 the use of which it was highly desirable to extend and encourage. 
 
 In pursuit of what it mistakes for profound policy, or to gratify 
 feelings it supposes to be laudable, a government will sometimes 
 prohibit or divert the course of a particular trade, and thereby do 
 irreparable mischief to the productive powers of the nation. When 
 Philip II. became master of Portugal, and forbade all intercourse 
 between his new subjects and the Dutch, whom he detested, what 
 was the consequence 1 The Dutch, who before resorted to Lisbon 
 for the manufactures of India, of which they took off an immense 
 quantity, finding this avenue closed against their industry, went 
 straight to India for what they wanted, and, in the end, drove out 
 the Portuguese from that quarter; and, what was meant as the 
 deadly blow of inveterate hatred, turned out the main source of 
 their aggrandizement. "Commerce," says Fenelon, "is like the 
 native springs of, the rock, which often cease to flow altogether, if 
 it be attempted to alter their course."f 
 
 Such are the principal evils of impediments thrown in the way of 
 import, which are carried to the extreme point by absolute prohibi- 
 tion. There have, indeed, been instances of nations that have thriven 
 under such a system ; but then it was, because the causes of national 
 prosperity were more powerful than the causes of national impover- 
 ishment. Nations resemble the human frame, which contains a vital 
 principle, that incessantly labours to repair the inroads of excess and 
 dissipation upon its health and constitution. Nature is active in 
 closing the wounds and healing the bruises inflicted by our own 
 awkwardness and intemperance. In like manner, states maintain 
 themselves, nay, often increase in prosperity, in spite of the infinite 
 injurie? of every description, which friends as well as enemies inflict 
 upon them. And it is worth remarking, that the most industrious 
 nations are those, which are the most subjected to such outrage, 
 because none others could survive them. The cry is then " our sys- 
 tem must be the true one, for the national prosperity is advancing.' ; 
 Whereas, were we to take an enlarged view of the circumstances, 
 that, for the last three centuries, have combined to develope the 
 power and faculties of man ; to survey with the eye of intelligence 
 
 * Bulletin de la Societe d* Encouragement pour V Industrie Nationale, No. 4. 
 
 f The national convention of France prohibited the import of raw hides from 
 Spain, on the plea that they injured the trade in those of France; not observing, 
 that the self-same hides went back to Spain in a tanned state. The tanneries of 
 France being obliged to procure the raw article at too dear a rate, were quickly 
 abandoned; and the manufacture was transferred to Spain, along with oreat^parl 
 of the capital, and many of the hands employed. It is next to impossible tor a 
 government, not only to do any good to national production by its interference 
 but even to avoid doing mischief. 
 
ON PRODUCTION. BOOK I. 
 
 the progress of navigation and discovery, of invention in every 
 branch of art and science ; to take account of the variety of useful 
 animals and vegetables that have been transplanted from one hemi- 
 sphere to the other, and to give a due attention to the vast augment- 
 ation and increased scope both of science and of its practical appli- 
 cations, that we are daily witnesses of, we could not resist the 
 conviction, that our actual prosperity is nothing to what it might 
 have been ; that it is engaged in a perpetual struggle against the 
 obstacles and impediments thrown into its way ; and that, even in 
 those parts of the world where mankind is deemed the most enlight- 
 ened, a great part of their time and exertions are occupied in 
 destroying instead of multiplying their resources, in despoiling 
 instead of assisting each other; and all for want of correct know- 
 ledge and information respecting their real interests.* 
 
 But, to return to the subject, we have just been examining, the 
 nature of the injury that a community suffers by difficulties thrown 
 in the way of the introduction of foreign commodities. The mischief 
 occasioned to the country that produces the prohibited article, is 
 of the same kind and description ; it is prevented from turning its 
 capital and industry to the best account. But it is not to be supposed 
 that the foreign nation can by this means be utterly ruined and 
 stripped of all resource, as Napoleon seemed to imagine, when he 
 excluded the products of Britain from the markets of the continent. 
 To say nothing of the impossibility of effecting a complete and actual 
 blockade of a whole country, opposed as it must be by the universal 
 motive of self-interest, the utmost effect of it can only be to drive 
 its production into a different channel. A nation is always competent 
 to the purchase and consumption of the whole of its own products, 
 for products are always bought with other products. Do you think 
 it possible to prevent England from producing value to the amount 
 of a million, by preventing her export of woollens to that amount? 
 You are much mistaken if you do. England will employ the same 
 capital and the same manual labour in the preparation of ardent 
 spirits, by the distillation of grain or other domestic products, that 
 were before occupied in the manufacture of woollens for the French 
 market, and she will then no longer bring her woollens to be barter- 
 ed for French brandies. A country, in one way or other, direct or 
 indirect, always consumes the values it produces, and can consume 
 nothing more. If it cannot exchange its products with its neighbours, 
 it is compelled to produce values of such kinds only as it can con- 
 sume at home. This is the utmost effect of prohibitions ; both parties 
 are worse provided, and neither is at all the richer. 
 
 * It is not my design to insinuate by this, that it is desirable that all minds 
 should bo imbued with all kinds of knowledge ; but that every one should have 
 just and correct notions of that, in which he is more immediately concerned. 
 Nor is the general and complete diffusion of information requisite for the bene- 
 ficial ends of science. The good resulting from it is proportionate to the extent 
 of its progress : and the welfare of nations differs in degree, according to the 
 correctness of their ideas upon those points, which most intimately concern them 
 *;spectively. 
 
CHAP. XVH. ON PRODUCTION. ]67 
 
 Napoleon, doubtless, occasioned much injury, both to England 
 and to the continent, by cramping their mutual relations of com- 
 merce as far as he possibly could. But, on the other hand, he did 
 the continent of Europe the involuntary service of facilitating the 
 communication between its different parts, by the universality of 
 dominion, which his ambition had well-nigh achieved. The frontier 
 duties between Holland, Belgium, rmrt of Germany, Italy, and 
 France, were demolished ; and those of the other powers, with the 
 exception of England, were far from oppressive. We may foivn 
 some estimate of the benefit thence resulting to commerce, from the 
 discontent and stagnation that have ensued upon the establishment 
 of the present system of lining the frontier of each state with a 
 triple guard of douaniers. All the continental states so guarded 
 have, indeed, preserved their former means of production; but that 
 production has been made less advantageous. 
 
 It cannot be denied, that France has gained prodigiously by the 
 suppression of the provincial barriers and custom-houses, consequent 
 upon her political revolution. Europe had, in like manner, gained 
 by the partial removal of the international barriers between its dif- 
 ferent political states ; and the world at large would derive similar 
 benefit from the demolition of those, which insulate, as it were, the 
 various communities, into which the human race is divided. 
 
 I have omitted to mention other very serious evils of the exclusive 
 system ; as, for instance, the creation of a new class of crime, that 
 of smuggling ; whereby an action, wholly innocent in itself, is made 
 legally criminal: and persons, who are actually labouring for the 
 general welfare, are subjected to punishment. 
 
 Smith admits of two circumstances, that, in his opinion, will justify 
 a government in resorting to import-duties: 1. When a particular 
 branch of industry is necessary to the public security, and the ex- 
 ternal supply cannot be safely reckoned upon. On this account a 
 government may very wisely prohibit the import of gun-powder, if 
 such prohibition be necessary to set the powder-mills at home in 
 activity; for it is better to pay somewhat dear for so essential an 
 article, than to run the risk of being unprovided in the hour of need.* 
 2. Where a similar commodity of home produce is already saddled 
 with a duty. The foreign article, if wholly exempt from duty, 
 would in this case have an actual privilege ; so that a duty imposed 
 has not the effect of destroying, but of restoring the natural equi- 
 librium and relative position of the different branches of production. 
 
 Indeed, it is impossible to find any reasonable ground for exempt- 
 ing the production of values by the channel of external commerce 
 from the same pressure of taxation that weighs upon the production 
 effected in those of agriculture arid manufacture. Taxation is, doubt 
 
 * There is no great weight in this plea of justification. For experience has 
 shown, that saltpetre is stored against the moment of need, in the largest quan- 
 tity, when it is most an article of habitual import. Yet the legislature of Francs 
 has saddled it with duties amounting to prohibition. 
 
1G8 ON PRODUCTION. BOOK I. 
 
 less, an evil, and one which should be reduced to the lowest possible 
 decree; but when once a given amount of taxation is admitted to be 
 necessary, it is but common justice to lay it equally on all three 
 branches of industry. The error I wish to expose to reprobation is 
 the notion that taxes of this kind are favourable to production. A 
 tax can never be favourable to the public welfare, except by the 
 good use that is made of its proceeds. 
 
 These points should never be lost sight of in the framing of com- 
 mercial treaties, which are really good for nothing but to protect 
 industry and capital, diverted into improper channels by the blunders 
 of legislation. These it would be far wiser to remedy than to per- 
 petuate. The healthy state of industry and wealth is the state of 
 absolute liberty, in which each interest is left to take care of itself. 
 The only useful protection authority can afford them is that against 
 fraud or violence. Taxes and restrictive measures never can be a 
 benefit : they are at the best a necessary evil ; to suppose them useful 
 to the subjects at large, is to mistake the foundation of national pros- 
 perity, and to set at naught the principles of political economy. 
 
 Import duties and prohibitions have often been resorted to as a 
 means of retaliation : ' Your government throws impediments in the 
 way of the introduction of our national products: are not we, then, 
 justified in equally impeding the introduction of yours ?" This is 
 the favourite plea, and the basis of most commercial treaties ; but 
 people mistake their object : granting that nations have a right to do 
 one another as much mischief as possible, which, by the way, 1 can 
 hardly admit; I am not here disputing their rights, but discussing 
 their interests. 
 
 Undoubtedly, a nation that excludes you from all commercial 
 intercourse with her, does you an injury; robs you, as far as in her 
 lies, of the benefits of external commerce ; if, therefore, by the dread 
 of retaliation, you can induce her to abandon her exclusive measures, 
 there is no question about the expediency of such retaliation, as a 
 matter of mere policy. But it must not be forgotten that retaliation 
 hurts yourself as well as your rival ; that it operates, not defensively 
 against her selfish measures, but offensively against yourself, in the 
 first instance, for the purpose of indirectly attacking her. The only 
 point in question is this, what degree of vengeance you are animated 
 by, and how much will you consent to throw away upon its gratifi- 
 cation.* I will not undertake to enumerate all the evils arising from 
 treaties of commerce, or to apply the principles enforced throughout 
 
 * The transatlantic colonies, that have within these few years thrown off their 
 colonial dependence, amongst others, the provinces of La Plata, and St. Domingo 
 or Haiti, have opened their ports to foreigners, without any demand of reciprocity, 
 md are more rich and prosperous than they ever were under the operation of the 
 exclusive system. We are told that the trade and prosperity of Cuba have 
 doubled since its ports have been opened to the flags of all nations, by a concur- 
 rence of imperious circumstances, and in violation of the system of the mother- 
 country. The elder states of Europe go on Irke wrong-headed farmers, in a 
 bigoted attachment to their old prejudices and methods, while they have exam 
 pls of the good effects of an improved system all around them. 
 
CHAA XVII. ON PRODUCTION. 1GQ 
 
 this work to all the clauses and provisions usually contained in them. 
 1 will confine myself to the remark, that almost every modern treaty 
 of commerce has had for its basis the imaginary advantage and 
 possibility of the liquidation of a favourable balance of trade by an 
 import of specie. If these turn out to be chimerical, whatever 
 advantage may have resulted from such treaties must be wholly 
 referred to the additional freedom and facility of international com- 
 munication obtained by them, and not at all to their restrictive 
 clauses or provisoes, unless either of the contracting parties has 
 availed itself of its superior power, to exact conditions savouring of 
 a tributary character ; as England has done in relation to Portugal. 
 In such case, it is mere exaction and spoliation.(l) 
 
 (1) Mr. Villiers and Dr. Bowring, in their very valuable report on the com 
 mercial relations between France and Great Britain, presented to both Houses 
 of Parliament, during the present year, (1834,) in remarking upon the disappoint- 
 ments which had been experienced from treaties of commerce between France 
 and Great Britain, point out the true causes of the failure of these arrangements, 
 however usefully they were intended ; and as it is of importance in other coun- 
 tries to guard against a recurrence to similar experiments which might present 
 a formidable barrier against any permanent or solid change to a more liberal in- 
 ternational intercourse, we cannot do better, in this place, than to copy their ex- 
 cellent observations on this head. 
 
 " These arrangements, however usefully intended, were productive of so much 
 inconvenience and suffering from the sudden shifting of capital, as to induce an 
 unwillingness to await patiently for their ultimate but somewhat remote advan- 
 tages. Every treaty of commercial change must, it is certain, affect some interest 
 or other, and by these treaties, particularly the treaty of 1786, so many interests 
 were suddenly and severely affected, that they were enabled, by combining 
 together, to overthrow all the expectations of future good which would have in- 
 evitably followed the removal of restrictions and prohibitions." 
 
 "It may also be observed, that treaties of commerce are generally agreements 
 for mutual preferences ; and in so far, are encroachments upon sound commercial 
 principles. They are intended to benefit the contracting parties by common 
 intercourse, to the exclusion (and consequently to the detriment) of other nations. 
 They ordinarily propose exclusive advantages, which, if they open some chan- 
 nels of commercial profit, necessarily close others, and prevent the negotiating 
 nations from availing themselves of the improvements or accommodating them- 
 selves to the changes which the fluctuations of agriculture, manufactures, or 
 trade demand. The Methuen treaty, for example, bound Great Britain to take 
 the produce of a particular country at diminished duties, whatever superior ad- 
 vantages any other country might chance to offer; while Portugal was, at the 
 same time, compelled to receive the manufactures of England, whether or not she 
 might have supplied herself more profitably elsewhere. A treaty, therefore, with 
 France, proffering reciprocal advantages, that is to say, giving to France peculiar 
 privileges in the English market, or obtaining peculiar privileges for England in 
 the markets of France, did not appear to offer any prospect of permanent utility; 
 but, if it were possible that each country should, for itself, and, with a special 
 view to its own interests, remove those impediments to intercourse which had 
 grown out of hostile feelings or erroneous calculations, and by comparing thefacta 
 which each government was enabled to furnish for the elucidation of the inquiry, 
 each should find that it could safely and judiciously prepare for more extended 
 transactions; if, in a word, it could be shown that each possessed sources of wealth 
 which might be made productive to the other, while they lost nothing of their 
 productiveness to the nation that possessed them, we believed that, in selecting 
 such topics for our examination, and such objects for their result, we were bes* 
 discharging the duty which had devolved on us." AMERICAN EDITOR. 
 
 IK W 
 
170 ON PRODUCTION. BOOK I 
 
 Again, I would observe, that the offer of peculiar achantages by 
 one nation to another, in the way of a treaty of commerce, if not an 
 act of hostility, is at least one of extreme odium in the eyes of other 
 nations. For the concession to one can only be rendered effectual 
 by refusal to others. Hence the germ of discord and of war, with 
 all its mischiefs. It is infinitely more simple, and I hope to have 
 shown, more profitable also, to treat all nations as friends, and 
 impose no higher duties on the introduction of their products, than 
 what are necessary to place them on the same footing as those of 
 domestic growth. 
 
 Yet, notwithstanding all the mischiefs resulting from the exclusion 
 of foreign products, which I have been depicting, it would be an act 
 of unquestionable rashness suddenly to change even so ruinous a 
 policy. Disease is not to be eradicated in a moment ; it requires 
 nursing and management to dispense even national benefits. Mono- 
 polies are an abuse, but an abuse in which enormous capital is vested, 
 and numberless industrious agents employed, which deserve to be 
 treated with consideration ; for this mass of capital and industry 
 cannot all at once find a more advantageous channel of national 
 production. Perhaps the cure of all the partial distresses that must 
 follow the downfall of that colossal monster in politics, the exclusive 
 system, would be as much as the talent of any single statesman could 
 accomplish ; yet when one considers calmly the wrongs it entails 
 when it is established, and the distresses consequent upon its over- 
 throw, we are insensibly led to the reflection, that, if it be so difficult 
 to set shackled industry at liberty again, with what caution ought 
 we not to receive any proposition for enslaving her! 
 
 But governments have not been content with checking the import 
 of foreign products. In the firm conviction, that national prosperity 
 consists in selling without buying, and blind to the utter impossibility 
 of the thing, they have gone beyond the mere imposition of a tax 
 or fine upon purchasing of foreigners, and have in many instances 
 offered rewards in the shape of bounties for selling to them. 
 
 This expedient has been employed to an extraordinary degree by 
 the British government, which until recently always evinced the 
 greatest anxiety to enlarge the market for British commercial and 
 manufactured produce.* It is obvious, that a merchant, who re- 
 
 * Tho political circumstances of England, during the late war, and her prac- 
 tice of supporting and subsidizing military operations on the continent, furnished 
 her with a more plausible excuse for attempting to export, in the shape of manu- 
 factured produce, those values, which she thus expended without return. But 
 she had no need to be at any expense for that purpose. Had England charged 
 aseignorage upon the coinage of gold and silver, as she ought to have done, she 
 needed not to have given herself any trouble about the form of the values she 
 exported to meet her foreign subsidies and expenditure : guineas would them- 
 selves have been an object of manufacture. (a) 
 
 () So they were without the imposition of a seignorage, which, however, 
 should have been charged. But England had no occasion to give bounties with 
 I vifv to facilitate her foreign expenditure. The discount of her bills was a 
 
CHAP. XVII. ON PRODUCTION. 171 
 
 ceives a bounty upon export, can, without personal loss, afford to se.l 
 his goods in a foreign market at a lower rate than prime cost. In 
 the pithy language of Smith, " We cannot force foreigners to buy 
 the goods of our own workmen, as we may our own countrymen ; 
 the next best expedient, it has been thought, therefore, is to pay them 
 for buying." 
 
 In fact, if a particular commodity, by the time it has reached the 
 French market, costs the English exporter 20 dollars, his trouble, 
 &c. included, and the same commodity could be bought in France 
 at the same or a less rate, there is nothing to give him exclusive 
 possession of the market. But if the British government pays a 
 bounty of 2 dollars upon the export, and thereby enables him to 
 lower his demand from 20 to 18 dollars, he may safely reckon upon 
 a preference. Yet what is this but a free gift of two dollars from 
 the British government to the French consumer? It may be con- 
 ceived, that the merchant has no objection to this mode of dealing ; 
 for his profits are the same as if the French consumer paid the full 
 value, or cost price, of the commodity. The British nation is the 
 loser in this transaction, in the ratio of 10 per cent, upon the French 
 consumption; and France remits in return a value of but 18 for 
 what has cost 20 dollars. 
 
 When a bounty is paid, not at the moment of export, but at the 
 commencement of productive creation, the home consumer partici- 
 pates with the foreigner in the advantage of the bounty ; for, in that 
 case, the article can be sold below cost price in the home as well as 
 in the foreign market. And if, as is sometimes the case, the producer 
 pockets the bounty, and yet keeps up the price of the commodity, 
 the bounty is then a present of the government to the producer, over 
 and above the ordinary profits of his industry. 
 
 When, by the means of a bounty, a product is raised either for 
 home or foreign consumption, which would not have been raised 
 without one, the effect is, an injurious production, one that costs 
 more than it is worth. Suppose an article, when completely finished 
 off, to be saleable for 5 dollars and no more, but its prime cost, in- 
 cluding of course the profits of productive industry, to amount to 6 
 dollars, it is quite clear that nobody will volunteer the production, 
 for fear of a loss of 1 dollar. But, if the government, with a view 
 to encourage this branch of industry, be willing to defray this loss 
 in other words, if it offer a bounty of 1 dollar to the producer, the 
 production can then go on, and the public revenue, that is to say, the 
 nation at large, will be a loser of 1 dollar. And this is precisely 
 the kind of advantage that a nation gains by encouraging a branch 
 
 sufficient premium to the manufacturer ; and, where that expenditure was laige, 
 greatly exceeded either drawbacks or bounties. Had specie been directly pro- 
 curable, perhaps it might have saved something 1 to the government, in the re- 
 duced profit payable to the merchants upon a mere complex operation. But the 
 merchants must have made their profit upon bullion. The sole difference occa- 
 sioned by the absurdity of gratuitous coinage was, the expense incurred in that 
 coinage ; but the imposition of a seignorage would neither have promoted the 
 import of bullion, nor facilitated its transport to the scene of expenditure. T. 
 
172 ON PRODUCTION. BOOK 1 
 
 of production which cannot support itself: it is in fact urging the 
 prosecution of a losing concern, the produce of which is exchanged, 
 not for other produce, but for the bounty given by the state. 
 
 Wherever there is any thing to be made by a particular employ- 
 ment of industry, it wants no encouragement; where there is nothing 
 to be made, it deserves none. There is no truth in the argument, 
 that perhaps the state may gain, though individuals cannot; for how 
 j can the state gain, except through the medium of individuals? Per- 
 haps it may be said, that the state receives more in duties than it 
 pays in bounties; but suppose it does, it merely receives with one 
 hand and pays with the other: let the duties be lowered to the whole 
 amount of the bounty, and production will stand precisely where it 
 did before, with this difference in its favour, viz. that the state will 
 save the whole charge of management of the bounties, and part of 
 fhat of the duties. 
 
 Though bounties a/e chargeable, and a dead loss to the gross 
 national wealth, there are cases in which it is politic to incur that 
 loss;(l) as when a particular product is necessary to public security, 
 and must be had at any rate, however extravagant. Louis XIV., 
 with a view to restore the marine of France, granted a bounty of 1 
 dollar per ton upon every ship fitted out in France. His object was 
 to train up sailors. So likewise when the bounty is the mere refund- 
 ing of a duty previously exacted. The bounty paid by Great Britain 
 upon the export of refined sugar is nothing more than the reimburse- 
 ment of the import duties upon muscovado and molasses. 
 
 Perhaps, too, it may be wise in a government to grant a premium 
 on a particular product, which, though it make a loss in the outset, 
 holds out a fair prospect of profit in a few years' time. Smith 
 thinks otherwise : hear what he says on the subject. " No regula- 
 tion of commerce can increase the quantity of industry in any 
 society, beyond what its capital can maintain. -It can only divert a 
 part of it into a direction, into which it might not otherwise have 
 
 tone; and it is by no means certain, that this artificial direction is 
 kely to be more advantageous to the society, than that into which 
 it would have gone of its own accord. The statesman, who should 
 attempt to direct private people in what manner they ought to em- 
 ploy their capitals, would not only load himself with a most unne- 
 cessary attention, but assume an authority, which could safely be 
 
 (1) We already have had occasion to remark (note 1, page 104) that there can 
 be few or no cases in which it would ever be politic to incur a loss by the pay- 
 ment of bounties, even with the expectation of insuring 1 the production of objects 
 necessary to the public safety. For the end aimed at never can be attained by 
 such means. The naval preponderance of England, as we before observed, was 
 not owing to any act of parliament, but can satisfactorily be traced to those 
 causes we have mentioned in the note referred to. Holland, besides, rose to the 
 highest point of European maritime power, without any navigation laws, or 
 bounties to her shipping; and France, it must be remembered, notwithstanding 
 the famous Ordomiance in 1664, of Louis XIV., " to engage builders and mer- 
 chants to construct French vessels," never obtained the so much desired superi- 
 ority in ships and in seamen. AMERICAN EDITOR. 
 
CHAP. XVH. ON PRODUCTION. 173 
 
 trusted, not only to no single person, but to no council or senate 
 whatever ; and which would nowhere be so dangerous, as in the 
 hands of a man who had folly and presumption enough to fancy 
 himself fit to exercise it. Though for want of such regulations, the 
 society should never acquire the proposed manufacture, it would not 
 upon that account necessarily be the poorer in any one period of its 
 duration. In every period of its duration, its whole capital and in- 
 dustry might still have been employed, though upon different ob- 
 jects, in the manner that was most advantageous at the time."* 
 
 ALU Smith is certainly right in the main ; though perhaps there 
 are circumstances that may form exceptions to the general rule, that 
 every one is the best judge how to employ his industry and capital. 
 Smith wrote at a period and in a country, where personal interest is 
 well understood, and where any profitable mode of investing capital 
 and industry is not likely to be long overlooked. But every nation 
 is not so far advanced in intelligence. How many countries are 
 there, where many of the best employments of capital are altogether 
 excluded by prejudices that the government alone can remove ! 
 How many cities and provinces, where certain established invest- 
 ments of capital have prevailed from time immemorial ! In one 
 place, every body invests in landed property, in another, in houses, 
 and in others still, in public offices or national funds. Every unusual 
 application of the power of capital is, in such places, contemplated 
 with distrust or disdain ; so that partiality shown to a profitable mode 
 of employing industry or capital may possibly be productive of 
 national advantage. 
 
 Moreover, a new channel of industry may ruin an unsupported 
 speculator, though capable of yielding enormous profit, when the 
 labourers shall have acquired practice, and the novelty has once been 
 overcome. France at present contains the most beautiful manufac- 
 tures of silk and of woollen in the world, and is probably indebted 
 for them to the wise encouragement of Colbert's administration. 
 He advanced to the manufacturers 2000 /r. for every loom at work; 
 and, by the way, this species of encouragement has a very peculiar 
 advantage. In ordinary cases, whatever the government levies upon 
 the product of individual exertion is wholly lost to future produc- 
 tion ; but, in this instance, a part was employed in reproduction ; a 
 portion of individual revenues was thrown into the aggregate pro- 
 ductive capital of the nation. This was a degree of wisdom one 
 could hardly have expected, even from personal self-interest.f (1) 
 
 * Wealth of Nations, book iv. c. 2. 
 
 f I am far from equally approving all the encouragements of this kind held 
 out by this minister; particularly the sums lavished on several establishments of 
 pure ostentation, which, like that of the Gobelin tapestry, have constantly cost 
 more than they have produced. 
 
 (1) Our author, here, has permitted, although with some slight qualification^ 
 an observation to escape from hia pen, in direct contradiction with his own gene- 
 ral principles, and which, therefore, it is necessary to point out and refute 
 ** France," he remarks, in speaking of her manufactures of silk and woollen, " m 
 
J74 ON PRODUCTION. BOOK I, 
 
 It w.ould be out of place here to inquire, how wide a field boun- 
 ties open to peculation, partiality, and the whole tribe of abuses in- 
 cident to the management of public affairs. The most enlightened 
 
 probably indebted for them to the wise encouragement of Colbert's administra- 
 tion." What is this but admitting that beneficial consequences to manufactures 
 necessarily flow from a protecting system 1 Now, this we deny, and, in support 
 of this denial, fortunately can at present invoke the highest authority. In the 
 report on the commercial relations between France and Great Britain, which we 
 cannot too often refer to in support of sound principles, Mr. Villiers and Dr. 
 Bowring, both on this point, and regarding the merits and character of Colbert's 
 administration, supply us with the following admirable strictures, which we 
 have great satisfaction in presenting to our readers. They will be found to con- 
 tain a complete answer to the gratuitous assumption of M. Say, of the wisdom 
 herein displayed by Colbert " by this species of encouragement" to manu- 
 factures. 
 
 " France thus became the country which adopted and still exhibits the conse- 
 quences of a protecting system on a large scale. Its introduction may be traced, 
 or rather its extension as far as possible, to Colbert, a minister to whose name 
 and administration a great portion of applause has been given, but whose system 
 of encouragement was based on a complete ignorance of the true principles of 
 commercial legislation. How small an amount of manufacturing prosperity 
 Colbert produced, and how great an amount of agricultural, commercial, and 
 manufacturing wealth he either destroyed or checked in its natural progress, will 
 be obvious to any observer who looks at the immense natural resources and the 
 active intelligence of France. It may be safely asserted, that the whole of the 
 bounties by which he induced adventurers to enter into remote speculations, as 
 well as the excessive duties which he imposed on cheaper foreign articles, were 
 almost uncompensated sacrifices; while, on the other hand, of the manufactures 
 which he transplanted into France, and which he protected by the exclusion of 
 rival productions, scarcely one took permanent root ; and of those which still 
 exist, and which he intended to support, there is perhaps none which would not 
 have been more prosperous and extensive, but for those regulations with which 
 his zeal encumbered the early march of manufacturing industry. The popularity 
 in France of Colbert's commercial legislation, and the erroneous deductions 
 drawn from the consequences of his interference, have produced a most prejudi- 
 cial effect on the minds of a large portion of the French public. Colbert's sys- 
 tem was a vain attempt to force capital in new directions. Thus, in order to 
 compel the establishment of a trade with the West Indies, he made the French 
 people pay a premium of thirty francs upon every ton of goods exported, and of 
 fifty francs for every ton of goods imported, independently of other encourage- 
 ments. In the same spirit, he incited manufacturing settlers, by large rewards, to 
 establish themselves in different parts of France, and boasted of his having set 
 up more than 40,000 looms, whose produce was protected by legal enactments ; 
 and no one was found to estimate the counterbalance of loss, while the most flat- 
 tering pictures were drawn of enormous gain. He began in miscalculation ; he 
 brought the most despotic interference to support his errors ; and, if their conse- 
 quences be faithfully traced, they will be found little creditable to his own saga- 
 city, while greatly ruinous to the nation for whose benefit they were intended. 
 The French Revolution broke down many of the absurd and pernicious regula- 
 tions which Colbert had introduced, but the vestiges of others remain; and 
 although they have become habitual, they interfere with improvement, and give 
 superiority to countries where the action of industry and capital is unfettered." 
 
 " Having stated thus much, it would be unjust to withhold from Colbert the 
 credit to which he is entitled for the admirable order he established in the 
 finances, the efforts which he made to improve, in many particulars, the system 
 f taxation, and his opposition to the inconsiderate plan of funding adopted 
 by Louvois. The commercial and maritime legislation of France owes to him 
 
CHAP. XVII. ON PRODUCTION. 175 
 
 statesman is often obliged to abandon a scheme of evident public 
 utility, by the unavoidable defects and abuses in the execution. 
 Amo*ng these, one of the most frequent and prominent is, the risk of 
 paying a premium, or granting a favour to the pretensions, not of 
 merit, but of importunity. In other respects, I have no fault to find 
 with the honours, or even pecuniary rewards publicly .given to 
 artists or mechanics, in recompense ofsome extraordinary achieve- 
 ment of genius or address. Rewards of this kind excite emulation, 
 and enlarge the stock of general knowledge, without diverting in- 
 dustry or capital from their most beneficial channels. Besides, they 
 cost nothing in comparison of bounties of another description. The 
 bounty on the export of wheat has, by Smith's account, cost England 
 in some years as much as a million and a half of dollars. I do not 
 believe that the British or any other government ever spent the 
 fiftieth part of that sum upon agriculture in any one year. 
 
 SECTION II. 
 
 Of the Effect of Regulations fixing the Manner of Production. 
 
 The interference of the public authority, with regard to the details 
 of agricultural production, has generally been of a beneficial kind. 
 The impossibility of intermeddling in the minute and various details 
 of agriculture, the vast number of agents it occupies, often widely 
 separated in locality and pursuits, from the largest farming concerns 
 to the little garden of the cottager, the small value of the produce in 
 comparison\vith its volume, are so many obstacles that nature has 
 placed in the way of authoritative restraint and interference. All 
 governments, that have pretended to the least regard for the public 
 
 the compilation of the ordonnance of 1681, a body of maritime law unrivalled to 
 this moment." 
 
 As there is, also, another error, in the same paragraph, we must be allowed 
 briefly to notice it. By advancing to the manufacturers 2000 francs for every 
 loom at work, our author thinks Colbert displayed a degree of wisdom hardly to 
 be expected, inasmuch, as in this instance, " a part of the advance would be 
 employed in reproduction," whereas, according to him, " in ordinary cases, whatr 
 ever the government levies upon the products of individual exertion is wholly 
 lost to future production." Now, nothing can be more clear, than that the tax 
 levied, for the payment of this advance, is a pure loss to the tax-paying people, 
 and with this peculiar aggravation, that a large class of the tax-payers are not 
 even the consumers of the " encouraged" product. Nor is it exactly true, that in 
 " ordinary cases whatever the government levies is wholly lost to future produc- 
 tion," for whether the tax be advanced for every loom at work, or for the work of 
 the looms themselves, is precisely the same thing ; and, as to the destination of 
 the tax, a portion of it is quite as likely to be employed in reproduction in the 
 latter as in the former case. Finally, where the tax is simply an " encourage- 
 ment" to the products, the amount of it will be limited by the effective demand 
 for them, whereas, when the advance is made for every loom at work, there is no 
 such limit to a useless tax. 
 
 AMERICAN EDITOR 
 
176 ON PRODUCTION. BOOK I. 
 
 welfare, have consequently confined themselves to the granting of 
 premiums and encouragements, and to the diffusion of knowledge 
 which has often contributed largely to the progress of this art. The 
 veterinary college of Alfort, the experimental form of Ramboullet, 
 the introduction of the Merino breed, are real benefits to the agri- 
 culture of France, the enlargement and perfection of which she 
 owes to the providence of the different rulers that her political 
 troubles have successively brought into power. 
 
 A national administration that guards with vigilance the facility 
 of communication and the quiet prosecution of the labours of hus- 
 bandry, or punishes' acts of culpable negligence, as the destroying 
 of caterpillars* and other noxious insects, does a service analogous 
 to the preservation of civil order and of property, without which 
 production must cease altogether. 
 
 The regulations relative to the felling of trees in France, however 
 indispensable for the preservation of their growth, at least in many 
 of their provisions, appear in others rather to operate as a discourage- 
 ment of that branch of cultivation, which, though particularly adapted 
 to certain soils and sites, and conducive to the attraction of atmo- 
 spheric moisture, yet seems to be daily on the decline. 
 
 But there is no branch of industry that has suffered so much from 
 ( the officious interference of authority in its details, as that of manu- 
 , facture. 
 
 Much of that interference has been directed towards limiting the 
 number of producers, either by confining them to one trade exclu- 
 sively, or by exacting specific* terms, on which they shall carry on 
 their business. This system gave rise to the establishment of char- 
 tered companies and incorporated trades. The effect is always the 
 same, whatever be the means employed. An exclusive privilege, a 
 species of monopoly, is created, which the consumer pays for, and of 
 which the privileged persons derive all the benefit. The monopo- 
 lists can prosecute their plans of self-interest with so much the more 
 ease and concert, because they have legal meetings and a regular 
 organization. At such meetings, the prosperity of the corporation 
 is mistaken for that of commerce and of the nation at large ; and the 
 last thing considered is, whether the proposed advantages be the 
 result of actual new production, or merely a transfer from one pocket 
 to another, from the consumers to the privileged producers. This 
 is the true reason why those engaged in any particular branch of 
 trade are so anxious to have themselves made the subject of regula- 
 
 * Under the old regime, of the canton of Berne, every proprietor of land was 
 required to furnish, in the proper season of the year, so many bushels of cock- 
 chafers, in proportion to the extent of his property. The rich landholders were 
 in the habit of buying their contingents from the poorest sort of people, who 
 made it their business to collect them, and did it so effectually, that the district 
 was ultimately cleared of them. But the extreme difficulty, that even the most 
 provident government meets with in doing good by its interference in the busi- 
 ness of production, may be judged of by a fact of which I am credibly assured, 
 viz. that this act of paternal care gave rise to the singular fraud of transporting 
 these insects in Backs from the Savoy side of the Leman lake into the Pays de 
 Vaud. 
 
CHAP. XVH. ON PRODUCTION. 177 
 
 tion ; and the public authorities are commonly, on their part, very 
 ready to indulge them in what offers so fair an opportunity of raising 
 a revenue. 
 
 Moreover, a rMtraryi. regulations are extremely flattering to the 
 vanity of men in power, as giving them an air of wisdom and fore- 
 sight, and confirming their authority, which seems to derive addi- 
 tional importance from the frequency of its exercise. There is, per- 
 haps, at this time, no country in Europe where a man is free to dis- 
 pose of his industry and capital in what manner he pleases ; in most 
 places he cannot even change his occupation or place of residence 
 at pleasure. It is not enough for a man to have the necessary quali- 
 fications of ability and inclination to become a manufacturer or 
 dealer in the woollen or silk line, in spirits or calicoes; he must 
 besides have served his time, or been admitted to the freedom of the 
 craft.* Freedoms and apprenticeships are likewise expedients of 
 police, not of that wholesome branch of police, whose object is the 
 maintenance of public and private security, and which is neither 
 costly nor vexatious ; but of that sort of police which bad govern- 
 ments employ to preserve or extend their personal authority at any 
 expense. By the dispensation of honorary or pecuniary advantages, 
 authority can generally influence the chiefs and superiors it has 
 appointed to the corporations, who think to earn those honours and 
 emoluments by their subservience to the power that confers them. 
 These are the ready tools for the management of the body at large, 
 and volunteer to denounce the individuals, whose firmness may be 
 formidable, and report those whose servility may be reckoned upon, 
 and all under the pretext of public good. Official harangues and 
 public addresses are never wanting in plausible reasons for the con- 
 tinuance of old restrictions on liberty of action, or for the establish- 
 ment of new ones ; for there is no cause so bad as to be without some 
 argument or other in its favour. 
 
 The chief advantage, and the one most relied upon, is, the insu- 
 rance ot a more perfect execution of the products raised for con- 
 sumption, and of a superiority in them highly favourable to the na- 
 tional commerce, and calculated to secure the continued demand of 
 foreigners. But does this advantage result from the system in ques- 
 tion ? What security is there that the corporate body itself will al- 
 ways be composed of men not merely of integrity, but of scrupulous 
 delicacy, such as would never be disposed to take in either their own 
 countrymen or foreigners ? We are told that this system facilitates 
 the enforcement of regulations for the warranty and verification of the 
 quality of products; but are not such regulations illusory in practice, 
 
 * When industry made its first start in the middle ages, and the mercantile 
 classes were exposed to the rapacity of a grasping and ignorant nobility, incorpo- 
 rated trades and crafts were useful in extending to individual industry the pro 
 tection of the association at large. Their utility has ceased altogether of lat 
 years: for governments have, in our days, been either too enlightened to 
 encroach upon the sources of financial prosperity, or too powerful to stand m 
 awe of such associations. 
 
 X 
 
178 ON PRODUCTION. BOOK I. 
 
 even under the corporate system 1 and, supposing them absolutely 
 necessary, is there no more simple way of enforcing them ? 
 
 Neither will the length of apprenticeship be a better guarantee of 
 the perfection of the work ; the only thing to be depended upon for 
 that perfection is the skill of the workman, and that is best attained 
 bv paying him in proportion to his superiority. " To teach any 
 young man," says Smith, " in the completest manner how to apply 
 the instruments, and how to construct the machines of the common 
 mechanic trades, cannot well require the lessons of more than a few 
 weeks, perhaps those of a few days might be sufficient. The dex- 
 terity of hand, indeed, even in common trades, cannot be acquired 
 without much practice and experience, but a young man would prac- 
 tise with much more diligence and attention, if from the beginning 
 he wrought as a journeyman, being paid in proportion to the little 
 work which he could execute, and paying in his turn for the mate- 
 rials which he might sometimes spoil through awkwardness and in- 
 experience."* 
 
 Were apprentices bound out a year later, and the interval spent 
 in schools conducted on the plan of mutual instruction, I can hardly 
 think the products would be worse executed; and, beyond all doubt, 
 the labouring class would be advanced a stage in civilization. 
 
 Were apprenticeships a sure means of obtaining a greater perfec- 
 tion of products, those of Spain would be as good as those of Britain. 
 It was not before incorporated trades and compulsory apprentice- 
 ships had been abolished in France, that she attained that superiori- 
 ty of execution she has now to boast of. 
 
 Perhaps there is no one mechanic art nearly so difficult as that 
 of the gardener or field labourer; yet this is almost the only one that 
 has nowhere been subjected to apprenticeship. Are vegetables and 
 fruits produced in less abundance or perfection ? Were cultivators 
 a corporate body, I suppose it would soon be asserted, that high- 
 flavoured peaches and white-heart lettuces could not be raised with- 
 out a code of some hundred well penned-articles. 
 
 After all, regulations of this nature, even admitting their utility, 
 must be nugatory as soon as evasion is allowed ; now it is notorious 
 that there is no manufacturing towns where money will not pur- 
 chase exemption. So that they are more than merely useless as ? 
 warranty of quality; inasmuch as they are the engine of the most 
 odious injustice and extortion. 
 
 In support of these opinions, the advocates for the corporate sys 
 tem appeal to the example of Great Britain, where industry is wel: 
 known to be greatly shackled, and yet manufactures prosper. But 
 in this they expose their ignorance of the real causes of that pros- 
 perity. " These causes," Smith tells us, " seem to be the genera! 
 ! : berty of trade, which, notwithstanding some restraints, is at least 
 equal, perhaps superior, to what it is in any other country ; the 
 liberty of exporting, duty free, almost 'all sorts of goods, which are 
 the produce of domestic industry, to almost any foreign country; 
 
 * Wealth of Nations, book i. c. 10. 
 
CHAP. XVIL ON PRODUCTION. 179 
 
 and, what perhaps is of still greater importance, the unbounded 
 liberty of transporting them from any one part of our own country 
 to any other, without being obliged to give any account to any pub- 
 lic office, without being liable to question or examination of any 
 kind," &c.* Add to these, the complete inviolability of all property 
 whatever, either by public or private attack, the enormous capital 
 accumulated by her industry and frugality, and lastly, the habitual 
 exercise of attention and judgment, to which her population is trained 
 from the earliest years; and there is no need of looking farther for 
 the causes of the manufacturing prosperity of Britain. 
 
 Those who cite her example in justification of their desire to 
 enthral the exertions of industry, are not perhaps aware that the 
 most thriving towns in that kingdom, those on which her character 
 for manufacturing pre-eminence is mainly built, are the very places 
 where there are no incorporations of crafts and trades; Manchester, 
 Birmingham, and Liverpool,! were mere villages a century or two 
 ago, but now rank in point of wealth and population next to London, 
 and much before York, Canterbury, and even Bristol, cities of the 
 greatest antiquity and privileges, and the capitals of her most thriv- 
 ing provinces, but still subjected to the shackles of these Gothic 
 institutions. " The town and parish of Halifax," says Sir John 
 Nickols,J a writer of acknowledged local information, " has, within 
 these forty years, seen the number of its inhabitants quadrupled: 
 whilst many other towns, subjected to corporations, have expe- 
 rienced a sensible diminution of theirs. Houses situated within the 
 precincts of the city of London hardly find tenants, and numbers of 
 them remain empty ; whilst Westminster, Southwark, and the other 
 suburbs are continually increasing. These suburbs are free, whilst 
 London supports within itself four-score and twelve exclusive com- 
 panies of all kinds, of which we may see the members annually 
 adorn, with a silly pageantry, the tumultuous triumphal procession 
 of the Lord Mayor." 
 
 The prodigious manufacturing activity of some of the suburbs of 
 Paris is notorious ; of the Faubourg St. Antoine, in particular, where 
 industry enjoyed many exemptions. Some products were made no- 
 where else. How happened it, that without apprenticeships, or the 
 necessity of being free of the craft, the manufacturer acquired a 
 greater degree of skill, than in the rest of the city, which was subject 
 to those institutions that are held up as so indispensable? For a 
 very simple reason : because self-interest is the best of all instructors. 
 
 An example or two will serve better than all reasoning in the 
 world, to show the impediments thrown in the way of the develop- 
 
 * Wealth of Nations, book iv. c. 7. f Baert. vol. 1. p. 107. 
 \ Remarks on the Advantages and Disadvantages of France and of Great 
 Britain, 12mo. 1754, $ 4, p. 142. (a) 
 
 (a) This work was originally published in French in 1752, with great success, 
 under the fictitious name of Sir John Nickols, and is supposed to have been the 
 production of a foreigner employed about the court of Versailles. It contains 
 many judicious remarks upon the internal policy of Britain. T. 
 
180 ON PRODUCTION. BOOK I. 
 
 ment of industry by incorporations of trades and crafts. Argand, 
 the inventor of the lamps that go by his name, and yield, at the same 
 expense, triple the amount of light, was dragged before the Park- 
 ment de Paris, by the company of tinmen, locksmiths, ironmongers, 
 and journeymen farriers, who claimed the exclusive right of making 
 lamps.* Lenoir, the celebrated Parisian philosophical and mathe- 
 matical instrument maker, had set up a small furnace for the con- 
 venience of working the metals used in his business. The syndics 
 of the founders' company came in person to demolish it ; and ht? 
 was obliged to apply to the king for protection. Thus was talent 
 dependent upon court favour. The manufacture of japanned hard 
 ware was altogether excluded from France until the era of the revo- 
 lution, by the circumstance of its requiring the skill and implement? 
 of many different trades, and the necessity of being admitted to the 
 freedom of them all, before an individual could carry it on. It would 
 be easy to fill a volume with the recapitulation of the disheartening 
 vexations that personal industry had to encounter in the city of Paris 
 alone, under the corporate system ; and another with that of the suc- 
 cessful efforts made, since that system was abolished by the revolution. 
 For the same reason that the free suburb of a chartered town, or 
 a free town in the midst of a country embarrassed by the officious- 
 ness of a meddling government, w T ill exhibit an unusual degree of 
 prosperity, a nation' that enjoys the freedom of industry, in the midst 
 of others following the corporate system, would probably reap simi- 
 tar advantages. Those have thriven the most, that have been the 
 least shackled by the observance of formalities, provided, of course, 
 that individuals be secured from the exactions of power, the chica- 
 nery of law, and the attempts of dishonesty or violence. Sully, 
 whose whole life was spent in the study and practice of measures 
 for improving the prosperity of France, entertained this opinion.f 
 In his memoirs, he notices the multiplicity of useless laws and ordi- 
 nances, as a direct barrier to the national progress.J 
 
 * " Why not get himself made free of the company?" say those who are ever 
 ready to palliate or justify official abuse. The corporation, which had the con- 
 trol over admissions, was itself interested in thwarting a dangerous competitor. 
 Besides, why compel the ingenious inventor to waste in a personal canvass, that 
 time which would be so much more profitably occupied in his calling ! 
 
 f tfv. xix. 
 
 | Colbert's early education in the counting-house of the Messrs. Mascrani, of 
 Lyons, a very considerable mercantile establishment, very early imbued him 
 with the principles of the manufacturers. Commerce and manufacture thrived 
 prodigiously under his powerful and judicious patronage ; but, though he liberated 
 them from abundance of oppression, he was himself hardly sparing enough of 
 ordinances and regulations ; he encouraged manufactures at the expense of agri- 
 culture, and saddled the people at large with the extraordinary profits of monopo- 
 lists. We cannot shut our eyes to the fact, that to this system, acted upon ever 
 since the days of Colbert, France owed the striking inequalities of private for- 
 tune, the overgrown wealth of some, and the superlative misery of others ; the 
 contrast of a few splendid establishments of industry, with a wide waste of 
 poverty and degradation. This is no ideal picture, but one of sad reality, vvi.ich 
 .e study of principles will help us to explain. 
 
CHAP. XVII. ON PRODUCTION. IS] 
 
 It may, perhaps, be alleged, that, were all occupations quite free, 
 a large proportion of those who engaged in them would fall a sacri- 
 fice to the eagerness of competition. Possibly they might, in some 
 few instances, although it is not very likely there should be a great 
 excess of candidates in a line, that held out but little prospect of gain ; 
 yet, admitting the casual occurrence of this evil, it would be of 
 infinitely less magnitude, than permanently keeping up the prices of 
 produce at a rate that must limit its consumption, and abridge the 
 power of purchasing in the great body of consumers. 
 
 If the measures of authority, levelled against the free disposition 
 of each man's respective talents and capital, are criminal in the eye 
 of sound policy, it is still more difficult to justify them upon the 
 principles of natural right. " The patrimony of a poor man," says 
 the author of the Wealth of Nations, " lies in the strength and dex- 
 terity of his hands : and to hinder him from employing this strength 
 and dexterity in what manner he thinks proper, without injury tc 
 his neighbour, is a plain violation of his most sacred property." 
 
 However, as society is possessed of a natural right to regulate the 
 exercise of any class of industry, that without regulation might pre- 
 judice the rest of the community, physicians, surgeons, and apothe- 
 caries, are with perfect justice subjected to an examination into their 
 professional ability. The lives of their fellow-citizens are dependent 
 upon their skill, and a test of that skill may fairly be established ; 
 but it does not seem advisable to limit the number of practitioners 
 nor the plan of their education. Society has no interest further than 
 to ascertain their qualification. 
 
 On the same grounds, regulation is useful and proper, when aimed 
 at the prevention of fraud or contrivance, manifestly injurious to 
 other kinds of production, or to the public safety, and not at pre- 
 scribing the nature of the products and the methods of fabrication. 
 Thus, a manufacturer must not be allowed to advertise his goods to the 
 public as of better than their actual quality: the home consumer is 
 entitled to the public protection against such a breach of faith ; and 
 so, indeed, is the mercantile character of the nation, which must suf- 
 fer in the estimation and demand of foreign customers from such 
 practices. And this is an exception to the general rule, that the best 
 of all guarantees is the personal interest of the manufacturer. For, 
 possibly, when about to give up business, he may find it answer to 
 increase his profit by a breach of faith, and sacrifice a future objec' 
 he is about to relinquish for a present benefit. A fraud of this kind 
 ruined the French cloths in the Levant market, about the year 
 1783; since when the German and British have entirely supplanted 
 them.* We may go still further. An article often derives a value 
 from the name, or from the place of its manufacture. When we 
 judge from long experience, that cloths of such a denomination, and 
 
 * The loss of this trade has been erroneously imputed to the liberty or' com- 
 merce, consequent upon the revolution. But Felix Beaujour, in his Tableau du 
 Commerce de la Grece, has shown that it must be referred to an earlier period, 
 when restrictions were still in force. 
 16 
 
j S2 ON PRODUCTION. BOOK 1. 
 
 mde at such a place, will be of a certain breadth and substance, it 
 
 a fraud to fabricate, under the same name and at the same place, 
 acommod ty of inferior substance and quality to the ordinary stand- 
 ard am? thus to send it into the world under a false certificate. 
 
 lici ce we may form an opinion of the extent to which govern- 
 men -may carry its interference with benefit. The correspondence 
 with the sample of conditions, express or implied must be rigidly 
 enforced, and government should meddle with production no further. 
 I would wish to impress upon my readers, that the mere interference 
 is itself an evil, even where it is of use :* first, because it harasses and 
 distresses individuals; and, secondly, because it costs money either 
 to the nation, if it be defrayed by government, that is to say, charged 
 upon the public purse, or to the consumer, if it be charged upon the 
 specific article ; in the latter case, the charge must of course enhance 
 the price, thereby laying an additional tax upon the home consumer, 
 and pro tanto discouraging the foreign demand. 
 
 If interference be an evil, a paternal government will be most 
 sparino- of its exercise. It will not trouble itself about the certifica- 
 tion of such commodities, as the purchaser must understand better 
 than itself; or of such as cannot well be certified by its agents ; for, 
 unfortunately, a government must always reckon upon the negli- 
 Cfence, incapacity, and misconduct of its retainers. But some arti r 
 cles may well admit of certification ; as gold and silver, the standard 
 of which can only be ascertained by a complex operation of chem- 
 istrv, which few purchasers know how to execute, and which, if 
 thev did, would cost them infinitely more than it can be executed 
 for by the government in their stead. 
 
 In 'Great Britain, the individual inventor of a new product or of a 
 new process may obtain the exclusive right to it, by obtaining what 
 is called a patent. While the patent remains in force, the absence 01 
 competitors enables him to raise his price far above the ordinary 
 return of his outlay with interest, and the wages of his own in- 
 dustry. Thus he receives a premium from the government, charged 
 upon the consumers of the new article ; and this premium is often 
 very large, as may be supposed in a country so immediately produc- 
 tive as Great Britain, where there are consequently abundance of 
 affluent individuals, ever on the look-out for some new object of 
 enjoyment. Some years ago a man invented a spiral or worm spring 
 for insertion between the leather braces of carriages, to ease their 
 motion, and made his fortune by the patent for so trifling an invention. 
 Privileges of this kind no one can reasonably object to ; for they 
 neither interfere with, nor cramp any branch of industry, previously 
 In operation. Moreover, the expense incurred is purely voluntary ; 
 and those who choose to incur it, are not obliged to renounce the satis- 
 faction of any previous wants, either of necessity or of amusement 
 
 * "Every restraint, imposed by legislation, upon the freedom of human action 
 t inevitably extinguish a portion of the energies of the community, and 
 abridge its annual product/' Vem. Refl. sur FEcon Pol c 12 
 
CHAP. XVII. ON PRODUCTION. 18.T 
 
 However, as it is the duty of every government to aim at the 
 constant amelioration of its subjects' condition, it cannot deprive other- 
 producers to eternity of the right to employ part of their industry 
 and capital in this particular channel, which perhaps they might 
 sooner or later have themselves discovered, or preclude the con- 
 sumer for a very long period from the advantages of a competition- 
 price. Foreign nations being out of its jurisdiction, would of course 
 grant no privilege to the inventor, and would, therefore, in this par- 
 ticular, during the operation of the patent, be better off than the 
 nation where the invention originated. 
 
 France* has imitated the wise example of England, in assigning a 
 limit to the duration of these patent rights, after which the invention 
 is free for all the world to avail themselves of. It is also provided, 
 that, if the process be capable of concealment, it shall be divulged at 
 the expiration of the term. And the patentee, \vho in this case, it 
 may be supposed, could do without the patent, has this advantage : 
 that if his secret be discovered by any body in the interim, it cannot 
 be made available till the expiration of the term. 
 
 Nor is it at all necessary that the government sTiouid inquire into 
 the novelty or utility of the invention ; for, if it be useless, so much 
 the worse for the inventor, and, if it be already known, every body 
 is competent to plead and prove that fact, and the previous right of 
 the public ; so that the only sufferer is the inventor, who has been 
 at the expense of a patent for nothing. Thus the public is no loser 
 by this species of encouragement, but, on the contrary, may derive 
 prodigious advantage. 
 
 The regulations tending to direct either the object or the method 
 of production, which have been above observed upon, by no means 
 comprise all the measures adopted by different nations with those 
 views. Indeed, were I to specify them all, my catalogue would 
 soon be incomplete ; for new ones are every day brought into prac- 
 tice. The great point is, to lay down certain principles, that may 
 enable us beforehand to judge of their consequences. But there are 
 two other branches of commerce, that have been the subject of more 
 than usual regulation, and are, therefore, worthy of more special 
 investigation. I shall devote the two succeeding sections to their 
 exclusive examination. 
 
 SECTION III. 
 Of Privileged Trading Companies. 
 
 A government sometimes grants to individual merchants, and 
 much oftener to trading companies, the exclusive privilege of buying 
 and selling specific articles, tobacco for example ; Or of trafficking 
 with a particular country, as with India. 
 
 * Vide the laws dated 7th Jan. and 25th May, 1791, and 20th Sept. 1792 
 Also the arret of the government, dated 5 Vandemaire, an. ix. 
 
]84 ON PRODUCTION. EOOK L 
 
 The privileged traders, being thus exempted from all competition 
 by the exertion of the public authority, can raise their prices above 
 the level that could be maintained under the operation of a free 
 trade This unnatural ratio of price is sometimes fixed by the 
 covernmcnt itself, which thus assigns a limit to the partiality it ex- 
 ercises towards the producers, and the injustice it practises upon the 
 consumers: otherwise, the avarice of the privileged company would 
 be bounded only by the dread of losing more by the reduction of 
 the gross amount of its sales, in consequence of increased prices, 
 than it would gain by their unnatural elevation. At all events, the 
 consumer pays for the commodity more than its worth ; and govern- 
 ment generally contrives to share in the profits of the monopoly. 
 
 It has been said, for the most ruinous expedient is sure to find 
 some plausible argument or other to support it, that the commerce 
 with certain nations requires precautionary measures, which privi- 
 leged companies only can enforce. At one time the plea is, that 
 forts must be built, and marine establishments kept up; as if in truth 
 it were worth while to traffic sword in hand, or an army were neces- 
 sary to protect plain dealing ; or as if the state did not already main- 
 tain at great charge a military force for the protection of its subjects ! 
 At another, that diplomatic address is indispensable. The Chinese, 
 for instance, are a people so bigoted to form and prone to suspicion 
 so entirely independent of other nations, by reason of their remote 
 position, the extent of their territory, and the peculiar character of 
 their wants, that is a matter of special and precarious favour to be 
 allowed to deal with them. We must, therefore, elect either to go 
 without their teas, silks, and nankeens, or be content to submit tc 
 precautions, which can alone insure thq continuance of the trade ; 
 for the dealings of individuals might endanger the continuance of 
 that good humour, without which the mutual intercourse of the two 
 nations would be at an end. 
 
 But, let me ask, is it so certain that the agents of a company, who 
 are too apt to presume upon the support of the military power, 
 either of the nation or at least of the company, is it quite certain, 
 that such agents are more likely to keep alive an amicable feeling 
 than private traders, in whom more deference to local institutions 
 might be expected, and who would have an immediate interest in 
 keeping clear of any misunderstanding that should endanger both 
 their persons and their property?* 
 
 But, supposing the worst that could happen, and granting, for 
 argument's sake, that the trade with China can not be conducted 
 otherwise than by a privileged company, does it follow, that with 
 out one we must needs give up the taste for Chinese productions? 
 
 * This has been exemplified in the commercial relations of the United States 
 China. The American traders conduct themselves at Canton with more 
 
 scretion, and are regarded by the Chinese authorities with less jealousy than 
 the agents of the English company. The Portuguese, for upwards of a centurv, 
 arried on the trade with the Eastern seas, without the intervention of a com- 
 pany, and with greater success than any of their contemporaries 
 
CKAP. XVII. ON PRODUCTION. 
 
 Certainly not The trade in Chinese goods will always exist, for 
 this plain reason, that it suits both parties, the Chinese and their 
 customers. But shall we not pay dearer for those goods? There is 
 no ground for thinking so. Three-fourths of the European states 
 have never sent a single ship to China, and yet are abundantly sup- 
 plied with teas, with silks, and with nankeens, and that too at a very 
 cheap rate. 
 
 There is another argument of more general application, and still 
 more frequently urged ; viz. that a company, having the exclusive 
 trade of any given country, is exempt from the effects of competi- 
 tion, and, therefore, buys a*t a less price. But, in the first place, it 
 is not true that the exclusive privilege exempts from the effect of 
 competition : the only competition it removes, is that of the national 
 traders, which would be of the utmost benefit to the nation ; but it 
 excludes neither the competition of foreign companies, nor of foreign 
 private traders. In the next place, there are many articles that 
 would not rise in price in consequence of the competition, which 
 some people affect to be alarmed at, though in truth it is a mere 
 bugbear. 
 
 Suppose Marseilles, Bordeaux, L'Orient, were all to fit out vessels 
 to bring tea from China, we have no reason to believe that all their 
 ventures together would import more tea into France, than France 
 could consume or dispose of. All we have to fear is, that they should 
 not import enough. Now, if they were to import no more than other 
 merchants would have imported for them, the demand for tea in 
 China will have been just the same in both cases ; consequently, the 
 commodity will not have become more scare there. Our merchants 
 would hardly have to pay dearer for it, unless the price should rise 
 in China itself; and what sensible effect could the purchases of a few 
 merchants of France have upon the price of an article consumed in 
 China itself, to one hundred times the amount of the whole consump- 
 tion of Europe? 
 
 But, granting that European competition would operate to raise 
 the price of some commodities in the eastern market, is that a suffi- 
 cient motive for excepting the trade to that part of the world from 
 the general rules that are acted upon in all other branches of com- 
 merce? Are we to invest an exclusive company with the sole con- 
 duct of the import or export trade between Germany and France, for 
 the sole purpose of getting our cottons and woollens from Germany 
 at a cheaper rate ? If the commerce of the East were put upon the 
 same footing as foreign trade in general, the price of any one article 
 of its produce could never long remain much above the cost of pro- 
 duction in Asia; for the rise of price would operate as a stimulus to 
 increased production, and the competition of sellers would soon be on 
 a par with that of purchasers. 
 
 But, admitting the advantage of buying cheap to be as substantial 
 
 as it is represented, the nation at large has a right to participate IP 
 
 that cheapness ; the home consumers ought to buy cheap as well as 
 
 the company. Whereas in practice it is just the reverse, and, for a 
 
 16* Y 
 
18G ON PRODUCTION. BOOK 1. 
 
 very simple reason: the company is not exempt fiom competition as 
 a purchaser, for other nations are its competitors : but as a seller it is 
 exempt; for the rest of the nation can buy the articles it deals in no- 
 where else, the import by foreigners being wholly prohibited. It 
 asks its own price, and can command the market, especially if it be 
 attentive lo keep the market always understocked, as the English 
 call it; that is, if the supply be just so far short of the demand, as to 
 keep alive the competition of purchasers.* 
 
 In this manner, trading companies not only extort exorbitant 
 profits from the consumer, but moreover saddle him with all the 
 fraud and mismanagement inseparable from the conduct of these 
 unwieldy bodies, with their cumbrous organisation of directors and 
 factors without end, dispersed from one extremity of the globe to the 
 other. The only check to the gross abuses of these privileged 
 bodies is the smuggling or contraband trade, which, in this point of 
 view, may lay claim to some degree of utility. 
 
 This analysis brings us to the point in question; are the gains of 
 the privileged company, national gains? Undoubtedly not; for they 
 are wholly taken from the pockets of the nation itself. The whole 
 excess of value, paid by the consumer, beyond the rate at which free 
 trade could afford the article, is not a value produced, but so much 
 existing value presented by the government to the trader at the con- 
 sumer's expense. It will probably be urged, that it must at least be 
 admitted, that this profit remains and is spent at home. Granted . 
 but by whom is it spent? that is the point. Should one member of 
 a family possess himself of the whole family income, dress himself 
 in fine clothes, and devour the best of every thing, what consolation 
 would it be to the rest of the family, were he to say, what signifies 
 it whether you or I spend the money ? the income spent is the same, 
 so it can make no difference. 
 
 The exclusive as well as excessive profits of monopoly would soon 
 glut the privileged companies with wealth, could they depend upon 
 the good management of their concerns; but the cupidity of agents, 
 tne long pendency of distant adventures, the difficulty of bringing 
 factors abroad to account, and the incapacity of those interested, are 
 causes of ruin in constant activity. Long and delicate operations of 
 commerce require superior exertion and intelligence in the parties 
 interested. And how can such qualities be expected in shareholders, 
 imountm" sometimes to several hundreds, all of them having other 
 *s of more personal importance to look after ?f 
 
 Such are the consequences of privileges granted to trading compa- 
 
 f the 
 
 the spices 
 
 * r ? nnais to f of the directors of the French East 
 
 ^M^Ss^Iss 
 
 33? 
 
CHAP. XVII. ON PRODUCTION. 187 
 
 nies : and these consequences, it must be observed, are in the nature 
 of things inseparable ; circumstances may reduce their efficacy, but 
 can never remove them altogether. The English East India Com- 
 pany has met with more success than the three or four French ones 
 that at different times made the experiment* This company is 
 sovereign as well as merchant ; and we know, by experience, that the 
 most detestable governments may last for several generations ; wit- 
 ness that of the Mamelukes in Egypt. (1) 
 
 There are some minor evils also incident to commercial privileges. 
 The grant of exclusive rights frequently exiles from a country a 
 branch of industry and a portion of capital that would readily have 
 taken root there, but are compelled to settle abroad. Towards the 
 close of the reign of Louis XIV. the French East India Company, 
 being unable to support itself, notwithstanding its exclusive rights, 
 transferred the exercise of its privileges to some speculators at St. 
 Malo, in consideration of a small share in their profits. The trade 
 began to revive under the influence of this comparative liberty, and 
 would, on the expiration of the company's charter, in 1714, have 
 been as active as the then melancholy condition of France would 
 have permitted : but the company petitioned for a retoewal, and ob- 
 tained one, pending the ventures of some private traders. Soon 
 afterwards, a vessel of St. Malo, commanded by a Breton of the 
 name of Lamerville, appeared upon the French coast, on its return 
 from the East Indies, but was refused permission to enter the har- 
 bour, on the plea, that it was in contravention of the company's 
 rights. Consequently, he was compelled to prosecute his voyage to 
 the nearest port in Belgium, and carried his vessel into Ostend, 
 where he disposed of the cargo. The governor of the Low Coun- 
 tries, hearing of the enormous profits he had made, proposed to the 
 captain a second voyage, with a squadron to be fitted out for the 
 express purpose ; and Lamerville afterwards performed many simi- 
 
 * The first French East India Company was established in the reign of Henry 
 IV. A D. 1604, at the instance of a Fleming of the name of Gerard Leroi. It 
 met with no success. 
 
 (1) The commercial monopoly of the English East India Company was finally 
 abolished by three acts of Parliament, passed during the year 1833, namely, 
 chapters 85, 93, and 101 of the 3d and 4th William IV. The first is entitled, an 
 act for effecting an arrangement with the East India Company, and for the better 
 government of His Majesty's Indian territories, till the 30th day of April, 1854; 
 the second, an act to regulate the trade of China and India ; and the third, an act 
 to provide for the collection and management of duties on tea. 
 
 By these acts the trade with both China and India is thrown open, for the first 
 time, to British enterprise and capital, and British subjects are also permitted to 
 take up their residence in these countries. It is needless to point out the vast 
 importance of these enactments, and the great advantages that must result from 
 them, not only to British subjects, but to the whole commercial world. The 
 resources of regions of rich countries that have hitherto lain dormant will no\y 
 be called into activity, and the general wealth of the country, and its capacity of 
 absorbing foreign commodities, immensely increased. 
 
 AMERICAN EDITOR. 
 
Jgs ON PRODUCTION, BOOK I. 
 
 !ar voyages for different employers, and laid the foundation of the 
 Ostend Company.* 
 
 Thus, the French consumer must necessarily have sunered by 
 this monopoly: and so, in fact, he did. But, at any rate, it will be 
 supposed, the company must have benefited. Just the contrary: 
 the company was itself ruined ; in spite of the monopoly of tobacco, 
 the lotteries, and other subsidiary grants bestowed on them by the 
 government.! "In short," says'VoltaireJ "all that remained to 
 France in the East was the regret of having, in the course of forty 
 years, squandered enormous sums, to bolster up a company that 
 never made a six-pence profit, never made any dividend from the 
 resources of its commerce, either to its share-holders or creditors; 
 and supported its establishments in India, solely by the underhand 
 practice of pillage and extortion upon the natives." 
 
 The only case in which the establishment of an exclusive com- 
 pany is justifiable, is, when there is no other way of commencing a 
 new trade with distant or barbarous nations. In that case, the 
 charter is a kind of patent of invention, and confers an advantage, 
 commensurate to the extraordinary risk and expense of the first 
 experiment. The consumers have no reason to complain of the 
 dearness of products, which, but for the grant of the charter, they 
 would either not have enjoyed at all, or have enjoyed at a still 
 dearer rate. But such grants should, like patents, be limited to such 
 duration only, as will repay and fully indemnify the adventurers for 
 the advances and risk incurred. Any thing further is a mere free 
 gift to the company, at the expense of the nation at large, who have 
 a natural right to get what they want wherever they can, and at the 
 lowest possible price. 
 
 What has been said with respect to commercial is equally applica- 
 ble to manufacturing privileges. The reason why governments are 
 so easily entrapped into measures of this kind is, partly because they 
 see a statement of large profits, and do not trouble themselves to in- 
 quire whence they are derived ; and partly because this apparent 
 profit is easily reduced to numerical calculation, no matter whether 
 wrong or right, correct or incorrect; whereas the loss and mischief 
 resulting to the nation are infinitely subdivided amongst the mem- 
 bers of the community, and operate after all in a very indirect, com- 
 plex, and general way, so as to escape and defy calculation. Some 
 writers maintain arithmetic to be the only sure guide in political 
 
 I economy ; for my part, I see so many detestable systems built upon 
 arithmetical statements, that I am rather inclined to regard that 
 uence as the instrument of national calamity. 
 
 * Taylor's Letters on India 
 
 iv. i M Ta HiSt ' PkiL ^ 
 \ Siecle de Louis XV. 
 
CHAP. XVII. ON PRODUCTION. 189 
 
 SECTION IV. 
 Of regulations affecting the Corn Trade. 
 
 IT would seem that the general principles, which govern the com- 
 merce of all other commodities, should be equally applicable to the 
 commerce of grain. But grain, or whatever else may happen to be 
 the staple article of human subsistence to any people, deserves more 
 particular notice. 
 
 It i universally found, that the numbers of mankind increase, in 
 proportion to the supply of subsistence. The abundance and cheap- 
 ness of provisions are favourable to the advance of population ; their 
 scarcity is productive of the opposite effect ;* but neither cause ope- 
 rates so rapidly as the annual succession of crops. The crop of one 
 year may, perhaps, exceed or fall short of the usual average, by as 
 much as one-fifth or one-fourth ; but a country, that, like France, has 
 thirty millions of inhabitants one year, cannot have thirty-six mil- 
 lions the next ; nor could its population be reduced to twenty-four 
 millions in the space of one year, without the most dreadful degree 
 of suffering. Therefore it is the law of nature, that the population 
 shall one year" be superabundantly supplied with subsistence, and 
 another year be subjected to scarcity in some degree or other of 
 intensity. 
 
 And so, indeed, it is with all other objects of consumption ; but, 
 as the most of them are not absolutely indispensable to existence, the 
 temporary privation of them amounts not to the absolute extinction 
 of life. The high price of a product, which has wholly or partially 
 failed at home, is a powerful stimulus to commerce to import it from 
 a greater distance and at a greater expense. But it is unsafe to leave 
 wholly to the providence of individuals the care of supplying an 
 article of such absolute necessity : the delay of which, but for a few 
 days, may be a national calamity ; the transport of which exceeds 
 the ordinary means of commerce ; and whose weight and bulk 
 would make its distant transport, especially by land, double or triple I 
 its average price. If the foreign supply of corn be relied upon, it 
 may happen to be scarce and dear in the exporting and importing 
 country at the same moment. The government of the exporting 
 country may prohibit the export, or a maritime war may interrupt 
 the transport. But the article is one the nation cannot do without ; 
 or even wait for a few days longer. Delay is death to a part of the 
 population at least. 
 
 For the purpose of equalizing the average consumption to the 
 average crop, each family ought literally to lay by, in years of plenty 
 for the deficiency of years of scarcity. But such providence canno' 
 be reckoned upon in the bulk of the population. A great majority, to 
 say nothing of their utter want of foresight, are destitute of the 
 means of keeping such a store in reserve sometimes several vear* 
 
 * Vide infra. Book II. chap. 11. 
 
190 ON PRODUCTION. BOOK L 
 
 toother, neither have they the accommodations for housing it, or 
 thl means of taking it along with them on a casual change of abode. 
 
 Can speculative commerce be depended upon for this reserve 
 a-ainst a deficiency? At first sight it might appear that it could, 
 that self-interest would be an adequate motive; ior the difference of 
 the price of corn in years of abundance and those of scarcity is very 
 meat But the recurrence of the oscillation is too irregular in dis- 
 tance of time, and too infrequent also, to give rise to a regular traffic, 
 01 one that can be repeated at pleasure. The purchase of the gram, 
 the number and size of the storehouses, require a very large advance 
 of capital and a heavy arrear of interest: it is an article that must 
 bo repeatedly shifted and turned, and is much exposed to fraud and 
 damage, as well as to popular violence. All these are to be covered 
 by a profit of rare occurrence. Wherefore, it is possible, that the 
 article may not hold out sufficient temptation to the speculator, 
 although this would be the most commendable kind of speculation, 
 being framed upon the principle of buying from the producer when 
 he is eager to sell, and selling to the consumer \vhen he finds it diffi- 
 cult to purchase. 
 
 In default of the individual providence of the consumer, and of 
 speculative accumulation and reserve, neither of which it would seem 
 can be safely depended upon, can the public authority, as represent- 
 ing the aggregate interest, undertake the charge of providing against 
 a scarcity with any prospect of success? I am aware, that, in a few 
 very limited communities, blessed with a very economical govern- 
 ment, like some of the Swiss cantons, public granaries for storing a 
 casual surplus have answered the purpose well enough. But I should 
 pronounce them impracticable in large and populous countries. The 
 advance of capital and its accruing interest would affect the govern- 
 ment in the same manner as private speculators, and even in a 
 gi eater degree; for there are few governments, that can borrow on 
 such low terms as individuals in good credit. The difficulties of 
 managing a commercial concern, of buying, storing, and re-selling 
 to so large an extent, would be still more insuperable. Turgot, in 
 his letters on the commerce of grain, has clearly proved, that, in 
 matters of this kind, a government never can expect to be served at 
 a reasonable rate ; all its agents having an interest in swelling its 
 expenditure, and none of them in curtailing. It would be utterly im- 
 possible to answer for the tolerable conduct of a business left to the 
 discretion of agents without any adequate control, whose actions are, 
 for the most part, governed by the superior dignitaries of the state, 
 who seldom have either the knowledge or condescension requisite 
 for such details. A sudden panic in the public authorities might 
 prematurely empty the granaries; a political measure, or a war, 
 divert their contents to quite a different destination. 
 
 Generally speaking, it appears that there is no safe dependence for 
 a reserve of supply against a season of scarcity, unless the business 
 be confided to the discretionary management of mercantile houses of 
 the first capital, credit, and intelligence, willing to undertake the 
 
CHAP. XVII. ON PRODUCTION. 19] 
 
 purchase, and the filling and replenishment of the granaries upon cer- 
 tain stipulated terms, and with the prospect of such advantages, ad 
 may fairly recompense them for all their trouble. The operation 
 would then be safe and effectual, for the contractors would give secu- 
 rity for due performance; and it would also be cheaper executed in 
 this way than in any other. Different establishments might be con- 
 tracted with for the different cities of note ; and these being thus 
 supplied in times of scarcity from the stores in reserve, would no 
 longer drain the country of the subsistence destined to the agricul- 
 tural population, (a) 
 
 Public stores and granaries are after all but auxiliary and tempo- 
 rary expedients of supply. The most abundant and advantageous 
 supply will always be that furnished by the utmost freedom of com- 
 merce, whose duties in respect to grain consist chiefly in trans- 
 porting the produce from the farmyard to the principal markets, 
 and thence in smaller quantities from the markets of the districts 
 where it is superabundant to those of others that may be scantily 
 supplied ; or in exporting when cheap, and importing when dear. 
 
 Popular prejudice and ignorance have universally regarded with 
 an evil eye those concerned in the corn-trade ; nor have the deposi- 
 tories of national authority been always exempt from similar illibe- 
 rality. The main charge against them is, that they buy up corn with 
 "the express purpose of raising its price, or at least of making an 
 unreasonable profit upon the purchase and re-sale, which is in effect 
 so much gratuitous loss to the producer and consumer. 
 
 First, I would ask, what is meant by this charge? If it be meant 
 to accuse the dealers of buying in plentiful seasons, when corn is 
 cheap, and laying by in reserve against seasons of scarcity, we have 
 just seen that this is a most beneficial operation, and the sole means 
 of accommodating the supply of so precarious an article to the regu- 
 larity of an unceasing demand. Large stores of grain laid in at a 
 ,ow price contribute powerfully to place the subsistence of the popu- 
 lation beyond risk of failure, and deserve not only the protection, 
 but the encouragement of the public authorities. But, if it be meant 
 to charge the corn-dealers with buying up on a rising market and 
 on the approach of scarcity, and thereby enhancing the scarcity and 
 the price, although I admit that this operation has not the same 
 
 (a) It is singular, that, after the very careful revision which this section has 
 undergone in the last edition, this paragraph should have been suffered to stand. 
 Indeed, one would almost suspect that our author had left it rather in compli- 
 ment to the popular notions of his own country, than from personal conviction of 
 the propriety of the measure he suggests; which is impugned by the whole con- 
 text of the remaining part of the section. The best security against famine is, 
 the total absence of all official interference whatever, whether permanent or 
 temporary, as the example of Great Britain will testify. There the government 
 has at all times abstained from taking a personal part in the supply either of 
 town or country, and has limited its interference to the mere export and import, 
 which have only been cramped and impeded by ill-advised operations. Another 
 important ground of security is, the variety of the national food. Upon this ou 
 author has observed. Vide, infra. T. 
 
|92 ON PRODUCTION. BOOK T. 
 
 commendation of utility, and thai the consumer is saddled with 
 Sal cost of the operation without any direct equivalent 
 tenea for in this instance the deficiency of one year is not made 
 !d by the hoarded surplus of a preceding one ; yet I cannot think 
 ft has ever been attended with any very alarming or fatal conse- 
 quences. Corn is a commodity of most extended production ; and 
 Us price cannot be arbitrarily raised, without disarming the competi- 
 tion of an infinity of sellers, and without an extent of dealing and of 
 ,0-encv scarcely practicable to individuals. It is, besides, a most 
 
 nbersome and inconvenient article in comparison with its price, 
 and, consequently, most expensive and troublesome in the carriage 
 and warehousing A store of any considerable value can not escape 
 observation.* And its liability to damage or decay often makes sales 
 compulsory, and exposes the larger speculators to immense loss. 
 
 Speculative monopoly is, therefore, extremely difficult, and little 
 to be dreaded. The kind of engrossment most prejudicial, as well 
 as most difficult of prevention, is that practised by the domestic pru- 
 dence of individuals in apprehension of a scarcity. Some, from 
 excess of precaution, lay by rather more than they want; while farm- 
 ers, farming proprietors, millers, and bakers, who habitually keep a 
 stock on hand, take care somewhat to swell that stock, in the idea 
 that they shall sell to a profit whatever surplus there may be ; and 
 the infinite number of these petty acts of engrossment makes them 
 greatly exceed, in the aggregate, all the united efforts of speculation. 
 
 But what if it should turn out, after all, that even the selfish and 
 odious views of such speculators are productive of some good ? 
 When corn is cheap, it is consumed with less providence and fru- 
 gality, and used as food for the domestic animals. The distant 
 prospect of scarcity, or even a slight rise of price, is insufficient to 
 check this improvidence betimes. If the great holders shut up their 
 stores, however, the consequent anticipation of a rise of price imme- 
 diately puts the public on their guard, and awakens the particulai 
 frugality and care of the little consumers, of whom the great mass 
 of consumption is composed. Ingenuity is set at work to find a sub- 
 stitute for the scarce article of food, and not a particle is \vasted. 
 Thus, the avarice of one part of mankind operates as a salutary 
 check upon the improvidence of the rest ; and, when the stock with- 
 held at length appears in the market, its quantity tends to lower the 
 price in favour of the consumer. 
 
 With regard to the tribute which the dealer is supposed to exact 
 from both producer and consumer, it is a charge that will attach with 
 equal justice upon every branch of commerce whatsoever. There 
 would be some meaning in it, could products reach the hands of the 
 consumer without any advance of capital, without warehouses, trou 
 
 * Lamarre, who was a great advocate for the interference of authority in these 
 matters, an/I was commissioned by the government, in the scarcities of the years 
 -1709, to discover all concealed hoards, and bring to light the monopolists, 
 trunkly confesses, that he was not able to make seizure of so much as 100 quar 
 tors altogether. Traitt dc la Police, Supplement au tome 11. 
 
CHAP. XVIL ON PRODUCTION. 193 
 
 ble, combination, or any kind of difficulty. But, so long as difficul- 
 ties shall exist, nobody will be able to surmount them so cheaply, as 
 those who make it their special business. Legislation should take 
 an enlarged view of commerce in the aggregate, small and great; 
 it will find its agents busied in traversing the whole surface of the 
 territory, watching every fluctuation of demand and supply, adjusting 
 the casual or local deficiency of price to meet the charges of pro- 
 duction and excess of price above the capacity of consumption. Is 
 it to the cultivator, to the consumer, or to the public administration 
 that we can safely look for so beneficial and powerful an agency ? 
 Extend, if you please, the facility of intercourse, and particularly 
 the capacities of internal navigation, which alone is suited to the 
 transport of a commodity so cumbrous and bulky as grain ; vigilantly 
 watch over the personal security of the trader; and then leave him 
 to follow his own track. Commerce cannot make good the failure 
 of the crop; but it can distribute whatever there may be to distribute, 
 in the manner best suited to the wants of the community, as well as 
 to the interests of production. And doubtless it was for this reason 
 that Smith pronounced the labour of the corn dealer to be favourable 
 to the production of corn, in the next degree to that of the cultivator 
 himself. 
 
 The prevalence of erroneous views of the production and com- 
 merce of articles of human subsistence, has led to a world of mis- 
 chievous and contradictory laws, regulations, and ordinances, in all 
 countries, suggested by the exigency of the moment, and often ex- 
 torted by popular importunity. The danger and odium thus heaped 
 upon the dealers in grain have^ frequently thrown the business into 
 the hands of inferior persons, qualified neither by information nor 
 ability for the business ; and the usual consequence has followed ; 
 namely, that the same traffic has been carried on in secret, at far 
 greater expense to the consumers; the dealers to whom it was 
 abandoned being of course obliged to pay themselves for all the risk 
 and inconvenience of the occupation. 
 
 Whenever a maximum of price has been affixed to grain, it has 
 immediately been withdrawn or concealed. The next step was to 
 compel the farmers to bring their grain to market, and prohibit the 
 private sales. These violations of property, with all their usual 
 accompaniments of inquisitorial search, personal violence, and in- 
 justice, have never afforded any considerable resource to the govern- 
 ment employing them. In polity as well as morality, the grand 
 secret is, not to constrain the actions, but to awaken the inclinations 
 of mankind. Markets are not to be supplied by the terror of the 
 bayonet or the sabre.* 
 
 When the national government attempts to supply the population 
 
 * The French minister of the interior, in his report, presented in December, 
 1817, admits that the markets were never so ill supplied as immediately after 
 the decree of May 4, 1812, prohibiting all sales out of open market. The con- 
 sumers crowded thither, having nowhere else to resort to; while the farmers, 
 being obliged to sell below the current price, pretended to have nothing for sale. 
 17 Z 
 
1{)4 ON PRODUCTION. BOOK I 
 
 !,v becoming itself a dealer, it is sure to fail in satisfying the nationa, 
 wants itself and at the same time to extinguish all the resources that 
 freedom of commerce would offer; for nobody else will knowingly 
 embark in a losing trade, though the government may. 
 
 During the scarcity prevalent throughout many parts of b ranee, 
 in the year 1775, the municipalities of Lyons and some other towns 
 attempted to relieve the wants of the inhabitants, by buying up cxttn 
 in the country, and re-selling it at a loss in the towns. To defray 
 the expense of this operation, they at the same time obtained an in- 
 crease of the octroi or tolls upon goods entering their gates. The 
 scarcity grew worse and worse, for a very obvious reason ; the ordi- 
 nary dealers naturally abandoned markets where goods were sold 
 below the cost price, and which they could not resort to without 
 paying extra toll upon entry.* 
 
 The more necessary an article is, the more dangerous it is to 
 reduce its price below the natural level. An accidental dearnessvbf 
 corn, though doubtless a most unwelcome occurrence, is commonly 
 brought about by causes out of all human power to remove.f Therfe 
 is no wisdom in heaping one calamity upon another, and passing 
 bad laws because there has been a bad season. 
 
 Governments have met with no better success in the matter of 
 importation, than in the conduct of internal commerce. The enor- 
 mous sacrifices made by the commune of Paris and the general 
 government, to provision the metropolis in the winter of 1816-17 
 with grain imported from abroad, did not protect the consumer from 
 an exorbitant advance in the price of bread, which was besides de- 
 ficient both in weight and quality; and the supply was found inade- 
 quate after all.J 
 
 * In all ao-es and in all places this effect will follow. The Emperor Julian, 
 A. D. 362, caused to be sold at Antioch 420,000 modii of wheat imported from 
 Chalsis and Egypt for the purpose, at a price lower than the average of the 
 market; the supplies of private commerce were immediately stopped in conse- 
 quence, and the famine was aggravated. Vide Gibbon, c. 24. The principles of 
 political economy are eternal and immutable ; but one nation is acquainted with 
 them, and another not. 
 
 The metropolis of the Roman empire was always destitute of subsistence, 
 when the government withheld the gratuitous largesses of grain drawn from a 
 tributary world ; and these very largesses were the real cause of the scarcity 
 felt and complained of. 
 
 f One of the most frequent causes of famine is, indeed, of human creation, 
 and that is war, which both interrupts production, and wastes existing products. 
 This cause is, therefore, within human control ; but we can hardly expect it to 
 be effectually exerted, until governments shall entertain more accurate notions 
 of their own, as well as of the national interests; and nations be weaned of the 
 puerility of attaching sentiments of admiration and glory to perils encountered 
 without necessity or reason. 
 
 J It is mere mockery to talk of the paternal care, solicitude, or beneficence 
 of government, which are never of any avail, either to extend the powers of 
 authority, or to dimmish the suffering of the people. The solicitude of the 
 government can never be doubted; a sense of intense personal interest will 
 always guide it to the conservation of social order, by which it is sure to be the 
 principal gainer. And its beneficence can have little merit ; for it can exert 
 Done but at the expense of its subjects. 
 
CHAP. XVII. ON PRODUCTION. 195 
 
 On the subject of bounties on import, it is hardly necessary to 
 touch. The most effectual bounty is the high price of the article in 
 the country where the scarcity occurs, amounting sometimes to as 
 much as 200 or 300 per cent. If this be not sufficient to tempt the 
 importer, I know of no adequate inducement that the government 
 could hold out to him. 
 
 Nations would be less subject to famine, were they to employ a 
 greater variety of aliments. When the whole population depends 
 upon a single product for subsistence, the misery of a scarcity is 
 extreme. A deficiency of corn in France is as bad as one of rice in 
 Elindostan. When their diet consists of many articles, as butcher's 
 meat, poultry, esculent roots, vegetables, fruits, fish, &c., according 
 to local circumstances, the supply is less precarious ; for these arti- 
 cles seldom fail all at a time.* 
 
 Scarcity would also be of less frequent occurrence, if more atten- 
 tion were paid to the dissemination and perfection of the art of 
 preserving, at a cheap rate, such kinds of food, as are offered in 
 superabundance at particular seasons and places ; fish, for instance ; 
 their periodical excess might in this way be made to serve for times 
 of scarcity. A perfect freedom of international maritime intercourse 
 would enable the inhabitants of the temperate latitudes to partake 
 cheaply of those productions, that nature pours forth in such pro- 
 fusion under a tropical sun.f I know not how far it would be possi- 
 ble to preserve and transport the fruit of the banana ; but the expe- 
 
 * Custom, the tyrant of weak minds, and of such, unfortunately, is the great 
 mass of mankind, and of the lower classes in particular, is always a formidable 
 opponent to the introduction of a new article of food. I have observed in some 
 provinces of France, a decided distaste for the paste prepared in the Italian 
 method, although a most nutritious substance, and well calculated for keeping- the 
 flour sound and good. Probably, nothing but the frequent recurrence of scarcity 
 during the political agitations of the nation could have extended the cultivation 
 and consumption of the potatoe, so as to have made it a staple article of food in 
 many districts. The appetite for that vegetable would be still more general, 
 were a little more attention bestowed upon preserving and ameliorating the 
 species, and the practice of raising it from the seed rather than the root more 
 strictly observed. 
 
 f Humboldt tells us, in his Essai pol. sur la Nouvelle Espagne, c. ix. that an 
 equal area of land in that country will produce bananas, potatoes, and wheat, in 
 the following proportions of weight : 
 
 Kilogrammes. 
 
 Bananas 106,000 
 
 Potatoes 2,400 
 
 Wheat 800 
 
 The product of bananas is, therefore, in weight, 133 times that of wheat, and 
 44 times that of potatoes. But a large deduction must be made for the aqueous 
 particles of the banana. 
 
 A demi-hectare of fertile land in Mexico, by proper cultivation of the larger 
 species of banana, may be made to feed more than 50 individuals ; whereas the 
 same extent of surface in Europe, supposing it to yield eight-fold, will give an 
 annual product of no more than 576 kils. of wheat flour, which is not enough for 
 the sustenance of two persons. It is natural that Europeans, on their first arrival 
 in a tropical region, should be surprised at the very limited extent of cultivated 
 ground, encircling the crowded cabins of the native population. 
 
li)6 ON PRODUCTION. Boo" I- 
 
 runent has in a great measure succeeded with respect to ^sugar- 
 cane, which furnishes, in a thousand shapes, an agreeable and 
 wholesome article of diet, and is produced so abundantly by all parts 
 of the world, lying within 38 of latitude, that, but for our present 
 absurd legislative provisions, it might be had much cheaper than 
 butcher's meat, and for the same price as many ind lg enous fruits 
 and vegetables.* . , . .. . . 
 
 To return to the corn-trade, I must protest against the indiscrimi- 
 nate and universal application of the arguments I have adduced to 
 show the benefits of liberty. Nothing is more dangerous in prac- 
 tice, than an obstinate, unbending adherence to system, particularly 
 in its application to the wants and errors of mankind. The wiser 
 course is, to approximate invariably to the standard of sound and 
 acknowledged principles, to lead towards them by the never-failing 
 influence of gradual and insensible attraction. It is^well to fix 
 beforehand a maximum of price beyond which exportation of grain 
 shall either be prohibited, or subjected to heavy duties ; for, as smug- 
 gling cannot be prevented entirely, it is better that those who are 
 resolved to practise it should pay the insurance of the risk to the 
 state than to individuals. 
 
 We have hitherto regarded the inflated price of grain as the only 
 evil to be apprehended. But England, in 1815, was alarmed by a 
 prospect of an opposite evil ; viz. that its price would be reduced too 
 low by the influx of foreign grain. The production of this article 
 is, like that of every other, much more costly in England than in the 
 neighbouring states, owing to a variety of causes, which it is im- 
 material here to explain ; amongst others, chiefly to the exorbitance 
 of her taxation. Foreign grain could be sold in England at two- 
 thirds of its cost price to the English grower. It, therefore, became 
 a most important question, whether it were better to permit the free 
 importation, and thus, by exposing the home producer to a ruinous 
 competition with the foreign grower, to render him incapable of 
 paying his rent and taxes, to divert him from the cultivation of 
 wheat altogether, and place England in a state of dependence for 
 subsistence upon foreign, perhaps hostile nations ; or, by excluding 
 foreign grain from her market, to give a monopoly to the home pro- 
 ducer, at the expense of the consumer, thereby augmenting the diffi- 
 culty of subsistence to the labouring classes, and, by the advanced 
 price of the necessaries of life, indirectly raising that of all the 
 manufactured produce of the country, and proportionately disabling 
 it to sustain the competition of other nations. 
 
 This great question has given rise to the most animated contest 
 both of the tongue and the pen ; and the obstinate contention of two 
 parties, each of which had much of justice on its side, leaves the by- 
 
 * The same author informs us, that, in St. Domingo, a superficial square of 
 
 \ toises, is reckoned at an average capable of producing 10,000 Ibs. weight 
 
 f *ugar; and that the total consumption of that commodity in France, taking 
 
 it at the fair average of 20,000,000 kils. might be raised upon a superficial area 
 
 of seven square leagues. 
 
CHAP. XVIL ON PRODUCTION. 19? 
 
 slanders to infer, that neither has chosen to notice the grand cause 
 of mischief; that is to say, the necessity of supporting the arrogant 
 pretensions of England to'universal influence and dominion, by sacri- 
 fices out of all proportion to her territorial extent. At all events, 
 the great acuteness and intelligence, displayed by the combatants on 
 either side, have thrown new light upon the interference of authority 
 in the business of the supply of grain, and have tended to strengthen 
 the conclusion in favour of commercial liberty. 
 
 The substance of the argument of the prohibitionists may be re- 
 duced to this; that it is expedient to encourage domestic agriculture, 
 even at the expense of the consumer, to avoid the risk of starvation 
 by external means ; which is seriously to be apprehended on two 
 occasions in particular; first, when the power or influence of a bel- 
 ligerent is able to intercept or check the import, which might become 
 necessary ; secondly, when the corn-growing countries themselves 
 experience a scarcity, and are obliged to retain the whole of their 
 crops for their own subsistence.* 
 
 It was replied by the partisans of free-trade, that if England were 
 to become a regular and constant importer of grain, not one, but 
 many foreign countries would grow into a habit of supplying her : 
 the raising of corn for her market in Poland, Spain, Barbary, and 
 North America, would be more extensively practised, and the sale of 
 their produce would become equally indispensable to them, as the 
 purchase would be to England : that even Bonaparte, the most bitter 
 enemy England had ever encountered, had taken her money for the 
 license to export corn: that crops never fail at the same time all over 
 the world ; and that an extensive commerce of grain would lead to 
 the formation of large stores and depots, which will offer the best 
 possible security against the recurrence of scarcity; and that, accord- 
 ingly, as they asserted, there are no countries less subject to that 
 calamity, or even to violent fluctuations of price, than those that 
 grow no corn at all ; for which they cited the example of Holland 
 and other nations similarly circumstanced.f 
 
 However, it cannot be disputed that, even in countries best able 
 to reckon on commercial supply, there are many serious inconve- 
 niences to be apprehended from the ruin of internal tillage. Sub- 
 sistence is the primary want of a nation, and it is neither prudent 
 nor safe to become dependent upon distant supply. Admitting that 
 laws, which, f6r the protection of the agricultural prohibit the im- 
 port of grain to the prejudice of the manufacturing interest, are both 
 unjust and impolitic, it should be recollected that, on the other hand, 
 'excessive taxation, loans, overgrown establishments, civil, military, 
 or diplomatic, are equally impolitic and unjust, and fall more heavily 
 upon agriculture than upon manufacture. Perhaps one abuse may 
 make another necessary, to restore the equilibrium of production, 
 
 * Mai thus. Inquiry into the Nature and Progress of Rent. Grounds of an 
 Opinion, &c. on Foreign Corn. 
 
 f Ricardo. Essay on the Influence of the Low Price of Corn &c. 
 
 17* 
 
J9S ON PRODUCTION. BOOK L 
 
 otherwise industry would abandon one branch, and take exclusively 
 to another, to the evident peril of the existence of society. (1) 
 
 (1) The question of a free trade in corn is itself of such magnitude and im- 
 portance, that it would not be practicable to discuss it within the compass of a 
 note. As our author, however, has in this paragraph intimated at least doubts of 
 the superior advantages of entire freedom in the trade in grain, and even speaks 
 of the " many serious inconveniences to be apprehended from the ruin of internal 
 tillage," and deems it " neither prudent nor safe to become dependent upon dis- 
 tant supply," it would not be proper to withhold from the reader some notice of 
 the labours of the more recent political economists and practical inquirers, who 
 have poured a flood of light over this whole inquiry, and satisfactorily demon- 
 strated the entire inexpediency, as well as injustice, of restrictions and prohi- 
 bitions on the importation of foreign corn. 
 
 The first work to which we refer, is the "Essay on the External Corn Trade, 
 by R. Torrens, Esq. M. P. F. R. S., fourth edition, London, 1827." It is entitled 
 to distinguished notice, as a profound and masterly investigation of the principles 
 relating to the trade in grain, and explains the manner in which restrictive and 
 prohibitive laws on this subject have contributed to create revulsions and embar- 
 rassments, from which England has experienced so much suffering in her com- 
 merce and manufactures. The doctrines unfolded by Colonel Torrens, in relation 
 to the foreign trade in corn, have been sanctioned and confirmed by the authority 
 of all the principal writers on political economy, who have of late directed their 
 attention to the same important topic. He condemns these laws as unwise, unjust 
 and wholly inexpedient. 
 
 Next in order we name Mr. James Mill, the author of the " Elements of 
 
 Political Economy," and the " History of British India." In a pamphlet, which 
 
 published in London, in 1823, entitled an "Essay on the Impolicy of a Bounty 
 
 on the Exportation of Grain, and on the Principles which ought to regulate the 
 
 Commerce of Gram," he has given a most able examination of these questions. 
 
 e notices most of the arguments urged in favour of restrictions and prohibitions 
 
 in the corn trade, and successfully combats them. He, moreover, presents many 
 
 new and luminous views, and discusses the whole subject with a fairness and 
 
 at cannot fail to produce conviction in any unprejudiced mind 
 Among the numerous works, to which this important subject has given birth in 
 -nd, none has awakened more attention, or had a more extensive circulation 
 Collet CamT-d ?> ^ ^ LaWS by T * Perronet Thompson, of Queen's 
 e Tt WarSt Published in 1827 ' and we believe lias now 
 
 eth 
 
 a candid and 
 
 n of 11 f a can an com 
 
 ^f the fallacies that, from time to time, have been advanced by 
 
 any writer 
 
 commercial cemM^ 6 ^ P S S V6r the anti ' 
 governmont, he confines h mself to ex^osm", tl ^ Up n the expenses of 
 a high pr,ce of corn pw^Sp^^Sl^ per t T' OUS ^sequences which 
 lions of industrious capitalists E*inoP?h ? ^ e > and u P on the P era ' 
 
 the exertions of the latter and n ? g C mf rtS f the former ' frustrating 
 '< themselves. 5fa?* " " ^ f the 1 ricultu ^ 
 
 careful manner in which he h- c 1^}^}^ haS taken of the controversy, 
 
 id the arcmmonfa , either gid ^ ^j ^ 
 
CHAP. XVIII. ON PRODUCTION. 199 
 
 CHAPTER XVIII. 
 
 OP THE EFFECT UPON NATIONAL WEALTH, RESULTING FROM THE PRODUCTIVB 
 EFFORTS OF PUBLIC AUTHORITY. 
 
 THERE can be no production of new value, consequently no in- 
 crease of wealth, where the product of a productive concern does 
 not exceed the cost of production.* Thus, whether government or 
 individuals be the adventurers in the losing concern, it is equally 
 ruinous to the nation, and there is so much less value in the country. 
 
 It is of no avail to pretend, that, although the government be a 
 loser, its agents, the industrious people, or the workmen it employs, 
 have made a profit. If the concern cannot support itself and pay its 
 own way, the receipt must fall short of the outlay, and the difference 
 fall upon those, who supply the expenditure of the state ; that is to 
 say, the tax-payers.f 
 
 * It must not be forgotten, that the consumption of the value of the productive 
 agency, exerted in the course of production, is quite as real as that of the raw 
 material. And under this term, productive agency, I comprise that of capital aa 
 well as of human beings. 
 
 f This is equally true, when the government speculates with its own private 
 or peculiar funds, as with the produce of the national lands; for whatever is thus 
 expended might have gone towards alleviating the public burthens. 
 
 known bias of the order to which he belongs in favour of the corn laws, must 
 convince every dispassionate and honest inquirer, that the same process which 
 changed his opinions must change theirs. Years may elapse -in England, from 
 the undue influence of the landed aristocracy in legislation, before these restric- 
 tive laws can be repealed ; but the force of truth is too great to be resisted very 
 long, and must ultimately prevail. 
 
 The last writer we shall refer to is William Jacobs, Esquire, F. R. S., the 
 author of the "Tracts relating to the Corn Trade and Corn Laws: including the 
 Second Report ordered to be printed by the two Houses of Parliament," publish- 
 ed in London, in 1828. Mr. Jacobs has peculiar claims to the reader's attention 
 on this subject. He has been for many years devoted to the examination of the 
 corn trade, is the Comptroller of Corn Returns, and, from his great knowledge 
 and experience, was selected by the English Board of Trade to proceed to the 
 continent, and there carefully examine the actual condition of the agriculture 
 and trade in corn of the principal grain-growing countries in the North of Europe. 
 This work contains the results of his observations and laborious researches, and 
 is entirely a practical view of the past and present state of the trade in corn, 
 supported by a variety of curious and entirely authentic documents. In thia 
 place it would be impracticable to give any detailed account of its great merits 
 as a statistical view of the subject ; and this is not its only excellence. From 
 the comprehensive and careful survey the author took of the actual condition of 
 agriculture and trade in corn, in Europe, he became thoroughly satisfied of the 
 inexpediency of the corn laws, and declares it to be his deliberate conviction 
 that the fair and honest trade of speculation in corn should be by law restored, 
 as the only means by which the due price between the producer and consumer 
 can be equitably adjusted; and he adds, that the destruction of this trade has 
 been the chief cause of the depression of the agricultural proprietors both u>. 
 England and on the continent of Europe. 
 
 AMERICAN EDITOF. 
 
200 ON PRODUCTION. BOOK L 
 
 The manufacture of Gobeliii^lapestry, carried on by the govern- 
 ment of France, consumes a large quantity of wool, silk and dyeing- 
 ; furthermore, it consumes the rent of the ground and build- 
 
 , 
 
 n as well as the wages of workmen employed ; all which should 
 bereimbursed by the product, which they are very far from being. 
 This establishment, instead of a source of wealth to the nation at 
 larcre for the government is fully aware of the loss to itself, is, on 
 the contrary, a source of perpetual impoverishment. The annual 
 loss to the nation is the whole excess of the annual consumption of 
 the concern, including wages, which are one item of consumption, 
 above the annual product. The same may be said of the manufac- 
 ture of porcelain at Sevres, and I fear of all manufacturing concerns 
 carried on upon account of governments. 
 
 We are told, that this is a necessary sacrifice ; that otherwise the 
 sovereign would be unprovided with objects of royal bounty and of 
 royal splendour. This is no place to inquire how far the munificence 
 of the monarch and the splendour of his palaces contribute to the 
 good government of the people. I take for granted that these things 
 are necessary; yet, admitting them to be so, there is no reason why 
 the national sacrifices, requisite to support this magnificence ad 
 liberality, should be aggravated by the losses incurred by a mis- 
 direction of the public means. A nation had much better buy out- 
 right what it thinks proper to bestow ; it would probably obtain for 
 less money an obiect full as precious; for individuals can always 
 undersell the government.* 
 
 There is a further evil attending the productive efforts of the 
 government; they counteract the individual industry, not of those it 
 deals with, for they take good care to be no losers, but of its com- 
 petitors in production. The state is too formidable a rival in agri- 
 culture, manufacture, and commerce; it has too much wealth and 
 power at command, and too little care of its own interest. It can 
 submit to the loss of selling below prime cost ; it can consume, pro- 
 duce, or monopolize in very little time so large a quantity of pro- 
 ducts, as violently to derange the relative prices of commodities : and 
 every violent fluctuation of price is calamitous. The producer calcu- 
 lates upon the probable value of his product when ready for market; 
 nothing discourages him so much, as a fluctuation that defies all 
 calculation. The loss he suffers is equally unmerited, as the acci- 
 dental gains that may be thrown into his hands. His unmerited gains, 
 if any there be, are so much extra charge upon the consumer. 
 
 There are some concerns, I know, which the government must of 
 necessity keep in its own hands. The building of ships of war can- 
 
 * The same may be observed of commercial enterprises undertaken by the 
 public authority. During the scarcity of 1816-17, the French government bought 
 up corn in foieign markets; the price of corn rose to an exorbitant rate in the 
 home market, and the government resold at a very high rate, although somewhat 
 below the average of the market. Individual traders would have found this a 
 orv profitable venture; but the government was out of pocket 21 millions of 
 f ranrs and upwards. Rapport au Roi du 24 Dec. 1818. 
 
CHAP. XVIII. ON PRODUCTION. 201 
 
 not safely be left to individuals; nor, perhaps, the manufacture of 
 gunpowder. However, in France, cannon, muskets, caissons, and 
 tumbrils are bought of private makers, and seemingly with benefit 
 Perhaps the same system might be further extended. A government 
 must act by deputy, by the intermediate agency of a set of people, 
 whose interest is in direct opposition to its own ; and they will of 
 course attend to their own in preference. If it be so circumstanced 
 as to be invariably cheated in its bargains, there is no need to mul- 
 tiply the opportunities of fraud, by engaging itself in production and 
 adventure ; that is to say, embarking in concerns, that must infinitely 
 multiply the occasions of bargaining with individuals. 
 
 But, although the public can scarcely be itself a successful pro- 
 ducer; it can at any rate give a powerful stimulus to individual pro- 
 ductive energy, by well-planned, well-conducted, and well-supported 
 public works, particularly roads, canals, and harbours. 
 
 Facility of communication assists production, exactly in the same 
 way as the machinery, that multiplies manufactured products, and 
 abridges the labour of production. It is a means of furnishing the 
 same product at less expense, which has exactly the same effect, as 
 raising a greater product with the same expense. If we take into 
 account the immense quantity of goods conveyed upon the roads of 
 a rich and populous empire, from the commonest vegetables brought 
 daily to market, up to the rarest imported luxuries poured into its 
 harbours from every part of the globe, and thence diffused, by means 
 of land-carriage, over the whole face of the territory, we shall readily 
 perceive the inestimable economy of good roads in the charges of 
 production. The saving in carriage amounts to the whole value the 
 article has derived gratuitously from nature, if, without good roads, 
 it could not be had at all. Were it possible to transplant from the 
 mountain to the plain the beautiful forests that flourish and rot 
 neglected upon the inaccessible sides of the Alps and Pyrenees, the 
 value of these forests would be an entirely new creation of value to 
 mankind, a clear gain of revenue both to the landholder and the 
 consumer also. 
 
 Academies, libraries, public schools, and museums, founded by 
 enlightened governments, contribute to the creation of wealth, by 
 the further discovery of truth, and the diffusion of what was known 
 before ; thus empowering the superior agents and directors of pro- 
 duction, to extend the application of human science to the supply of 
 human wants.* So likewise of travels, or voyages of discovery, 
 undertaken at the public charge ; the consequences of which have of 
 late years been rendered particularly brilliant, by the extraordinary- 
 merit of those who have devoted themselves to such pursuits. 
 
 It is observable, too, that the sacrifices made for the enlargement 
 of human knowledge, or merely for its conservation, should not be 
 reprobated, though directed to objects of no immediate or apparent 
 utility. The sciences have an universal chain of connexion. One 
 
 * Supra, Chap. 6. 
 2A 
 
202 ON PRODUCTION. BOOK 1. 
 
 which seems purely speculative must advance a step, before another 
 of great and obvious practical utility can be promoted. Besides it is 
 impossible to say what useful properties may lie dormant in an object 
 'mere curiosity. When the Dutchman, Otto Guencke, struck out 
 the first sparks of electricity, who would have supposed they would 
 have enabled Franklin to direct the lightning, and divert it from our 
 edifices; an exploit apparently so far beyond the powers of man 7 
 
 But of all the means, by which a government can stimulate pro- 
 duction, there is none so powerful as the perfect security of person 
 and property, especially from the aggressions of arbitrary power.* 
 This security is of itself a source of public prosperity, that more than 
 counteracts* all the restrictions hitherto invented for checking its 
 progress. Restrictions compress the elasticity of production; but 
 want of security destroys it altogether, (a) To convince ourselves 
 of this fact, it is sufficient to compare the nations of western Europe 
 with those subject to the Ottoman power. Look at most parts of 
 Africa, Arabia, Persia, and Asia Minor, once so thickly strown with 
 flourishing cities, whereof, as Montesquieu remarks, no trace now 
 remains but in the pages of Strabo. The inhabitants are pillaged 
 alike by bandits and pachas; wealth and population have vanished ; 
 and the thinly scattered remnant are miserable objects of want and 
 wretchedness. Survey Europe on the other hand ; and, though she 
 is still far short of the prosperity she might attain, most of her king- 
 doms are in a thriving condition, in spite of taxes and restrictions 
 innumerable; for the simple reason, that persons and property are 
 there pretty generally safe from violence and arbitrary exaction. 
 
 There is one expedient by which a government may give its sub- 
 jects a momentary accession of wealth, that I have hitherto omitted 
 to mention. I mean the robbery from another nation of all its 
 moveable property, and bringing home the spoil, or the imposition 
 of enormous tributes upon its growing produce. This was the mode 
 practised by the Romans in the latter periods of the republic, and 
 under the earliest emperors. This is an expedient of the same 
 
 * Smith, in his recapitulation of the real causes of the prosperity of Great 
 Britain, places at the head of the list, " That equal and impartial administration 
 of justice, which renders the rights of the meanest British subject respectable 
 to the greatest ; and which, by securing to every man the fruits of his own in- 
 dustry, gives the greatest and most effectual encouragement to every sort of 
 industry." Wealth of Nations, b. iv. c. l.Poivre, who was a great traveller, 
 tells us, that he never saw a country really prosperous, which did not enjoy the 
 freedom of industry as well as security of person and property. 
 
 (a) This security is in fact the main duty of all government. Were it not for 
 the imperfections of human nature the propensity of mankind to vice society 
 might exist without government, for no man would injure another. It is to pro- 
 tect one against the vices of another that the forms and institutions of society 
 arc established or supported ; thus arming individual right with the aggregate 
 of social strength. But the same moral imperfections which drive mankind into 
 tne bonds of society, undermine and vitiate its institutions. The very engine 
 irected to protect, is directed to the injury and spoliation of individuals, and 
 'jecomes occasionally more dangerous than individual wrong. T. 
 
CHAP. XIX. ON PRODUCTION. 203 
 
 nature, as the acquirement of wealth by individual acts of illegal 
 violence or fraud. There is no actual production, but a mere appro 
 priation of the products of others. I mention this method of acquiring 
 wealth, once fqj^all, without meaning to recommend it as either safe 
 or honourable. *Had the Romans followed the contrary system with 
 equal perseverance, had they studied to spread civilization among 
 their savage neighbours, arid to establish a friendly intercourse that 
 might have engendered reciprocal wants, the Roman power would 
 probably have existed to this day. 
 
 CHAPTER XIX. 
 
 OF COLONIES AND THEIR PRODUCTS. 
 
 COLONIES are settlements formed in distant countries by an elder 
 nation, called the mother-country. When the latter wishes to enlarge 
 its intercourse with a country, already populous and civilized, whose 
 territory it has, therefore, no hopes of getting into its own possession, 
 it commonly contents itself with the establishment of a factory or 
 mercantile residence, where its factors may trade, in conformity with 
 the local regulations, as the Europeans have done in China and Japan. 
 When colonies shake off their dependence upon the mother country, 
 they become substantive and independent states. 
 
 It is common for nations to colonize, when their population be- 
 comes crowded in its ancient territorial limits ; and when particular 
 classes of society are exposed to the persecution of the rest. These 
 appear to have been the only motives for colonization among the 
 ancients; the moderns have been actuated by other views. The 
 vast improvements in navigation have opened new channels to their 
 enterprise, and discovered countries before unknown; they have 
 found their way to another hemisphere, and to the most inhospitable 
 climates, not with the intention of there fixing themselves and their 
 posterity, but to obtain valuable articles of commerce, and return to 
 their native countries, enriched with the fruits of a forced, but yet 
 very extensive production. 
 
 It is worth while to note this difference of motive, which has made 
 so marked a difference in the consequences of the two systems of 
 colonization. I am strongly tempted to call one the colonial system 
 of the ancients, and the other the colonial system of the moderns; 
 although there have been many colonies in modern times established 
 on the ancient plan, of which those of North America are the most 
 distinguished, (a) 
 
 (a) The distinction of the two systems is more imaginary than real. Most of 
 the early establishments of the Europeans in the West were made with the view 
 
004 ON PRODUCTION. BOOK I. 
 
 The production of colonies, formed upon the ancient system, is 
 inconsiderable at the commencement; but increases with great 
 rapidity. The colonists choose for their country of adoption a spot 
 where the soil is fertile, the climate genial, or the position advan- 
 tageous for commercial purposes. The land is generally quite fresh, 
 whether it have been the scene of a dense population long since 
 extinguished, or merely the range of roving tribes, too small in 
 number and strength to exhaust the productive qualities of the soiL 
 Families transplanted from a civilized to an entirely new country, 
 carry with them theoretical and practical knowledge, W 7 hich is one 
 of the chief elements of productive industry: they carry likewise 
 habits of industry, calculated to set these elements in activity, as 
 well as the habit of subordination, so essential to the preservation of 
 social order; they commonly take with them some little capital also, 
 not in money, but in tools and stock of different kinds : moreover, 
 they have no landlord to share the produce of a virgin soil, far 
 exceeding in extent what they are able to bring into cultivation for 
 years to come. To these causes of rapid prosperity, should, perhaps, 
 be superadded the chief cause of all, the natural desire of mankind 
 to better their condition, and to render as comfortable as possible the 
 mode of life they have adopted. 
 
 The rapid increase of products in colonies, founded upon this plan, 
 would have been still more striking, if the colonists had carried with 
 them a larger capital; but, as we have already observed, it is not the 
 families favoured by fortune that emigrate; those who have the 
 command of a sufficient capital to procure a comfortable existence 
 in their native country, the scene of their halcyon days of infancy 
 will rarely be tempted to renounce habits, friends, and relations, to 
 embark in what .must always be attended with hazard, and encounter 
 the nseparable hardships of a primitive establishment. This accounts 
 the scarcity of capital in newly-settled colonies; and is one reason 
 why it bears so high a rate of interest there. 
 
 In point of fact, capital is of much more rapid accumulation in 
 ew colonies than in countries long civilized. It would seem as if 
 he colonists, in abandoning their native country, leave behind them 
 
 Me of tW f V1 T US PP e " sities ; the 7 certainly carry with them 
 that fondness for show, that costs so dear in Europe, and 
 s so poor a return. No qualities, but those of utility are i 
 
 IimatlOn in the COimtrv thpv nrp rrninr* f /% . J \- 
 
 ^j UIC 8 uin ? * a nd consumption is 
 desire, which is sooner satisfied than 
 
 
CHAP. XIX. ON PRODUCTION. 205 
 
 economical ; finally, their industry is proportionately more produc- 
 tive, and requires a smaller capital to work upon. 
 
 The character of the colonial government usually accords with 
 that of individuals ; it is active in the execution of its duties, sparing 
 of expense, and careful to avoid quarrels ; thus there are few taxes, 
 sometimes none at all; and, since the government takes little or 
 nothing from the revenues of the subject, his ability to multiply his 
 savings, and consequently to enlarge his productive capital, is very 
 great. With very little capital to begin upon, the annual produce of 
 *he colony very soon exceeds its consumption. Hence, the astonish- 
 ingly rapid progress in its wealth and population ; for human labour 
 becomes dear in proportion to the accumulation of capital, and it is 
 a well-known maxim, that population always increases according to 
 the demand.* 
 
 With these data, there is no difficulty in explaining the causes of 
 the rapid advance of such colonies. Among the ancients we find 
 that Ephesus and Miletus in Asia Minor, Tarentum and Crotona in 
 Italy, Syracuse and Agrigentum in Sicily, very soon surpassed the 
 parent cities in wealth and consequence. The English colonies in 
 North America, which bear the closest resemblance of any in our 
 times to those of ancient Greece, present a picture of prosperity less 
 striking perhaps, but quite as deserving of notice, and still in the 
 attitude of advance. 
 
 It is the invariable practice of colonies founded upon this plan, and 
 without any thoughts of returning home, to provide themselves an 
 independent government; and even where the mother-country 
 reserves the right of legislation, that right will sooner or later be 
 dissolved by the operation of natural causes, and matters be brought 
 to that footing, on which justice and regard to its real interest should 
 have prompted her to put them originally. 
 
 But, to proceed to the colonies formed upon the colonial system 
 of the moderns ; the founders of them were for the most part ad- 
 venturers, whose object was, not to settle in an adopted country, 
 but rapidly to amass a fortune, and return to enjoy it in their former 
 homes.f 
 
 The early adventurers of this stamp found ample gratification of 
 their extravagant rapacity, first in the cluster of the Antilles, in 
 Mexico and Peru, and subsequently in Brazil and in the Eastern 
 Indies. After exhausting the resources previously accumulated by 
 the aborigines, they were compelled to direct their industry towards 
 discovering the mines of these new countries, and to turn to account 
 the no less valuable produce of their agriculture. Successive swarms 
 of new colonists poured in from time to time, animated for the most 
 
 * Vide infra, under the head of Population, Book II. c. 11. 
 
 f There have been many exceptions in North America and elsewhere. The 
 colonies of Spain and Portugal in the New World were of an ambiguous charac 
 ter. Some of the colonists contemplated a return : others went to establish them- 
 selves and their posterity ; but the whole plan of them has been subverted, since 
 the commencement of the struggle for emancipation. 
 18 
 
200 ON PRODUCTION. BOOK L 
 
 part \vith some hope of return, with the desire, not of living in 
 affluence upon the land they cultivated, and leaving behind them a 
 contented posterity and a spotless name, but of making inordinate 
 gain to be afterwards enjoyed elsewhere : this motive led them to 
 adopt a system of compulsory cultivation, of which negro slavery 
 v/as the principal instrument. 
 
 But let me ask, in what manner does slavery operate upon pro- 
 duction? Is the labour of the slave less costly than that of the free 
 labourer? This is an important inquiry, originating in the influence 
 of the modern system of colonization upon the multiplication of 
 wealth. 
 
 Stewart, Turgot, and Smith, all agree in thinking, that the labour 
 of the slave is dearer and less productive than that of the freeman. 
 Their arguments amount to this: a man, that neither works nor con- 
 sumes on his own account, works as little and consumes as much as 
 he can : he has no interest in the exertion of that degree of care and 
 intelligence, which alone can insure success : his life is shortened by 
 excessive labour, and his master must replace it at great expense . 
 besides, the free workman looks after his own support ; but that of 
 the slave must be attended to by the master; and, as it is impossible 
 for the master to do it so economically as the free workman, the 
 labour of the slave must cost him dearer.* 
 
 This position has been controverted by the following calculation : 
 
 I he annual expense of a negro in the West Indies, upon the planta- 
 
 [ons most humanely administered, does not exceed 60 dollars : add 
 
 3 interest of his prime cost, say at ten per cent., for it is a life in- 
 
 jst ; the average price of a negro is about 400 dollars, so that, 
 
 owing 40 dollars for the annual interest, the whole expense of a 
 
 gro to his owner is but 100 dollars per annum, (a) a sum, doubtless, 
 
 mu, h inferior to the charge of free labour in that part of the world. 
 
 Vn ordinary free labourer may earn there from a dollar to a dollar 
 
 If per day, or even more. Taking the medium of a dollar 
 
 '^^s^t^:A^ *>" 
 i'SSSS 
 
 makers are generalfy free 
 
 ^trtssM? i^^^^^^^ 
 
 master; neither does our author seem tn i, clothing furnished by the 
 
 increase of ^gncnltor^r^^^^ ^ a"wance for the probable 
 European lahour would Tubt e s be far ^ "^ ^ might affo ^ Fre * 
 The interest of money is also estimated ! fi < re 1 ex P ens J lve ' were it practicable, 
 must be provided for by the mas e^T ' and the infant and the a ^ 
 
CHAP. XIX. ON PRODUCTION. 207 
 
 Common sense will tell us, that the consumption of a slave must 
 be less than that of a free workman. The master cares not if his 
 slave enjoy life, provided he do but live ; a pair of trowsers and a 
 jacket are the whole wardrobe of the negro : his lodging a bare hut, 
 and his food the manioc root, to which kind masters now and then 
 add a little dried fish. A population of free workmen, taken one 
 with another, has women, children, and invalids to support : the ties 
 of consanguinity, friendship, love, and gratitude, all contribute to 
 multiply consumption; whereas, the slave-owner is often relieved 
 by the effects of fatigue from the maintenance of the veteran : the 
 tender age and sex enjoy little exemption from labour ; and even the 
 soft impulse of sexual attraction is subject to the avaricious calcula- 
 tions of the master. 
 
 What is the motive which operates in every man's breast to 
 counteract the impulse towards the gratification of his wants and 
 appetites 1 Doubtless, the providential care of the future. Human 
 wants and appetites have a tendency to extend frugality to reduce 
 consumption; and it is easy to conceive, that these opposite motives, 
 working in the mind of the same individual, help to counteract each 
 other. But, where there are master and slave, the balance must needs 
 incline to the side of frugality ; the wants and appetites operate upon 
 the vyeaker party, and the motive of frugality upon the stronger. 
 It is a well-known fact, that the net produce of an estate in St. Do- 
 mingo cleared off* the whole purchase-money in six years ; whereas 
 in Europe the. net produce seldom exceeds the one twenty-fifth or 
 one thirtieth of the purchase-money, and sometimes falls far short 
 even of that. Smith, himself, elsewhere tells us, that the planters of 
 the English islands admit that the rum and molasses will defray the 
 whole expenses of a sugar plantation, leaving the total produce of 
 sugar as net proceeds: which, as he justly observes, is much the 
 same as if our farmers were to pay their rent and expenses with the 
 straw only, and to make a clear profit of all the grain. Now I ask, 
 how many products are there that exceed the expenses of produc- 
 tion in the same degree? (a) 
 
 Indeed, this very exorbitance of profit shows, that the industry of 
 the master is paid out of all proportion with that of the slave. To 
 the consumer it makes no difference. One of the productive classes 
 benefits by the depression of the rest ; and that would be all, were it 
 not that the vicious system of production, resulting from this de- 
 rangement, opposes the introduction of a better plan of industry. 
 The slave and the master are both degraded beings, incapable of ap- 
 proximating to the perfection of industry, and, by their contagion, 
 degrading the industry of the free man, who has no slaves at his 
 
 (a) What reference can this inequality have to the relative position of the 
 proprietor and the different productive agents one to another ? j.t is a mere 
 question of difference of interest of capital. Capital in the West Indies brings 
 a return very different, in its ratio, to rent or the profit of land, from what it 
 yields in Europe. Land, the source of production, sells cheap, because of the 
 greater unhealthiness of climate, insecurity of tenure, abundance, &c. &c. T 
 
208 ON PRODUCTION. BOOK L 
 
 command. For labour can never be honourable, or even respectable, 
 where it is executed by an inferior caste. The forced and unnatural 
 superiority of the master over the slave, is exhibited in the affecta- 
 tion of lordly indolence arid inactivity: and the faculties of rnmd 
 are debased "in an equal degree; the place of intelligence is usurped 
 by violence and brutality. 
 
 I have been told by travellers of veracity and observation, that 
 they consider all progress in the arts in Brazil and other settlements 
 of America as utterly hopeless, while slavery shall continue to be 
 tolerated. Those states of the North American Union, which have 
 proscribed slavery, are making the largest strides towards national 
 prosperity. The inhabitants of the slave states of Georgia and Caro- 
 lina raise the best cotton in the world, but cannot work it up. Dur- 
 ing the last war with England, they were obliged to send it over 
 land to New- York to be spun into yarn. The same cotton is sent 
 back at a vast expense to be consumed at the place of its original 
 growth in a manufactured state, (a) This is a just retribution for the 
 toleration of a practice, by which one part of mankind is made to 
 labour, and subjected to the severest privation, for the benefit of an- 
 other. Policy is in this point in accordance with humanity, (b) 
 
 It remains yet to be explained, what are the consequences of the 
 commercial intercourse between the colony and the mother country, 
 in regard to production ; always taking it for granted, that the colony 
 continues in a state of dependence, for the moment it shakes off the 
 yoke, it has nothing colonial but its origin, and stands in relation to 
 the mother-country, on exactly the same footing as any other nation 
 on the globe. 
 
 The parent state, with a view to secure to the products of its own 
 soil and industry the market of colonial consumption, generally pro- 
 hibits the colonists from purchasing European commodities from any 
 one else, which enables her own merchants to sell their goods in the 
 colony for somewhat more than they are currently worth. This is 
 a benefit conferred on the subjects of the parent state at the expense 
 of the colonists, who are likewise its subjects. Considering the 
 mother-country and the colony to be integral parts of one and the 
 same state, the profit and loss balance each other; and this restric- 
 tion Jsjnugatory, except inasmuch as it entails the charge of an 
 
 (a) So it is now from Hindostan, where labour is free and most abundant. 
 ftton will flow towards machinery, which has become too powerful for the 
 tion of human labour, even where it is the cheapest. That is, therefore, 
 not the effect of the toleration of slavery in those states. T. 
 
 (6) Therefore our author has come to this correct conclusion, his reasoning 
 
 neither logical nor satisfactory ; indeed, the whole of this important subject 
 
 amused with a precipitation little suited to its importance. There are two 
 
 motives of human industry, the hope of enjoyment, and the fear of suffering. 
 
 No! fr V f ,'? ! Principally by the latter, the free agent by the former, 
 
 itnerof these motives should have been thus cursorily "adverted to in the 
 
 v aftpr M th .Tl ^VTl' ^ ***" ^ 86t f rth '" the OUtset ' im '" e ' 
 
 f J he . detal1 f , the nm*s of production; being both of thorn the 
 t .which give activity to those sources. ARer all that our author anc 
 cthws have dene, much yet remains for the organization of the science T 
 
CHAP. XIX. ON PRODUCTION. 209 
 
 establishment of custom or excise officers ; and thus increases the 
 national expenditure. 
 
 While, on the one hand, the colonists are obliged to buy of the 
 mother-country, they are, on the other, compelled to sell their 
 colonial produce exclusively to its merchants, \vho thus obtain an 
 extra advantage without any creation of value, at the expense, like- 
 wise, of the colonists, by the enjoyment of an exclusive privilege, 
 and of exemption from competition. Here, too, the profit and loss 
 destroy each other nationally, but not individually ; what a merchant 
 of Havre or Bordeaux gains in this way is substantial profit ; but it 
 is taken from the pockets of one or more subjects of the same state, 
 who had equal right to have their interest attended to. It is true, 
 indeed, that the colonists are indemnified in another way ; viz. either 
 by the miseries of the slave population, as we have already explained ; 
 or by the privations of the inhabitants of the mother-country, as I 
 am about to show. 
 
 So completely is the whole system built upon compulsions, re- 
 striction, and monopoly, that these very domestic consumers are 
 compelled to buy what colonial articles of consumption they require 
 exclusively from the national colonies ; every other colony, and all 
 the rest of the world, being denied the liberty of importing colo- 
 nial* produce, or subjected to the payment of a heavy fine, in the 
 shape of an import duty. 
 
 It would seem that the home-consumer should at any rate derive 
 an obvious benefit, in the price of colonial produce, from his exclu- 
 sive right of purchasing of the colonists. But even this unjust pre- 
 ference is denied him ; for, as soon as the produce arrives in Europe, 
 the home-merchant is allowed to re-export and sell it where he 
 chooses, and particularly to those nations that have no colonies of 
 their own ; so that, after all, the planter is deprived of the competi- 
 tion of buyers, although the home-consumer is made to suffer its 
 full effect. 
 
 All these losses fall chiefly upon the class of home-consumers, 
 a class of all others the most important in point of number, and 
 deserving of attention on account of the wide diffusion of the 
 evils of any vicious system affecting it, as well as the functions 
 it performs in every part of the social machine, and the taxes it 
 contributes to the public purse, wherein consists the power of 
 the government. They may be divided into two parts ; whereof 
 the one is absorbed in the superfluous charges of raising the colonial 
 produce, which might be got cheaper elsewhere ;f this is a dead loss 
 
 * Or equinoctial ; the term is applied to the ordinary products of equinoctial 
 latitudes. 
 
 t Poivre, a writer of great information and probity, assures us, that white 
 sugar of the best quality is sold in Cochin-China, at the rate of about 3 dollars 
 per quintal of the country, which is little more than two cents per pound, and 
 that more than 80 millions of pounds are thence exported annually to China at 
 that rate. Adding 300 per cent. for the charges and profits of trade, which is n 
 most liberal allowance, the sugar of Cochin-China might, under a free trade, b 
 sold in France at from 8 to 9 cents a pound. 
 18* 2 B 
 
210 ON PRODUCTION. 
 
 to the consumer, without gain to any body. The other part which 
 is also paid by the consumer, goes to make the fortunes of West- 
 nd an planters and merchant! The wealth thus acquired is the 
 produce of a real tax upon the people, although, being centred m 
 few hands, it is apt to dazzle the eyes, and be Betaken for wealth 
 of colonial and commercial acquisition. And it is for the protection 
 of this imaginary advantage, that almost all the wars of the eigh- 
 teenth century have been undertaken, and that the European states 
 have thought themselves obliged to keep up, at a vast expense, civil 
 and judicial, as well as marine and military, establishments, at the 
 opposite extremities of the globe.* 
 
 When Poivre was appointed governor ol the Isle ol * ranee, the 
 colony had not been planted more than 50 years ; yet he calcu- 
 lated it to have then cost France no less than 12 millions of dollars 
 to be a source of regular and large out-going ; and to bring her no 
 return of any kind whatsoever.! It is true, that the money spent 
 on the defence of that settlement had the further object of uphold- 
 ing our other possessions in the East Indies ; but, when we find that 
 these latter were still more expensive both to the government and 
 to the proprietors of the two companies, old and new, it is impossi- 
 ble to deny, that all we gained by keeping the Mauritius ^ at this 
 enormous expense was, the opportunity of a further waste in Ben- 
 gal and on the coast of Coromandel. 
 
 The same observations will apply to such of our possessions in 
 other parts of the world, as were of no importance, but in a military 
 point of view. Should it be pretended, that these stations are kept 
 up at a great sacrifice, not with the object of gain, but to extend and 
 affirm the power of the mother-country, it might yet be asked, why 
 maintain them at such a loss, since this power has no other object 
 but the preservation of the colonies, which turn out to be themselves 
 a losing concern ? J 
 
 That England has benefited immensely by the loss of her North 
 
 The English already derive from Asia a considerable quantity both of sugar 
 and indigo, at a cheaper rate than those of the West Indies. And, doubtless, if 
 the Europeans were to plant independent and industrious colonies along the 
 northern coast of Africa, the culture of equinoctial products there would rapidly 
 gain ground, and supply Europe in greater abundance at a still cheaper rate. 
 
 * Arthur Young, in 1789, estimated the annual charge entailed on France, by 
 the possession of St. Domingo, at 9 millions of dollars. He has gone into 
 detail to prove, that, if the sums spent on her colonies for 25 years only had 
 been devoted to the improvement of any one of her own provinces, she would have 
 acquired an annual addition of 24 millions of dollars, net revenue, consisting of 
 actual products, without loss to any body. Vide his Journey in France. 
 
 t CEuvres de Poivre, p. 209. In this estimate he takes no account of the charge 
 of the military and marine establishment of France herself, of which a part 
 should be set down to the colony. 
 
 I Vide the works of Benjamin Franklin, vol. ii. p. 50, for the opinion of that 
 telobratod man, who had so much experience in these matters. I find it stated 
 n the Travels of Lord Valentia that the Cape of Good Hope, in 1802, cost Eng- 
 land an excess of from 1,000,000 to 1,200,000 dollars per annum above its own 
 
 ntromi*? 
 
CHAP. XIX. ON PRODUCTION. 211 
 
 American colonies, is a fact no one has attempted to deny.* Yet she 
 spent the incredible sum of 335,000,000 dollars in attempting to retain 
 possession ; a monstrous error in policy indeed ; for she might have 
 enjoyed the same benefits, that is to say, have emancipated her colo- 
 nies, without expending a sixpence ; besides saving a profusion of 
 gallant blood, and gaining credit for generosity, in the eyes of 
 Europe and posterity-! 
 
 The blunders committed by the ministers of George III., during 
 the whole course of the first American war, in which, indeed, they 
 were unhappily abetted, by the corruption of the parliament and the 
 pride of the nation, were imitated by Napoleon, in his attempt to 
 reduce the revolted negroes of St. Domingo. Nothing but its dis- 
 tance and maritime position prevented that scheme from proving 
 equally disastrous with the war of Spain. Yet, comparatively, the 
 independence of that fine island might have been made equally pro- 
 ductive of commercial benefit to France, as that of America had been 
 to England. It is high time to drop our absurd lamentations for the 
 loss of our colonies, considered as a source of national prosperity. 
 For, in the first place, France now enjoys a greater degree of pros- 
 perity, than while she retained her colonies; witness the increase of 
 her population. Before the revolution, her revenues could maintain 
 but twenty-five millions of people : they now support thirty-two 
 millions and a half, (1831) (1). In the second place, the first princi- 
 
 * " Bristol was one of the chief entrepots of North American commerce. Her 
 principal merchants and inhabitants joined in a most energetic representation to 
 parliament, that their city would be infallibly ruined by the acknowledgment of 
 American independence ; adding, that their port would be so deserted, as not to be 
 worth the charge of keeping up. Notwithstanding their representations, peace 
 became a matter of necessity, and the dreaded separation was consented to. 
 Ten years had scarcely elapsed after this event, when the same worthy persons 
 petitioned the parliament for leave to enlarge and deepen the port, which, 
 instead of being deserted, as they had apprehended, was incapable of receiving 
 the influx of additional shipping, that the commerce of independent America 
 had given birth to." De Levis, Lettres Chinoises. 
 
 f These remarks are not altogether applicable to the British dependencies in 
 the East; because there the nation is rather a conqueror than a colonist, having 
 the domination over thirty-two millions of inhabitants, and the absolute disposal 
 of the revenue levied upon them. But the clear national profits derived from the 
 acquisition is by no means so considerable, as may be generally supposed ; for 
 the charges of administration and protection must be deducted. Colquhoun, in 
 his Treatise on the Wealth, Power, and Resources of the British Empire, which 
 gives an exaggerated picture of them, states the total revenue of the sovereign 
 company, at 18,051,478J. sterling ; and its expenditure at 16,984,271Z. ; leaving a 
 surplus of 1,067,207*. 
 
 In all probability were India in a state of national independence, the commerce 
 between her and Great Britain would increase so much, as to produce to the lat- 
 ter an additional revenue, larger than the amount of that surplus, to say nothing 
 of the increase of individual profits. 
 
 (1) The population of France, notwithstanding the interruption to industry, 
 and the drains occasioned by the long wars, has increased since the commence- 
 ment of the Revolution. According to calculations made by the National Assem- 
 bly in 1791, France contained 26,363,074 inhabitants, and in 1831 it contain -jd 
 
212 ON PRODUCTION. BOOK I. 
 
 pies of political economy will teach us, that the loss of colonies by no 
 means implies a loss of the trade with them. Wherewith did France 
 before buy the colonial products ? with her own domestic products to 
 be sure. Has she not since continued to buy them in the same 
 way, though sometimes of a neutral, or even an enemy j 
 
 I admit, that the ignorance and vices of her rulers for the time 
 beintr have made her pay for those products much dearer than she 
 need^have done ; but now that she buys them at the natural price, 
 (exclusive, of course, of the import duties,) and pays for them as 
 before with her domestic products, in what way is she a loser ? 
 Political convulsions have given a new direction to commerce ; the 
 import of sugar and coffee is no longer confined to Nantes and Bor- 
 deaux ; and those cities have suffered in consequence. But, as 
 France now consumes at least as much of those articles as she ever 
 did, all, that has not come by the way of Nantes or Bordeaux, must 
 needs have found its way in* some other channel. France can not 
 have bought in any other way, than as of old, with the products of 
 her own land, capital, and industry; for, excepting robbery and piracy, 
 one nation has no other means of buying of another. Indeed, France 
 might have benefited largely by the trade which has supplanted her 
 own colonial commerce, had not old prejudices and erroneous 
 notions constantly opposed the natural current of human affairs. 
 
 Perhaps it may be argued, that the colonies furnish commodities 
 which are nowhere else to be had. The nation, therefore, that 
 should have no share of territories so highly favoured by nature, 
 would lie at the mercy of the nation that should first get possession $ 
 for the monopoly of purchasing the colonial produce would enable 
 her to exact her own price from her less fortunate neighbour. Now 
 it is proved beyond all doubt, that what we erroneously call colonial 
 produce, grows everywhere within the tropics, where the soil is 
 adapted to its cultivation. The spices of the Moluccas are found to 
 answer at Cayenne, and probably by this time in many other places ; 
 and no monopoly was ever more complete, than the trade of the 
 Dutch in that commodity. They had sole possession of the only 
 spice islands, and allowed nobody else to approach them. Has Eu- 
 rope been in any want of spices, or has she bought them for theii 
 weight in gold ? Have we any reason to regret the not having de- 
 voted two hundred years of war, fought a score of naval battles, and 
 sacrificed some hundreds of millions, and the lives of half a million 
 of our fellow-creatures, for the paltry object of getting our pepper 
 and cloves cheaper by some two or three sous a pound? And this 
 example, it is worth while to observe, is the most favourable one 
 for the colonial system, that could possibly be selected. One can 
 hardly imagine the possibility of monopolizing sugar, a staple pro- 
 duct of most parts of Asia, Africa, and America, so completely as 
 
 3-2,560,000 within the same limits. The annual increase is about 200,000 indi- 
 'iduais. (Vide Annuaire pour FAn 1834.) AMERICAN EDITOR. 
 
CHAP. XX. ON PRODUCTION. 213 
 
 the Dutch did the spice trade; yet has this very trade been snatched 
 from the avaricious grasp of the monopolist nation, almost without 
 firing a shot. 
 
 The ancients, by their system of colonization, made themselves 
 friends all over the known world; the moderns have sought to make 
 subjects, and therefore have made enemies. Governors, deputed by 
 the mother-country, feel not the slightest interest in the diffusion of 
 happiness and real wealth amongst a people, with whom they do not 
 propose to spend their lives, to sink into privacy and retirement, or 
 to conciliate popularity. They know their consideration in the 
 mother -country will depend upon the fortune they return with, not 
 upon their behaviour in office. Add to this the large discretionary 
 power, that must unavoidably be vested in the deputed rulers of 
 distant possessions, and there will be every ingredient towards the 
 composition of a truly detestable government. 
 
 It is to be feared, that men in power, like the rest of mankind, 
 are too little disposed to moderation, too slow in their intellectual 
 progress, embarrassed as it is at every step by the unceasing 
 manoeuvres of innumerable retainers, civil, military, financial, and 
 commercial; all impelled, by interested motives, to present things 
 in false colours, and involve the simplest questions in obscurity, to 
 allow any reasonable hope of accelerating the downfall of a system, 
 which for the last three or four hundred years must have wonder- 
 fully abridged the inestimable benefits, that mankind at large, in all 
 the five great divisions of the globe,* have, or ought to have derived 
 from the rapid progress of discovery, and the prodigious impulse 
 given to human industry since the commencement of the sixteenth 
 century. The silent advances of intelligence, and the irresistible 
 tide of human affairs, will alone effect its subversion. 
 
 CHAPTER XX 
 
 OP TEMPORARY AND PERMANENT EMIGRATION, CONSIDERED IN REFERENCE 
 TO NATIONAL WEALTH. 
 
 WHEN a traveller arrives in France, and there spends 2000 dol- 
 lars, it must not be supposed that the whole sum is clear profit to 
 France. The traveller expends it in exchange for the values he 
 consumes : the effect is just the same, as if he had remained abroad 
 and sent to France for what he wanted, instead of coming and con- 
 suming it here ; and is precisely similar to that of international com- 
 
 * The vast continent of New Holland, with its surrounding islands, is nov? 
 generally considered by geographers as a distinct portion of the globe, under the 
 denomination of Australia or Australasia, which has been given to it on account 
 of its position exclusively within the southern hemisphere. 
 
814 ON PRODUCTION. BOOK I. 
 
 merce, in which the profit made is not the whole or principal value 
 Deceived, but a larger or smaller per centage upon that principal 
 according to the circumstances. m 
 
 The matter has not hitherto been viewed in this light. In the 
 firm conviction of this maxim, that metal money was the only item 
 of real wealth, people imagined, that, if a foreigner came amongst 
 them with 2000 dollars in his pocket, it was so much clear profit to 
 the nation ; as if the tailor that clothes him, the jeweller that fur- 
 nishes him with trinkets, the victualler that feeds him, gave him no 
 values in exchange for his specie, but made a profit equal to the total 
 of their respective charges. All that the nation gains is the profit 
 upon its dealings with him, and upon what he purchases : and this 
 is by no means contemptible, for every extension of commerce is a 
 pioportionate advantage;* but it is well to know its real amount, 
 that we may not be betrayed into the folly of purchasing it too 
 dearly. An eminent writer upon commercial topics, tells us, that 
 theatrical exhibitions cannot be too grand, too splendid, or too 
 numerous ; for that they are a kind of traffic wherein France re- 
 reives all and pays nothing; a proposition which is the very reverse 
 of truth ; for France pays, that is to say, loses, the whole expense of 
 the exhibition, which is productive of nothing but barren amuse- 
 ment, and leaves no value whatever to replace what has been con- 
 sumed on it. Fetes of this description may be very pleasant things 
 as affording amusement, but must make a ridiculous figure as a specu- 
 lation of profit and loss. What would people think of a tradesman, 
 that was to give a ball in his shop, hire performers, and hand re- 
 freshments about, with a view to benefit in his business ? Besides, 
 it may be reasonably doubted, whether a fete or exhibition of the 
 most splendid kind, does in reality occasion any considerable influx 
 of foreigners. Such an influx would be much more powerfully 
 attracted by commerce, or by rich fragments of antiquity, or by 
 master-pieces of art nowhere else to be seen, or by superiority of 
 climate, or by the properties of medicinal waters, or, most of all, by 
 the desire of visiting the scenes of memorable events, and of learn- 
 ing a language of extensive acceptation. I am strongly inclined to 
 believe, that the enjoyment of a few empty pleasures of vanity has 
 never attracted much company from any great distance. People 
 may go a few leagues to a ball or entertainment, but will seldom 
 make a journey for the purpose. It is extremely improbable, that 
 the vast number of Germans, English, arid Italians, who visit the 
 al of France in time of peace, are actuated solely by the desire 
 
 *A strange country has some advantages over the traveller, and its deal- 
 
 s with him maybe considered as lucrative; for his ignorance of the Ian- 
 
 sruage i and of prices, and often a spice of vanity, make him pay for most of 
 
 e objects of his consumption above the current rate. Besides, the public 
 
 3 and exhibitions, which he there pays for seeing, are expenses already 
 
 Hirred by the nation, which he nowise aggravates by his presence. But 
 
 advantages, though real and positive, are very limited in amount, arid 
 
 must not be over-rated. 
 
CHAP. XX. ON PRODUCTION. 215 
 
 of seeing the French opera at Paris. That city has tortpnately 
 many worthier objects of general curiosity. In Spain, the bull- 
 fights are considered very curious and attractive ; yet I cannot think 
 many Frenchmen have gone all the way to Madrid to witness that 
 diversion. Foreigners, that have already come into the country on 
 other accounts, are, indeed, frequent spectators of such exhibitions ; 
 but it was not solely with this object that they first set out upoi? their 
 journey, (a) 
 
 The vaunted fetes of Louis XIV. had a still more mischievous 
 tendency. The sums spent upon them were not supplied by foreign 
 ers, but by French provincial visitors, who often spent in a week, as 
 much as would have maintained their families at home for a year. 
 So that France was two ways a loser ; first, of the sums expended 
 by the monarch, which had been levied on the subjects at large ; 
 secondly, of all that was spent by individuals. The sum total of 
 the consumption was thrown away, that a few tradesmen of the 
 metropolis might make their profits upon it; which they would 
 equally have done, had their industry and capital taken a more 
 beneficial direction. 
 
 A stranger, that comes into a country to settle there, and brings 
 his fortune along with him, is a substantial acquisition to the nation. 
 There is in this case an accession of two sources of wealth, industry 
 and capital : an accession of full as much value, as the acquirement 
 
 (a) This has become a matter of some interest to England, whose unpro- 
 ductive capitalists and proprietors have absolutely overwhelmed the society of 
 France and a great part of Italy, where they consume an immense revenue, 
 derived from Britain by the export of her manufactures without any return. 
 Thus their native country is, pro tanto, a producer without being a consumer 
 the scene of exertion but not of enjoyment. This circumstance, although 
 nowise prejudicial to her productive powers, is extremely so to the comfort and 
 enjoyment and content of her population ; for there are few enjoyments so per- 
 sonal and selfish, as not to be diffused in some degree or other at the moment 
 and place of consumption. Besides, the presence of the proprietor is always a 
 benefit, especially in Great Britain, where so many public duties are gratuitously 
 performed. Ireland suffers in a worse degree ; her gentry are attracted by 
 England as well as the continent ; and the consequences have long been matter 
 of regret and complaint. Though it might be impolitic to check the efflux by 
 authoritative measures, it should at least not be directly encouraged and stimu- 
 lated, as it really is, by the financial system, which the English ministry so 
 obstinately persevere in. Almost the whole of the taxation is thrown immedi- 
 ately upon consumption ; whilst the permanent sources of production and the 
 clear rent they yield to the idle proprietor are left untouched. The proprietor has, 
 therefore, an obvious interest in effecting his consumption where it is least bur- 
 thened with taxation ; that is to say, anywhere but in England. His property 
 is protected gratuitously, and the charge of its protection defrayed by the pro- 
 ductive classes, who thus are compelled to pay for the security of other people's 
 property as well as their own, and are themselves unable to imitate their unpro- 
 ductive countrymen, by running away from domestic taxation. A more unjust 
 arid discouraging system could not have been devised. Its evils are daily 
 increasing, and threaten the most serious diminution of the national resources. 
 But the ministers neither see the mischief themselves, nor will listen to thfc 
 warnings of others. Many of them, indeed, have an interest in perpetuating an 
 exemption, by which they benefit personally. T. 
 
216 ON PRODUCTION. BOOK I 
 
 of a proportionate extension of territory; to say nothing of what is 
 gained a moral estimate, if the emigrant bring with him private 
 virtue and attachment to the place of his adoption. When .bre- 
 derick William came into the regency," says the royal historian of 
 the house of Brandenburgh, "there was in the country no manufac- 
 ture of hats, of stockings, of serge, or woollen stuff of any kind. 
 All these commodities were derived from French industry. The 
 French emigrants introduced amongst us the making of broadcloths, 
 baizes and lighter woollens, of caps, of stockings wove in the frame, 
 of hats, of beaver and felt, as well as dyeing in all its branches, borne 
 refugees of that nation established themselves in trade, and retailed 
 the products of their industrious countrymen. Berlin soon could 
 boast of its goldsmiths, jewellers, watch-makers, and carvers ; those 
 of the emigrants, that settled in the low country, introduced the 
 cultivation of tobacco, and of garden fruits and vegetables, and by 
 their exertions converted the sandy tract in the environs into capital 
 kitchen-garden grounds." 
 
 This emigration of industry, capital, and local attachment, is no 
 less a dead and total loss to the country thus abandoned, than it is a 
 clear gain to the country affording an asylum. It was justly ob- 
 served by Christina, queen of Sweden, upon the revocation of the 
 edict of 'Nantes, that Louis XIV. had used his right hand to cut off 
 his left. 
 
 Nor can the calamity be prevented by any measures of legal 
 coercion. A fellow-citizen cannot be forcibly retained, unless he 
 be absolutely incarcerated ; still less can he be prevented from ex- 
 porting his movable property, if he be so inclined. For, putting 
 out of the question the channel of contraband, which can never be 
 closed altogether, he may convert his effects into goods, whose ex- 
 port is tolerated or even encouraged, and consign, or cause them to 
 be consigned, to some correspondent abroad. This export is a real 
 outgoing of value ; but how is it possible for government to ascer- 
 tain, that it is intended to be followed by no return ?* 
 
 The best mode of retaining and attracting mankind is, to treat 
 them with justice and benevolence; to protect every one in the en- 
 joyment of the rights he regards with the highest reverence ; to 
 allow the free disposition of person and property, the liberty of con- 
 tinuing or changing his residence, of speaking, reading, and writing 
 in perfect security. 
 
 Having thus investigated the means of production, and pointed 
 out the circumstances, that render their agency more or less prolific, 
 
 *In 179C, when the new authorities of France indemnified the holders of 
 suppressed offices in paper-money, these discarded functionaries for the most 
 part converted their assignats into specie, or other commodities of equal value, 
 which they took or sent out of the country. The consequent national loss to 
 h ranee was nearly as great, as if they had received their indemnities in cash ; 
 for its paper representative had not then suffered any material depreciation. 
 Kven when the individual remains himself in the country, he can not bo pre- 
 vented from transferring his fortune thence, if he be determined on so doing. 
 
CHAP. XXI. ON PRODUCTION. 217 
 
 it would be endless, as well as foreign to my subject, to attempt a 
 general review of all the various products that compose the wealth 
 of mankind : such a task would furnish materials for many distinct 
 treatises. But there is one amongst these products, the uses and 
 nature of which are very imperfectly known, although the know- 
 ledge of them would throw much light upon the matter now under 
 discussion : for which reason I have determined, before the conclu- 
 sion of this part of my work, to give a separate consideration to the 
 product money, which acts so prominent a part in the business of 
 production, in the character of the principal agent of exchange and 
 transfer. 
 
 CHAPTER XXI. 
 
 OF THE NATURE AND USES OF MONEY. 
 
 SECTION I. 
 General Remarks. 
 
 IN a society ever so little advanced in civilization, no single in- 
 dividual produces all that is necessary to satisfy his own wants ; and 
 it is rarely that an individual, by his single exertion, creates even 
 any single product ; but even if he does, his wants are not limited to 
 that single article ; they are numerous and various, and he must, 
 therefore, procure all other objects of his personal consumption, by 
 exchanging the overplus of the single product he himself creates be- 
 yond his own wants, for such other products as he stands in need of. 
 And, by the way, it is observable, that, since individual producers, 
 in every line, keep for their own use but a very small part of their 
 own products; the gardener, of the vegetables he raises, the bakec 
 of the bread he bakes, the shoemaker, of the shoes he makes, and so 
 of all others; the great bulk, nay, almost the whole of the products 
 of every community, arrive at consumption by the medium of ex- 
 change. 
 
 This is the reason, why it has been erroneously concluded, that 
 exchange and transfer are the basis and origin of the production of 
 wealth, and of commerce in particular; whereas they are only 
 secondary and accessory circumstances; inasmuch as, were each 
 family to raise the whole of the objects of its own consumption, as 
 we see practised in some instances in the back settlements of the 
 United States, society might continue to exist, without a single act 
 of exchange or transfer. I make this remark, merely with a view 
 to correctness of first principles, without any design to detract fron; 
 19 20 
 
218 ON PRODUCTION. BOOK t 
 
 the importance of exchange and transfer to the progressive advance- 
 ment of production; indeed, I set out with the position, that they 
 are indispensable in an advanced stage of civilization. 
 
 Admitting, then, the necessity of interchange, let us pause a mo- 
 ment, and consider, what infinite confusion and difficulty must arise 
 to all the different component members of society, who are for the 
 most part producers of but a single article, or two or three at the 
 utmost, but of whom even the poorest is a consumer of a vast num- 
 ber of different products ; I say, what difficulty must ensue, were 
 every one obliged to exchange his o\vn products specifically for 
 those he may want ; and were the whole of this process carried on 
 by a barter in kind. The hungry cutler must offer the baker his 
 knives for bread ; perhaps, the baker has knives enough, but wants 
 a coat ; he is willing to purchase one of the tailor with his bread, but 
 the tailor wants not bread, but butcher's meat ; and so on to infinity. 
 
 By way of getting over this difficulty, the cutler, finding he can- 
 not persuade the baker to take an article he does not want, will use 
 his best endeavours to have a commodity to offer, which the baker 
 will be able readily to exchange again for whatever he may happen 
 to need. If there exist in the society any specific commodity that 
 is in general request, not merely on account of its inherent utility, 
 but likewise on account of the readiness with which it is received in 
 exchange for the necessary articles of consumption, and the facility 
 of proportionate subdivision, that commodity is precisely what the 
 cutler will try to barter his knives for; because he has learnt from 
 experience, that its possession will procure him without any diffi- 
 culty, by a second act of exchange, bread or any other article he may 
 wish for. 
 
 Now, money is precisely that commodity. 
 
 The two qualities, that give a general preference of value, in the 
 shape of the current money of the country, to the same amount of 
 value in any other shape, are : 
 
 ^ 1. The aptitude, in the character of an intermedial object of ex- 
 change, to help all who have any exchange or any purchase to make, 
 that is to say, every member of the community, towards the specific 
 
 of desire, whatever it may be ; whereas, the possessor of any othei 
 commodity can never be sure that it will be acceptable to the DOS- 
 sessor of that particular object of desire. 
 
 2. The capability of subdivision and precise apportionment to the 
 >unt of the intended purchase; which capability is a recom- 
 mendation to all who have purchases to make; in other words, to 
 every member of the community. Every one is, therefore, anxious 
 r for money the product whereof he holds a superfluity, and 
 wWch is commonly that he himself produces; because, in addition 
 to the other quality above stated, he feels sure of being able to buy 
 witn its value in that shape is small or as large a portion of cor- 
 
CHAP. XXI. ON PRODUCTION. 
 
 responding value, as he may require ; and because he may buy, 
 whenever, and wherever he pleases, such objects as he may desire 
 to have in lieu of the product he has sold originally. 
 
 In a very advanced stage of civilization, when individual wants 
 have become various and numerous, and productive operations very 
 much subdivided, exchanges become a matter of more urgent neces- 
 sity, as well as much more frequent and more complicated ; and 
 personal consumption arid barter in kind becomes less practicable. 
 For instance, if a man makes not the whole knife, but the handle of 
 it only, as in fact is the case in towns where cutlery is conducted on 
 a large scale, he does not produce any thing that he can turn to ac- 
 count; for what could he do with the handle without the blade? He 
 can not himself consume the smallest part of his own product, but 
 must unavoidably exchange the whole of it for the necessaries or 
 conveniences of life, for bread, meat, linen, &c. But neither baker, 
 butcher, nor weaver, can ever stand in need of an article, that is fit 
 for nobody but the finishing cutler, who can not himself give either 
 bread or meat in exchange ; because he produces neither ; and who 
 must, therefore, give some one commodity, that, by the custom of 
 the country, may be expected to pass currently in exchange for most 
 others. 
 
 Thus, money is the more requisite, the more civilized a nation is, 
 and the further it has carried the division of labour, (a) Yet history 
 contains precedents of considerable states, in which the use of any 
 specific article, as money, was utterly unknown ; as we are told it 
 was among the Mexicans at the time of the discovery. We are in- 
 formed, that, just about the period of their conquest by the Spanish 
 adventurers, they were beginning to employ grains of cacao as 
 money, in the smaller transactions of commerce.* 
 
 I have referred to custom, and not to the authority of govern- 
 ment, the choice of the particular article that is to act as money in 
 preference to every other : for though a government may coin what 
 it pleases to call crowns, it does not oblige the subject to give his 
 goods in exchange for these crowns, at least not where property is 
 at all respected. Nor is it the mere impression, that makes people 
 consent to take this coin in exchange for other products. Money 
 passes current like any other commodity; and people may at liberty 
 barter one article for another in kind, or for gold in bars, or silver 
 bullion. The sole reason why a man elects to receive the coin in 
 preference to every other article, is, because he has learnt from ex- 
 
 * Raynal, Hist. phil. et pol. lib. vi. 
 
 (a) The utility of money is intense, in the compound ratio of the division of 
 labour and the variety of individual consumption. A sugar colony in the West 
 Indies, though highly productive in proportion to its population, requires little 
 money to facilitate the transfer of the produce; because the bulk of the population, 
 the negroes, have very little variety of consumption : they are fed, clothed, &c. 
 in the wholesale, and in the plainest and most uniform manner. Yet, possibly, 
 the division both of agricultural and manufacturing labour on each plantation 
 may be carried to considerable length. T. 
 
220 ON PRODUCTION. BOOK I 
 
 i>erience, that it is preferred by those whose products he has occa- 
 sion to purchase. Crown pieces derive their circulation as money 
 from no other authority than this spontaneous preference : and if 
 there were the least ground for supposing, that any other commodity, 
 as wheat, for instance, would pass more currently in exchange for 
 what they calculate upon wanting themselves, people would not give 
 their <Wds for crown pieces, but would demand wheat, which would 
 then be invested with all the properties' of money. And this has 
 occurred occasionally in practice, where the authorized or govern- 
 ment money has consisted of paper destitute of credit or public 
 conhdence. 
 
 Custom, therefore, and not the mandate of authority, designates 
 the specific product that shall pass exclusively as money, whether 
 crown pieces or any other commodity whatever.* 
 
 The more frequent recurrence of the exchange of every individual 
 product for the commodity, money, than for any other product, has 
 attached particular names to this transaction ; thus, to receive money 
 in exchange is called, selling, and to give it, buying. 
 
 In this way originated the use of money. These positions are by 
 no means purely speculative ; for on them must all arguments, and 
 laws, and regulations, on the subject of money, be grounded. A 
 system built upon any other foundation can possess neither beauty 
 nor solidity, and must fail to fulfil the object of its construction. 
 
 With the view of throwing the utmost possible light upon the 
 essential properties of money, and the principal contingencies it is 
 subject to, I shall treat of these particulars in separate sections, and 
 endeavour to enable such as may give me their attention, to follow 
 with ease the cnain of connexion, notwithstanding that classification ; 
 and themselves to arrange in one comprehensive view the whole 
 play of the mechanism, and the causes of that derangement, which 
 human folly or misfortune may occasionally effect. 
 
 SECTION II. 
 Of the Material of Money. 
 
 If, as it would appear by the reasoning in the preceding section, 
 money be employed as a mere intermedial object of exchange be- 
 
 * When the intercourse between the Europeans and the negroes of the river 
 Gambia first commenced, the commodity most in request with them was iron, 
 for the purposes of war and of tillage. Iron, therefore, became the standard of 
 comparison of value. In a little time, it became a mere nominal standard in 
 their mercantile dealings ; and a bar of tobacco consisting of 20 or 30 leaves of 
 that herb, was given for a bar of rum consisting of four or five pints, according 
 to the abundance or scarcity of the article. In such a state of society, each 
 product successively performs the functions of money in reference to all other 
 products; which leaves the community subject to all the inconveniences of bar- 
 ter m kind, the chief of which is, the inability to offer any one article in genera] 
 request and acceptation, and capable of ready apportionment in amount to other 
 commodities at large. Vide Travels of Mungo Park, vol i c 2 
 
CHAP. XXI. ON PRODUCTION. 221 
 
 tween an object in possession and the object of desire, the choice of 
 its material is of no great importance. Money is not desired as an 
 object of food, of household use, or of personal covering, but for the 
 purpose of re-sale, as it were, and re-exchange for some object of 
 utility, after having been originally received in exchange for one 
 such already. Money is, therefore, not an object of consumption ; 
 it passes through the hands without sensible diminution or injury ; 
 and may perform its office equally well, whether its material be gold 
 or silver, leather or paper. 
 
 Yet, to enable it to execute its functions, it must of necessity be 
 possessed of inherent and positive value ; for no man will be content 
 to resign an object possessed of value, in exchange for another of 
 less value, or of none at all. 
 
 There are some other less essential requisites, which add to its 
 efficiency. A material, wherein these are not combined, is unfit for 
 the purpose, and cannot hope to engross its functions either generally 
 or permanently. 
 
 We are told by Homer, that the armour of Diomede had cost 
 nine oxen. A warrior, that wished to arm himself at half the price, 
 must have been puzzled to pay four oxen and a half. Wherefore, 
 the article employed as money must be capable of being readily 
 and without injury apportioned to the different objects of desire, 
 and subdivided in such manner, as to admit of exchanges of the 
 exact amount required. 
 
 Again, we read, that in Abyssinia, they make use of salt for 
 money. If the same custom prevailed in France, a man must take 
 a mountain of salt to market to pay for his weekly provisions. 
 Wherefore, the commodity employed as money must not be so 
 abundant, as to make it necessary to transfer a large quantity, on 
 each recurring act of exchange. 
 
 At Newfoundland, it is said, that dried cod performs the office of 
 money, and Smith makes mention of a village in Scotland, where 
 nails are made use of for that purpose.* Besides many other incon- 
 veniences, that substances of this nature are subject to, there is this 
 grand objection, that the quantity may be enlarged almost at plea- 
 sure, and in a very short space of time, ahd thereby a vast fluctuation 
 effected in their relative value. But who would readily accept in 
 exchange an article, that might, perhaps, in a few moments, lose the 
 half or three-fourths of its value ? Wherefore, the commodity em- 
 ployed as money must be of such difficult acquisition, as to ensure 
 those who take it, from the danger of sudden depreciation. 
 
 In the Maldive islands, and in some parts of India and Africa, 
 shells, called coivries, are employed as money, although they have 
 no intrinsic value, except that they serve for ornament to some rude 
 tribes. This kind of money would never do for nations that carry 
 on trade with many parts of the globe ; a medium of exchange o'f 
 such very limited circulation would offer insuperable objections. It 
 
 * Wealth of Nations, book i. c. 4. 
 19* 
 
222 ON PRODUCTION. BOOK I 
 
 is natural for people to receive most willingly in exchange that art*, 
 cle, which is the most universally received in like manner by othei 
 people in their turn. 
 
 We need not, then, be surprised, that almost all the commerce 
 nations of the world should have selected metal to perform the office 
 of money; when once the more industrious and commercial com- 
 munities* had declared their choice, all the rest had an evident in- 
 ducement to follow their example. 
 
 At times, when the metals now most abundantly produced were 
 yet rare, people were content to make use of them for the purpose. 
 The le^al currency of Lacedaemon was of iron ; that of the early 
 Romans, of copper. In proportion as those metals were extracted 
 from the earth in greater quantity, they became liable to the objec- 
 tion above stated in respect to all products of too little^comparative* 
 value ; and it is long since the precious metals, that is to say, gold 
 and silver, have been almost universally adopted. To this use they 
 are particularly applicable : 
 
 1. As being divisible, into extremely minute portions, and capable 
 of re-union, without any sensible loss of weight or value ; so that 
 the quantity may be easily apportioned to the value of the article of 
 purchase. 
 
 2. The precious metals have a sameness of quality all over the 
 world. One grain of pure gold is exactly similar to another, whe- 
 ther it came from the mines of Europe or America, or from the 
 sands of Africa. Time, weather, and damp, have no power to alter 
 the quality : the relative weight of any specific portion, therefore, 
 determines at once its relative quality and value to every other 
 portion : two grains of gold are worth exactly twice as much as one. 
 
 3. Gold and silver, especially with the mixture of alloy, that they 
 admit of, are hard enough to resist very considerable friction, and 
 are therefore fitted for rapid circulation, though, indeed, in this re- 
 spect, they are inferior to many kinds of precious stones. 
 
 4. Their rarity and consequent dearness are not so great that the 
 quantity of gold or of silver, equivalent to the generality of goods, 
 is too minute for ordinary perception ; nor, on the other hand, are 
 they so abundant and cheap, as to make a large value amount to a 
 great weight. It is possible, that in progress of time, they may be- 
 come liable to objection on this score ; especially if new and rich 
 veins of ore should be discovered : and then mankind must have 
 recourse to platina, or some other yet unknown metal, for the pur- 
 pose of currency. 
 
 Lastly, gold and silver are capable of receiving a stamp or impres- 
 sion, certifying the weight of the piece, and the degree of its purity. 
 
 *The money of Lacedremon is a proof of the position, that public authority 
 i incompetent of itself to give currency to its money. The laws of Lycurgus 
 directed the money to be made of iron, purposely to prevent its being easily 
 hoarded, or transferred in large quantities ; but they were inoperative, because 
 they went to defeat these, the principal purposes of money. Yet no legislate- 
 *as ever more rigidly obeyed than Lycurgus. 
 
CHAP. XXI. ON PRODUCTION. 223 
 
 Although the precious metals used for money have generally 
 some mixture of baser metal, generally of copper, by way of alloy, 
 the value of the baser metal, thus incorporated, is reckoned for no- 
 thing. Not that the alloy is itself destitute of value; but because 
 the operation of disuniting it from the purer metal would cost more 
 than it would be worth, after it was extracted. For this reason a 
 piece of coined gold or silver, mixed with alloy, is estimated by the 
 quantity of precious metal only contained in it.* 
 
 * The present silver coin of France contains one part copper to nine parts 
 fine silver ; the relative value of copper to silver being as 1 to 60, or thereabouts. 
 So that the copper contained in the whole silver coinage, amounts to about 
 shr of the total value of the silver coin, or 1 cent in 6 fr. Supposing it were 
 attempted to disengage the copper, it would not pay the expenses of the process 
 of separation; to say nothing of the value of the impression that must be 
 destroyed. Wherefore, it is reckoned for nothing in the valuation of the coin. 
 A piece of 5 fr. presents the idea of the 22| grammes of fine silver contained 
 in it, though actually weighing 25 gr. inclusive of the alloy. (1) 
 
 (1) The values of the gold, silver, and copper coins of the United States, 
 were first regulated by the act of Congress of the 2d of April, 1792, establish- 
 ing the mint. By that act, the eagle contained 247.5 grains of pure gold and 
 22.5 grains of alloy, making together 270 grains of standard gold ; and the 
 half eagle and the quarter eagle, their respective fractional proportions of the 
 same metals. By the act of Congress of the 30th of June, 1834, this standard 
 has been debased, and the weight of the gold coins reduced : the eagle now 
 contains 232 grains of pure gold and 26 grains of alloy, making together 258 
 grains of standard gold ; and the half eagle and the quarter eagle are reduced 
 in like proportions. By the act of 1792, the standard of gold was eleven- 
 twelfths of pure gold to one-twelfth of alloy, or 22 carats fine. By the act of 
 the present year, the relative fineness or number of carats has been reduced to 
 about 21.58, equivalent to a debasement of about 1.9 per cent. ; and the actual 
 quantity of pure metal in the coin has been diminished more than 6.25 per 
 cent. (6.262626+). The alloy of standard gold is composed of silver and 
 copper, not exceeding one half silver. 
 
 In the silver coins of the United States, no change has been made, since the 
 act of 1792, which regulated their value. The dollar, by that act, is made the 
 unit, of the same value as the Spanish milled dollar then current. The dollar 
 of the United States contains 371.25 grains of pure silver and 416 grains of 
 standard silver ; the half dollar 185.625 grains of pure silver and 208 grains of 
 standard silver ; the quarter dollar 92.8125 grains of pure silver and 104 grains 
 of standard silver ; the dime 37.125 grains of pure silver and 41.6 grains of 
 standard silver; and the half dime 18.5625 grains of pure silver and 20.8 grains 
 of standard silver. The standard of silver is 1485 parts of fine to 179 parts 
 alloy ; accordingly, 1485 parts in 1664 parts of the entire weight of the silver 
 coins are of pure silver, and the remaining 179 parts of alloy. The alloy of 
 standard silver is wholly composed of copper. 
 
 The copper coins of the United States are the cent and the half cent ; the 
 weight of which, since the act of 1792, has been twice reduced. By the act of 
 1792, the cent contained 264 grains, and the half cent 132 grains, of copper, 
 and the cent was fixed at the value of the hundredth part of the dollar, or unit. 
 By an act of the 14th of January, 1793, the cent was reduced to 208 grains, 
 and the half cent to 104 grains, of copper ; and by an act of the 3d of March, 
 1795, the President was authorized by proclamation, and accordingly, on the 26th 
 of January, 1796, reduced the cent to 168 grains, and the half cent to 84 grains 
 of copper, their present weight. The proportional mint value of gold to silver, 
 by the act of 1792, was as 1 of pure gold to 15 of pure silver ; and by the act of 
 
ON PRODUCTION. BOOK I. 
 
 SECTION III. 
 
 Of the Accession of Value a Commodity receives by being Vested with 
 the Character of Money. 
 
 From the foregoing sections it will appear, that money is indebted 
 for its currency, not to the authority of the government, but to its 
 beino- a commodity bearing a peculiar and intrinsic value. But its 
 preference, as an object of exchange, to all other commodities of 
 equivalent value, is owing to its characteristic properties as money ; 
 and to the peculiar advantage it derives from its employment in that 
 character; namely, the advantage of being in universal use and re- 
 quest. The whole population, from the lowest degree of poverty to 
 the highest of wealth, must effect exchanges, must buy the objects 
 of want; must be consumers of money; or, in other words, must 
 obtain possession of the commodity, that acts as the medium of ex- 
 change, the commodity generally admitted to be best suited, and 
 most frequently employed for that purpose. A man that has any 
 other commodity, jewels, for instance, to offer in exchange for the 
 necessaries or luxuries he may have occasion for, cannot get those 
 necessaries or luxuries by the process of exchange, until he has 
 found a consumer for his jewels ; nor can he even then be sure, that 
 such a consumer will be able to give him, in return, the very identi- 
 cal article he may want : whereas, a man, with money in his pocket, 
 is quite certain, that it will be acceptable to the person, pf whom he 
 would buy any thing ; because that person will, in turn, be himself 
 obliged to become a purchaser in like manner.* With the com- 
 modity, money, he can obtain all he wants by a single act of ex- 
 change only, called a purchase ; whereas, with all others two acts 
 at least are necessary ; a sale and a purchase. This is the sum total 
 of its advantages in the character of money : but it must be obvious 
 to every body, that the preference, thus shown it as money, is a 
 consequence of its actual use as such. 
 
 I must here observe, that the adoption of any specific commodity 
 to serve as money, considerably augments its intrinsic value, or 
 value as an article of commerce. A new use being discovered for 
 the commodity, it unavoidably becomes more in request ; the em- 
 ployment of a great part, the half or perhaps three-fourths of the 
 whole stock of it on hand, in this new way cannot fail to render the 
 whole more scarce and dear, (a) 
 
 *The other property of money, the capability of subdivision, and apportion- 
 ment of the value parted with, must not be lost sight of: by it the jeweller is 
 tc ^change a minute portion of his precious commodity for the smallest 
 item of his household expenditure. 
 
 ' SUr la Form ' et 
 
 r P r P<; rtional mint <*lue of gold to silver is as 1 of pure gold 
 of pure silver. AMERICAN EDITOR. 
 
CHAP. XXI. ON PRODUCTION. 225 
 
 Were the actually existing stock of silver and gold applied to 
 no other use than the fabrication of plate or ornament, the quantity 
 would be abundant and much cheaper than it is at present ; that is to 
 gay, whenever they were exchanged for other commodities, more 
 of them would be given or received in proportion to the value ob- 
 tained in exchange. But a large portion of these metals being 
 destined to act as money, and exclusively occupied in that way, 
 there is less remaining to be manufactured into jewellery and plate, 
 and the scarcity of course adds to the value. On the other hand, if 
 they were never used in plate or jewellery, there would be more of 
 them applicable to the purpose of money, and money would grow 
 cheaper, that is to say, more of it would be necessary to purchase 
 an equal quantity of goods. The employment of the precious 
 inetals in manufacture makes them scarcer and dearer as money ; 
 in like manner as their employment as money makes them scarcer 
 and dearer in manufacture.* 
 
 Hence it naturally follows, that these metals being, by reason of 
 their employment as money, raised to such a price, as precludes 
 their so general use in the form of plate and jewellery, it is in con- 
 sequence found less convenient to use them in that form. The 
 luxury costs more than it is worth. Thus, massive gold plate has 
 gone completely out of fashion, particularly in those countries, where 
 the activity of commerce, and the rapid progress of wealth, make 
 gold in great demand for the purposes of money. The richest in- 
 dividuals content themselves with gilt plate, that is to say, plate 
 covered with a very thin coat of gold ; solid gold is used only in 
 smaller articles of manufacture, and those in which the value of the 
 workmanship exceeds that of the metal. In England, plate is made 
 very light, and people of affluence often content themselves with 
 silver-plated goods. The ostentation of displaying a large service 
 of that metal costs the interest of a considerable capital. 
 
 The increase of the value of metals is, generally speaking, at- 
 tended with some disadvantages; inasmuch as it places many arti- 
 cles of comfort and convenience, silver dishes, spoons, &c., beyond 
 the reach of most private families ; but there is no disadvantage in 
 such increased value of the metal in its character of money ; on the 
 
 * Ricardo and some other writers maintain, that the charges of obtaining the 
 metal wholly determine its price or relative value in exchange for all other com- 
 modities. According to their notions, therefore, the want or demand nowise 
 influences that price ; a position in direct contradiction to daily and indisputable 
 experience, which leads us invariably to the conclusion, that value is increased 
 by increase of demand. Supposing that, by the discovery of new mines, silver 
 were to become as common as copper, it would be subject to all the disqualifica 
 tions of copper for th^ purposes of money, and gold would be more generally 
 employed. The consequent increase of the demand for gold would increase the 
 intensity of its value ; and mines would be worked, that are now abandoned, be- 
 cause they do not defray the expense. It is true that the ore would ther be ob- 
 tained at a heavier rate; but will any one deny, that the increased value of th* 
 metal would be owing to the increased demand for if? It is the increased in 
 tensity of that demand, that determines the miner to incur the increased charge 
 of production. 
 
 2D 
 
o. 26 ON PRODUCTION. BOOK 1. 
 
 contrary, there is a greater convenience in the transfer of a less 
 bulky commodity, on every change of residence, and every act of 
 
 iX Thef election of any commodity, to act as money in but one part 
 of the world, increases its value everywhere else. There is no 
 doubt that, if silver should cease to be current as money in Asia, 
 the value of that metal in Europe would be affected, and more oi it 
 would be given in exchange for all other commodities; for one use 
 of silver in Europe is, the possibility of exporting it to Asia. 
 
 The employment of the precious metals as money by no means 
 renders their value stationary ; they remain subject to local as well 
 as temporary fluctuations of value, like every other object of com- 
 merce. In China, half an ounce of silver will purchase as many 
 objects of use or pleasure as an ounce in France; and an ounce of 
 silver in France will generally go much farther in the purchase of 
 commodities, than it will in America. Silver is more valuable in 
 China than in France, and in France than in America. 
 
 Thus money, or specie, as some people call it, is a commodity, 
 whose value is determined by the same general laws, as that of all 
 other commodities ; that is to say, rises and falls in proportion to the 
 relative demand and supply. And so intense is that demand, as to 
 have sometimes been sufficient to make paper, employed as money, 
 equal in value to gold of the same denomination ; of which the mo- 
 ney of Great Britain is a present example. 
 
 It must not be imagined, that the paper money of that country 
 derives its value from the promise of payment in specie, which it 
 purports to convey. That promise has been held out ever since the 
 suspension of casji payments by the bank in 1797, without any 
 attempt at performance, which many people consider impossible.* 
 
 * Before the Bank of England can pay off its notes in cash, the government, 
 its principal debtor, must discharge its debts in specie ; which it can not do unless 
 it purchase the specie, either with its savings, or with the proceeds of further 
 taxation. In doing so, it would, in effect, substitute a new and very costly en- 
 gine of circulation, which must be purchased by the state, for the present one, 
 which, although much out of order, and altogether destitute of intrinsic value, 
 is yet made to do the business well enough. (1) 
 
 (1) The Bank of England, notwithstanding the opinion expressed by the author 
 in this note, has long since resumed and continued the payment of its notes on 
 demand in specie ; and, it must be added, without any intention having been 
 expressed, or attempt made, by the British government, to " discharge its debts 
 in specie." which M. Say seemed here to think must be previously effected. 
 
 By an act of parliament, passed in July 1819, generally known as Mr. Peel's 
 Act, the Bank of England was required, from the 1st of May, 1823, to pay its 
 notes on demand, in the legal coins of the realm. The final resumption of cash 
 payments by the Bank of England took place, however, at a still earlier period ; 
 for, finding itself in possession of sufficient gold to make payments in cash sooner 
 than this iaw prescribed, the bank obtained the passage of another act, which 
 made it imperative upon the institution to pay all demands in the legal coin of 
 tii*? realm on the 1st of May, 1822, since which time it has never ceased to 
 M discharge its debts in specie " when required. 
 
 AMERICAN EDITOR. 
 
CHAP. XXI. ON PRODUCTION. 22? 
 
 Gold is only procurable piecemeal, and by payment of an agio or 
 per centage ; in other words, by giving a larger amount in paper for 
 a smaller amount in gold. Yet the paper, though depreciated, is 
 invested with value far exceeding that of its flimsy material. 
 Whence, then, is that value derived t From the urgent want, in a 
 very advanced stage of society and of industry, of some agent 01 
 medium of exchange. England, in its actual state, requires, for the 
 effectuation of its sales and purchases, an agent or medium equal in 
 value, say to 1,284,000 Ibs. weight of gold; or, what is the same 
 thing, to 1 ,200,000,000 Ibs. weight of sugar ; or, what is still the 
 same thing, to 60,000,000/. sterling of paper, taking the Bank of 
 England paper at 30 millions, and the paper of the country banks 
 at as much more, (a) This is the reason, why the 60 millions of 
 paper, though destitute of intrinsic value, are, by the mere want of 
 a medium of exchange, made equal in value to 1,284,000 Ibs. weight 
 of gold, or 1,200,000,000 Ibs. weight of sugar. 
 
 As a proof that this paper has a peculiar and inherent value, 
 when its credit was the same as at present, and its volume or nominal 
 amount was enlarged, its value fell in proportion to the enlargement, 
 just like that of any other commodity. And, as all other commodi- 
 ties rose in price, in proportion to the depreciation of the paper, its 
 total value never exceeded the same amount of 1,284,000 Ibs. weight 
 of gold, or, 1,200,000,000 Ibs. weight of sugar. Why? Because the 
 business of circulating all the values of England required no larger 
 value. No government has the power of increasing the total national 
 money otherwise than nominally. The increased quantity of the 
 whole reduces the value of every part ; and vice versa.* 
 
 Since the national money, whatever be its material, must have a 
 peculiar and inherent value, originating in its employment in that 
 character, it forms an item of national wealth, in the same manner 
 as sugar, indigo, wheat, and all the other commodities that the nation 
 may happen to possess. f It fluctuates in value like other commodi- 
 
 * For the consequence of an excessive issue of paper-money, vide infrd, Chap. 
 XXII. sect. 4. where the subject of paper-money is discussed. 
 
 f The multiplication of paper-money, and its consequent depreciation, effects 
 no augmentation of the wealth of the community, although it makes necessary a 
 more liberal use of figures in the estimation ; just in the same way as its valua- 
 tion in wheat instead of silver would do. The total of national wealth might be 
 20,000,000,000 kilogr. of wheat, and but 25,000,000 kilogr. of silver, and yet the 
 value precisely the same. If the value of the money be less intense, it will ro- 
 quire more of it to express the same degree of value. 
 
 (a) It must not be supposed, that our author is ignorant of the wide difference 
 between Bank of England and country bank paper, viz : that the one is paper- 
 money, the principal ; the other, its convertible representative. This position 
 is perfectly correct. The credit, embodied, as it were, in the provincial paper, 
 is equally an agent of circulation with the inconvertible principal, the paper- 
 money ; which, but for its presence and rivalry, would be required in double the 
 quantity, to maintain the same scale of money-prices. Great confusion haa 
 hitherto prevailed on this subject for want of a clear conception of the concurrent 
 operation of coin and its rival, credit. T. 
 
ON PRODUCTION. BOOK I. 
 
 ties ; and like them, too, is consumed, though less rapidly than most 
 of them. Wherefore, it would be wrong to subscribe to the opinion 
 of Gamier, (a) who lays it down as a maxim, that, " so long as sil- 
 ver remains in the shape of money, it i-s not an item of actual wealth 
 in the strict sense of the word ; for it does not directly and imme- 
 
 diately satisfy a want or procure an enjoyment." There are abun- 
 
 ither as food or as clothing; yet it is nevertheless an item of 
 wealth, and one that can be converted, at will, into another value fit 
 for immediate use. Silver, in the shape of crown pieces, is, there- 
 fore, equally an article of wealth with indigo in chests. Besides, is 
 not the utility of money an object of desire in civilized society ? 
 
 Indeed, the same writer elsewhere admits that, " specie in the 
 coffers of an individual is real wealth, an integral part of his sub- 
 stance, which he may immediately devote to his personal enjoy- 
 ment ; although, in the eye of political economy, this same coin is a 
 mere instrument of exchange, essentially differing from the wealth 
 it helps to circulate."* I hope what I have said is quite sufficien/ 
 to show the complete analogy of specie to all other items of wealth 
 Whatever is wealth to an individual, is wealth to the nation, whicb 
 is but an aggregate of many individuals; and is wealth also in the 
 eye of political economy, which must not be misled by the notion 
 of imaginary value, or regard as value any thing, but what all the 
 members of the community, individually, as well as jointly, treat as 
 value, not nominal, but actual. And this is one proof more, thai 
 there are not two kinds of truth in this, more than in any other 
 science. What is true in relation to an individual, is true in rela- 
 tion to the government, and to the community. Truth is uniform ; 
 in the application only can there be any variety. 
 
 SECTION IV. 
 Of the Utility of Coinage, and of the Charge of its Execution. 
 
 No mention has hitherto been made of the value that money 
 derives from the impression and coinage. I have merely pointed 
 out the various utility of gold and silver as articles of commerce, 
 wherein originates their value ; and considered their fitness to act 
 as money, as part of that utility. 
 
 Wherever gold and silver act as money, they must of course be 
 constantly passing from hand to hand. Most people buy or sell 
 
 <f .Economic Publique, Ire partie, c. 4, and the ad 
 (a) Garmer de Saintes, translator of the Wealth of Nations. 
 
CHAP. XXI. ON PRODUCTION. 229 
 
 several times a day ; judge, then, what inconvenience must ensue, 
 were it necessary to be always provided with scales to weigh the 
 money paid or received; and what infinite blunders and disputes 
 must arise from awkwardness or defective implements. Nor is this 
 all ; gold and silver can be compounded with other metals without 
 any visible alteration. The degree of purity can not be exactly 
 ascertained, without a delicate and complex chemical process. The 
 transactions of excharge are wonderfully facilitated, when the weight 
 and standard of each piece of money are denoted by an impression, 
 that nobody can mistake. 
 
 Metals are reduced to an established standard, and divided into 
 pieces of an established weight, by the art of coining. 
 
 The government of each state usually reserves to itself the exclu- 
 sive exercise of this branch of manufacture ; whether with a view 
 of gaining somewhat more by the monopoly, than it could, if every 
 body were at liberty to practise it, or to hold out to the subjects a 
 more solid security, than any private manufacturer could offer, which 
 is more frequently the motive. In fact, though governments have 
 too often broken faith in this particular, their guarantee is still pre- 
 ferred by the people to that of individuals, both for the sake of 
 uniformity in the coin, and because there would probably be more 
 difficulty in detecting the frauds of private issuers. 
 
 The coinage unquestionably adds a value to the metal coined ; that 
 is to say, a lump of silver, wrought into a dollar, is better than an 
 equal weight of bullion of like standard ; and for a very simple rea- 
 son. The fashion given to the metal saves the person, that takes it 
 in course of exchange, all the charges of weighing and assaying, 
 among which the loss of time and labour must be reckoned ; just in 
 the same manner as a coat ready made is worth more than the 
 materials it is to be made of. Even if the business of coining were 
 open to all the world, and government confined itself to fixing the 
 standard, the weight, and the impression, that each piece should 
 possess, still the holders of bullion would find it answer to pay a 
 premium to the coiner, for coining their bullion into money; other- 
 wise, they would have some difficulty in effecting an exchange, and 
 would, perhaps, lose more on the exchange, than it would cost to 
 have the bullion converted into coin. 
 
 But the additional value, thus communicated to the precious 
 metals by the coinage, must not be confounded with that, which 
 bullion, as an article of trade, receives from the circumstance of its 
 employment as money. The latter value attaches to the whole stock 
 of gold and silver in existence ; a silver tankard is of greater value, 
 because that metal is employed as money, whereas, the additional 
 value accruing from the coinage is peculiar to the specific portion 
 coined, exactly as its fashion is peculiar to the goblet ; and is wholly 
 independent of the value, that the commodity, silver, derives frcrn 
 its various utility. 
 
 In England, the whole expense of coinage is defrayed by the 
 government ; the same weight of guineas is delivered at the mint HI 
 20 
 
,^30 ON PRODUCTION. BOOK I. 
 
 return for a like weight of bullion of the legal standard. The 
 nation, in quality of consumer of money, is gratuitously presented 
 with the charges of coining, which are levied by taxation upon them 
 in their other character of payers of taxes. Yet gold, in the shape 
 of guineas, has an evident advantage over bullion; not that of being 
 ready weighed, for people are often at the pains of re-weighing, but 
 that of being ready assayed. Consequently, it has happened some- 
 times, that bullion has been carried to the mint, not to be converted 
 into coin, but merely to have the standard ascertained, and certified 
 to the foreign or domestic purchaser, (a) For guineas are a better 
 article of export than bullion, inasmuch as bullion, bearing the cer- 
 tificate of assay, is preferable to bullion without any such certificate. 
 On the contrary, for the purposes of importation into England, gold 
 bullion answers every purpose of guineas ready coined, and is of 
 just the same value, weight and standard being alike ; for the mint 
 makes no charge for converting the bullion into coin. Foreigners 
 have, in fact, an object in keeping back the guineas, which have 
 already received the certificate of assay, and remitting bullion to 
 ' England to obtain a like gratuitous certificate. This system, there- 
 fore, makes it an object to export the coined metal, but holds out no 
 encouragement to its reimportation.* 
 
 The mischief is somewhat palliated by an accidental circumstance, 
 which never entered into the calculation of the legislature. There 
 is no other mint in England, but that of the metropolis, which is so 
 completely overloaded with business, that it can not re-deliver the 
 
 * It is hardly necessary to repeat, that the specie exported is not so much 
 value lost to the community ; for nobody will feel inclined to make a present of 
 it to the foreigner. Its value is transmitted, for the purpose of obtaining a cor- 
 responding value in return; but the nation loses the value of the coinage in this 
 operation. When guineas are exported from England, she receives in exchange 
 the value of the metal only, and nothing for the impression it bears. (6) 
 
 (a) That is to say, to receive the certificate of coinage, for use, not in the cha- 
 racter of money, but as an article of commerce. The assay is charged for at the 
 English mint, upon bullion re-delivered without coinage. And, before the 
 export of coin was made free, the risk was probably equal to the value of the cer- 
 tificate conferred by coinage. These remarks apply to the coinage of gold only, 
 silver being now subject to a seignorage of 4*. in 665. But silver is no longer 
 the material of the metallic money, except for minute and fractional exchanges. 
 
 T. 
 
 (6) This is hardly true to the full extent. The Spanish dollars pass current 
 in many countries at a considerable advance on bullion of equal weight and fine- 
 ness, and constitute the legal currency of some communities, that have not under- 
 taken the business of coinage themselves ; as in Hayti, and elsewhere. The 
 difference is the local value of the coinage, which is paid for sometimes very 
 liberally. But to whom is it paid) to the Spanish individual or to the Spanish 
 government. If to the former, it is an undue advantage to the individual at the 
 inse of the community ; if to the latter, it is the recompense of productive 
 pncv. Were the gold coinage of England subject to a seignorage like the 
 
 rer, it would never be exported habitually, but to such nations as were con- 
 tent to pay the extra value of the coinage. Indeed, our author presently says in 
 express terms, that the value of the coinage is not always lost on importation. 
 
 T. 
 
CHAP. XXI. ON PRODUCTION. 231 
 
 metal coined till many weeks, and often months, after it is brought 
 for coinage.* The consequence is, that the owner, who leaves his 
 bullion to be coined, loses the interest of its value during the whole 
 time it remains in the mint. This operates as a small tax on coin- 
 age, and raises the value of the coin somewhat above that of bullion. 
 For it is manifest, that the value would be exactly the same, if 
 bullion and guineas were taken without distinction, weight for 
 weight. 
 
 So much for the effect of the English regulations on this head. 
 
 All the other governments of Europe, if I mistake not, derive from 
 the coinage a revenue more than equal to the charges of the process.f 
 The exclusive privilege of issuing money which they have most 
 properly engrossed, together with the severe penalties denounced 
 against private coiners, would enable them to raise the profit of the 
 business very high by the limitation of their issues ; for the value of 
 money, like that of every thing else, is always in the direct ratio to 
 the demand, and in the inverse ratio to the supply. 
 
 In fact when silver in the shape of coin is so rare and dear, that 
 18 dollars in coin will purchase the weight of 20 dollars of equal 
 fineness in the shape of bullion, it is an indication that the public- 
 attaches the same value to 15 oz. 12 dwt. of coined, as to 17 oz. 6 
 dwt. 16 grs. of uncoined metal. Wherefore, the government can, 
 by its coinage, in such case, give to 9 dollars, the value of 10 dollars, 
 and make a profit of 10 per cent. But, if the coin become more 
 abundant, and more of it be necessary in exchange for bullion, it 
 may perhaps be necessary to give 95 dollars in coin for the weight 
 of 100 dollars in bullion: in which latter case, the government can 
 make a profit of no more than 5 per cent, upon the purchase and 
 conversion of bullion into coin. 
 
 If, in the latter case, the government, with a view to increase the 
 ratio of its profit, instead of purchasing bullion itself, were simply 
 to charge a seignorage, say of 10 per cent, upon the bullion brought 
 to the mint for coinage, none at all would be brought for that pur- 
 pose by individuals, who would have to pay 10 per cent, for an 
 operation, which added 5 per cent, only to the value of the metal. 
 Thus the mint would have nothing to coin either on public or private 
 account; and the government would find a high ratio of profit incom- 
 patible with an extended amount of coinage. 
 
 * Wealth of Nations, book i. c. 5. 
 
 f One of my German translators, the learned Professor Morstadt, of Heidel 
 berg-, has observed upon this passage, that since 1810, the Russian government 
 has made no charge for the coinage. It might with equal reason execute gra- 
 tuitously the business of letter-carriage, instead of charging for it to the indi 
 viduals. 
 
 I am perhaps incorrect in saying, that most governments make a profit over 
 and above the expense of execution. The French government charges a seigno- 
 rage, equal at most to defray the expense of the mere process. But the interest 
 and wear and tear of the capital vested in buildings, machinery, &c. and the 
 charge of administration, &c. are so much dead loss to the government; and 
 probably many other governments are in the same predicament. 
 
232 ON PRODUCTION. BOOK I. 
 
 Whence it may be concluded, that the duty or seignorage upon 
 coinage, which has been so frequently discussed, is an absolute 
 nullity - for that governments can not fix their own ratio of profit 
 upon'the execution of the coinage, but that it must depend upon the 
 state of the bullion market, which again is regulated by the relative 
 supplies of coined and uncoined metal, and the demand tor them at 
 the time being. 
 
 It is to be observed, that, to the public at large, in its capacity of 
 consumer of coined bullion, it is a matter of perfect indifference, 
 whether the coin be dear or cheap ; for, so long as its value is not 
 subject to sudden fluctuations, it will pass current for as much as it 
 has been taken for. 
 
 When the coinage of money is not executed gratuitously, and 
 especially when it is paid for at a monopoly-price, it is a matter of 
 perfect indifference to the state, whether or not its coin be melted 
 down or exported, for it can neither be melted down or exported, 
 without having first paid the coinage in full, which is all that is lost 
 by melting or exportation.* On the contrary, the export of such 
 coin is quite as advantageous as that of any other manufactured com- 
 modity whatever. It is a branch of the bullion trade ; and unques- 
 tionably, a coin, so well executed as to be difficult to counterfeit, 
 accurate in the weight and assay, and charged with a moderate duty 
 on the coinage, may acquire a currency in different parts of the 
 world, and yield the government, that issues it, a profit of no con- 
 temptible amount. 
 
 Witness the gold ducats of Holland, which are in request through- 
 out all the north of Europe, at a higher rate than their intrinsic value 
 as bullion ; and the dollars of Spain, which are all coined at Lima 
 and Mexico, and have been executed with so much regularity and 
 integrity, as to pass current as money not only all over Spanish 
 America, but likewise in the United States and in several parts of 
 Europe, Africa, and Asia.f 
 
 The Spanish dollar is a remarkable instance of the value attached 
 to the metal by the process of coinage. When the Americans of the 
 Union determined on a national coinage of dollars, they contented 
 themselves with simply re-stamping those of the Spanish mint, with- 
 out varying their weight or standard. But the piece thus re- 
 stamped would not pass current with the Chinese, and other Asiatics, 
 at the same rate; 100 dollars of the United States would not pur- 
 chase so much of other commodities as 100 dollars of Spain. The 
 American Executive, nevertheless, continued to deteriorate the coin 
 by giving it a handsome impression, apparently wishing to avail 
 
 * Tn* value of the coinage, or fashion of the metal, is not always lost in the 
 art 1 he impression is, to a certain degree, a recommendation beyond the 
 
 I" 1 <l / ??\\ ty T hlCh executes * a *d raises the value somewhat higher 
 than that of bullion in bars. 
 
 t The 5/r. pieces of France, have, by their invariable uniformity of weight 
 lhe JjoriJ SmCG 1SSU6 ' acquired a similar currency in many parts / f 
 
CHAP. XXI. ON PRODUCTION. 233 
 
 itself of this method of checking the export of specie to Asia. For 
 this purpose it was directed, that all exports of specie should be 
 made in dollars of its own coinage, hoping in this way to make the 
 exporters give a preference to the domestic products of its own ter- 
 ritory. Thus, after wantonly depreciating the Spanish dollar, with- 
 out prejudice, it is true, to the specie remaining current within the 
 territory of the Union, it went on further to enjoin its use in the 
 least profitable way, viz. in the commercial intercourse with those 
 nations that set the least value on it. The natural course would 
 have been, to suffer the value exported to go out of the country in 
 the form that might offer the prospect of the largest returns. Self- 
 interest might have been safely relied on in this particular. (1) 
 
 But what are we to think of the wisdom of the Spanish govern- 
 ment, which was enabled by the confidence in its good faith in the 
 execution of its coinage, to export dollars with a profit, and sell them 
 abroad at an advance upon their intrinsic value; and yet thought fit 
 to prohibit so advantageous a traffic, which would have furnished a 
 vent to a product of the national soil, worked up by domestic indus- 
 try for an ample recompense 1 
 
 Though a government be the exclusive coiner of money, and is 
 by no means bound to coin gratuitously, it can not with justice 
 deduct the expense of coinage from its payments, in discharge of its 
 own contracts. If it has engaged to pay a million, say for supplies 
 advanced, it can not honestly say to the contractor : " We bargained 
 to pay a million, but, we pay you in specie just coined ; and there- 
 fore shall deduct 20,000 dollars, more or less, for the charges of 
 coinage." In fact, all pecuniary engagements, contracted by govern- 
 ment or individuals, virtually imply a promise to pay a given sum, 
 not in bullion but in coin. The act of exchange, wherein the bar- 
 gain originated, is effected with the implied condition, on behalf of 
 one of the contracting parties, to give a commodity somewhat more 
 valuable than silver bullion ; namely, silver in crown pieces, or coin 
 of some denomination or other. The virtual contract of a govern- 
 ment is to pay in coined money ; and, in consequence of that im- 
 plied condition, it obtains a greater quantity of goods, than it will, 
 if the bargain be to pay in bullion. In this instance, it offers the 
 charge of coinage into the bargain at the time of concluding the 
 contract, and thereby obtains better terms, than if it is in the habit 
 of paying in bullion. 
 
 The charges of coinage should be deducted from the metal brought 
 
 (1) This paragraph contains three errors in relation to the coinage of dollars 
 by the United States, and the exportation of specie, which it is of importance to 
 point out : 1st. Spanish dollars are not, and never have been, simply restamped at 
 our mint, without varying their weight or standard : 2d. A pound, troy, of Spanish 
 dollars, contains 10 oz. 15 dwts. of fine silver : a pound, troy, of American do( 
 lars contains 10 oz. 14 dwts. 5 grains of fine silver : 3d. No law has ever been 
 enacted by Congress, directing the exportation of specie to be made in dollars 
 of our own coinage ; nor has the executive the power to regulate, or in any 
 manner interfere with the exportation of specie from the United States. 
 
 AMERICAN EDITOR. 
 20* 2E 
 
234 ON PRODUCTION. BOOK I. 
 
 to the mint to be coined, at the time of its re-delivery in a coined 
 
 ese considerations lead us to the necessary conclusions, that 
 the manufacture of bullion into coin increases the value of the 
 metal in the ratio of the additional convenience resulting to the com- 
 munity, from the circumstance of coinage, and not an item further, 
 whatever charges or duties the state may attempt to saddle it with ;* 
 (hat a government, by monopolising the business of coming may 
 make a profit to the whole extent of this accession of value ; that il 
 can not possibly advance this profit any further, in its discharge of 
 engagements, fairly and freely entered into; and that it can not dc 
 so with regard to prior engagements, without committing an act of 
 partial bankruptcy. 
 
 Moreover, it is evident that, in all dealings between individuals, 
 the public authority has still less power, by means of the impression 
 of its die, to make the commodity, acting as money, pass for more 
 than its intrinsic value, plus the value added by the fashion it receives. 
 Vain will be any enactment, that the stamp impressed shall give to 
 an ounce of silver a specific or determinate value ; it will never buy 
 more goods than an ounce of silver, bearing that impression, is worth 
 at the time being. 
 
 SECTION V. 
 Of Alterations of the Standard Money. 
 
 The first thing to be observed under this head is, that the public 
 authority has generally taken upon itself to fix arbitrarily the com- 
 modity, that shall serve as money. This assumption, on its part, has 
 little inconvenience in itself; for the interests of the nation and of 
 the ruling power happen to be exactly the same. Should a govern- 
 ment attempt to force an ill-adapted medium into circulation, it would 
 sustain a loss itself on every bargain, and the people would, by 
 degrees, adopt some other medium. Thus, the first issue of coined 
 money among the Romans was by their King Numa, and his coin- 
 age was of copper, which at that time of day was the properest metal 
 for the purpose ; for, before the time of Numa, the Romans knew no 
 other money but copper in bars. On the same principle, modern 
 governments have made choice of gold and silver, which would 
 undoubtedly have been selected by the general accord of individuals 
 without the interference of their rulers. 
 
 But the sovereign power, being firmly persuaded that its mandate 
 
 * In Spanish America, a higher duty is charged, amounting, according to Hum- 
 boldt, to 11^ per cent on silver, and 3 per cent, on gold, over and above the 
 actual charges of coinage ; for the government allows no bullion to be exported 
 in an uncoined state. So that, in fact, this is not a seignorage, but a duty on 
 cyoortation, exacted a*, the time of converting the bullion into coin. 
 
CHAP. XXI. ON PRODUCTION. 235 
 
 was necessary and competent to invest any commodity whatever 
 with the currency of money, succeeded in impressing its subjects 
 with the same notion during the darker ages, and that too at the very 
 time that individuals, with a view to personal interest, were acting 
 upon principles diametrically opposite ; for, whoever was dissatisfied 
 with the authorised money, either abstained from selling altogether, 
 or disposed of his goods in some other way. 
 
 This error led to another of much more serious mischief, that has 
 overset all order whatever. 
 
 The public authority persuaded itself, that it could raise or depress 
 the value of money at pleasure ; and that on every exchange of goods 
 for money, the value of the goods adjusted itself to the imaginary 
 value, which it pleased authority to affix to it, and not to the value 
 naturally attached to the agent of exchange, money, by the conflict- 
 ing influence of demand and supply. 
 
 Thus, when Philip I. of France, adulterated the lime of Charle- 
 magne, containing 12 oz. of fine silver,* and mixed with it a third 
 part alloy, but still continued to call it a livre, though containing but 
 8 oz. of fine silver, he was nevertheless fully persuaded, that his 
 adulterated livre was worth quite as much as the lime of his prede- 
 cessors. Yet it was really worth 1-3 less than the lime of Charle- 
 magne. A livre in coin would purchase but 2-3 of what it had done 
 before. However, the creditors of the monarch, and of individuals, 
 got paid but 2-3 of their just claims ; land-owners received from their 
 tenants but 2-3 of their former revenue, till the renewal of leases 
 placed matters on a more equitable footing. Abundance of injustice 
 was committed and authorised : but after all it was impossible to 
 make 8 oz. of fine silver equal to 12.f 
 
 In the year 1113, the livre, as it was still called, contained no more 
 than 6 oz. of fine silver. At the commencement of the reign of Louis 
 VII. it had been reduced to 4 oz. St. Louis gave the name of livre 
 to a quantity of silver weighing but 2 oz. or 6 gros. 6 grains.J At 
 the era of the French revolution, the money bearing that name 
 weighed only the 1-6 of an oz. ; so that it had been reduced to 1.72 
 of its original standard of weight or quality in the days of Charle 
 magne. 
 
 I take no notice, at present, of the great fall experienced in the 
 relative value of fine silver to commodities at large, which has been 
 
 * The measure of weight called a livre contained 12 oz. in the time of Char- 
 lemagne. 
 
 f According to the principles established supra, sect. 3 of this chapter, there 
 is reason to believe, that the value of the adulterated livre of 8 oz. of fine silver 
 might have been kept up to that of the old livre of 12 oz., if the volume of the 
 coin had not been augmented. But the rise of money prices, consequent upon 
 the adulteration of the coin, is a ground of presumption, that the government, 
 with a view to profit by this momentary operation, ordered a recoinage, and 
 made 12 pieces out of 8, by the addition of alloy, so as to increase the total 
 quantity proportionately to the reduction of the standard of quality. 
 
 t We find in the Prolegomenes of Le Blanc, 25, that the silver sol of St. Louis 
 weighed 1 gros. 7% grains, which, multiplied by 20, makes 2 oz. 6 gros 
 grains, the livre. 
 
236 
 
 ON PRODUCTION. BOOK 1. 
 
 reduced so low as 1-4 of its former amount ; but this is foreign to the 
 subject of the present section, and I shall take occasion to speak of 
 il hereafter. 
 
 Thus the term, Hire tournois, has at different times been applied 
 to very different quantities of fine silver. The alteration has been 
 effected, sometimes by reducing the size and weight of the coin 
 bearing that denomination, sometimes by deteriorating the standard 
 of quality, that is to say, mixing up a larger portion of alloy, and a 
 smaller one of pure metal ; and, sometimes, by raising the denomina- 
 tion of a specific coin ; making, for instance, what was before a 2fr. 
 piece ] ass under the name of one of Sfr. As no account is ever 
 taken of any thing but the pure silver, which is the only valuable 
 substance in silver coin, all these expedients have had a similar effect; 
 for this reason; that they all, in fact, reduced the quantity of silver 
 contained in what was called a livre tournois. And this is what all 
 French writers, in compliment to the royal ordinances, have digni- 
 fied by the term, raising the standard ; on the ground, that the nomi- 
 nal value of the coin is raised by these operations ; which might, with 
 much more propriety, be said to lower the standard, since the metal, 
 which alone constitutes the money, is thereby reduced in quantity. 
 
 Though the quantity of metal in the livre has been continually 
 decreasing from the days of Charlemagne till the present period, 
 many of our monarchs have, at different times, adopted a contrary 
 course, and advanced the weight and standard of quality, particu- 
 larly since the reign of St. Louis. The motives for deterioration 
 are evident enough : it is extremely convenient to pay one's debts 
 with less money than one borrowed. But kings are not only 
 debtors ; they are frequently creditors too. In the matter of taxa- 
 tion, they stand precisely in the same relative position to the subject, 
 as landlords to their tenants. Now, if every body be enabled by 
 law to pay their debts and discharge their contracts with a less 
 amount of silver than bargained for, the subject, of course, can pay 
 his taxes, and the tenant his rent, with a smaller quantity of that 
 metal. And, although the king received less silver, yet he continued 
 to spend as much as before ; for the nominal price of commodities 
 rose, in proportion to the diminution of metal in the coin. When 
 what was before Sfr. was declared by law to be 4 fr. the govern- 
 ment was obliged to pay 4 fr. where it before paid but 3 fr. ; so 
 that it was necessary, either to increase the old, or to impose new 
 taxes; in other words, the government, to obtain the same quantity 
 of fine silver, was obliged to demand a greater number of limes 
 from the subject. This course, however, was always odious, even 
 when it really made no difference in the real pressure of taxation, 
 and was often quite impracticable. Recourse was, therefore, had to 
 the restoration of the coin to the higher standard. The livre being 
 o contain a greater weight of silver, the nation really paid 
 more silver in paying the same number of Kvres.* Thus we find, 
 
 * The same expedient was resorted to by that monster of prodigalicyTthe Rol 
 :uan emperor Heliogabalus. The taxes of the empire were payable in specific 
 
CHAP. XXI. ON PRODUCTION. 237 
 
 that the ameliorations of the coin commence nearly about the same 
 period as the establishment of permanent taxation. Before that 
 innovation, the monarch had no personal motive for increasing the 
 intrinsic value of the coin he issued. 
 
 It would be a great mistake to suppose that the frequent varia- 
 tions of standard alluded to, were effected in the same clear and 
 intelligible manner which I have adopted to explain them. Some- 
 times the alteration, instead of being openly avowed, was kept secret 
 as long as possible;* and this attempt at concealment gave occasion 
 to the barbarous technical jargon used in this branch of manufacture. 
 At other times, one denomination of coin was altered, while the rest 
 were left untouched; so that, at a given period, a lime, paid in one de- 
 nomination, contained more silver than if paid in another. Finally, 
 to throw the matter in still greater obscurity, the subject was com- 
 monly forced to reckon up his accounts, sometimes in Kvres and 
 sous, sometimes in crowns, and to pay in coin representing neither 
 liure, sol, nor crown, but either fractions or multiples of these seve- 
 ral denominations. Princes, that resort to such pettifogging ex- 
 pedients, can be viewed in no other light, than as counterfeiters 
 armed with public authority. 
 
 The injurious effect of such measures upon credit, commercial in- 
 tegrity, industry, and all the sources of prosperity, may be easily 
 conceived ; indeed, it was so serious, that, at several periods of oui 
 history, the monetary operations of the state suspended all com- 
 merce whatever. Philip le Bel drove all foreigners out of the fairs 
 of France, by compelling them to receive his discredited coin in 
 payment, and prohibiting the making of bargains in a coin of better 
 credit.f Philip de Valois did the same thing with respect to the 
 gold coin, and with precisely the same result. A cotemporary 
 chronicler J informs us, that almost all foreign merchants discon- 
 tinued their dealings with France ; that the French traders them- 
 selves, ruined by the frequent alterations of the coin, and the con- 
 sequent uncertainty of values, withdrew to other countries; and that 
 the rest of the king's subjects, both noble and bourgeois, were 
 equally impoverished with the merchants; for which reason, the 
 annalist adds simply enough, the king was not at all beloved. 
 
 The examples I have cited are taken from the monetary system 
 
 gold coin, called aurei, and not in gold by the tule : and the emperor, to enlarge 
 his receipts, made a new issue of aurei, weighing as much as 24 oz. each. The 
 virtuous Alexander Severus, actuated by an opposite motive, made a considerable 
 reduction of the weight. 
 
 * Philip de Valois, in his official instructions to the officers of the mint, 
 A. D. 1350, enjoins the utmost secrecy on the subject of the purposed adultera- 
 tion, even with the sanction of an oath, for the express purpose of taking in tho 
 commercial classes ; directing them " to put a good face upon the matter of the 
 course of exchange of the mark of gold, so that the intended adulteration might 
 not be discovered." Many similar instances are to be met with in the reign o f 
 King John. Le Blanc, Traite Hist, des Monnaies, p. 251. 
 
 f Le Blanc, Traite Hist, des Monnaies, p. 27. 
 Matthieu Villani. 
 
!>38 . ON PRODUCTION. BOOK I. 
 
 of France; but similar expedients have been practised in almost 
 every nation, ancient or modern. Popular forms of government 
 have been equally culpable with those of a despotic character. The 
 Romans, dgring the most glorious periods of the republic, effected a 
 national bankruptcy more than once, by deteriorating the intrinsic 
 value of their coin. In the course of the first Punic war, the as, 
 which was originally 12 oz. of copper, was reduced to 2 oz. ; and, in 
 the second Punic war, was again lowered to 1 oz.* 
 
 In the year 1722, the State of Pennsylvania, which acted, in this 
 particular, as an independent government, even before the American 
 war, passed a law, enacting, that I/, sterling should pass for I/. 5s. ;f 
 and the United States, and France also, after declaring themselves 
 republics, have both gone still further. 
 
 "It would require a separate treatise," says Stewart, "to investi- 
 gate all the artifices which have been contrived to make mankind 
 lose sight of the principles of money, in order to palliate and make 
 this power in the sovereign to change the value of the coin appear 
 reasonable.''! He might have added, that such a volume would be 
 of little practical service, and by no means prevent the speedy adop- 
 tion of some new device of the same kind. The only effectual pre- 
 ventive would be, the exposure of the corrupt system, that engen- 
 ders such abuses; w 7 ere that system rendered simple and intelligible, 
 every abuse would be detected and extinguished in the outset. 
 
 And let no government imagine, that, to strip them of the power 
 of defrauding their subjects, is to deprive them of a valuable privi- 
 lege. A system of swindling can never be long-lived, and must 
 infallibly in the end produce much more loss than profit. The feel- 
 ing of personal interest is that which soonest awakens the inte" 
 lectual faculties of mankind, and sharpens the dullest apprehensions. 
 Wherefore, in matters affecting personal interest, a government has 
 the least chance of outwitting its subjects. Individuals are not 
 easily duped by measures tending to procure supplies to the state in 
 an under-hand manner: and although they cannot guard against 
 direct outrage, or breach of public faith, yet it can never long escape 
 their penetration, however artfully disguised and concealed. The 
 government will acquire a character for cunning as well as faithless- 
 ness, and will lose entirely the powerful engine of credit, which will 
 operate with infinitely more efficacy, than the mere trifle that fraud 
 can procure. Yet, even that trifle will often be wholly engrossed 
 by the agents of government, who are sure to turn every act of in- 
 fice towards the subject, to their own private advantage. Thus, 
 the government loses its credit, its agents get all the profit; 
 and the public authority is disgraced, for no other purpose, than to 
 enrich its menials. 
 
 The real interest of a government is, to look not to fictitious, dis- 
 graceful, and destructive resourcesJbuUo such as are really prolific 
 
 * Montesquieu, Esptit des Lois, liv. xxii. c. iTT 
 
 f Smith's Wealth of Nations, book ii. c. 2. 
 
 t Stewart's Inquiry into the Princ. Pol. Econ. 8vo. 1805, vol. ii. p. 306. 
 
CHAP. XXI. ON PRODUCTION. 230 
 
 and inexhaustible ; and one can render it no better service, than to 
 expose and render abortive those of the former kind, and point out 
 to it those of the latter. 
 
 The immediate consequence of a deterioration of the coin is, a 
 proportionate reduction of all debts and obligations payable in 
 money ; of all perpetual or redeemable rent-charges, whether upon 
 the state or upon individuals ; of all salaries, pensions, and rack- 
 rents; in short, of all values previously expressed in money; by 
 which reduction, the debtor gains what the creditor loses. It is a 
 legal authorization of a partial bankruptcy, or compromise, by every 
 money-debtor with his creditor, for a sum less than his fair claim, in 
 the ratio of the diminution of precious metal in the same denomina- 
 tion of coin. 
 
 Thus, whatever government has recourse to this expedient, is not 
 content with giving itself an illegitimate advantage, but urges all 
 other debtors to do so likewise. 
 
 The kings of France, however, have not always allowed their sub- 
 jects to reap the same advantage in their private concerns, which the 
 monarch proposed to himself by the operation of increasing or dimin- 
 ishing the quantity of metal contained in a particular denomination 
 of coin. Their personal motive was, on all such occasions, to pay 
 less, or receive more silver or gold themselves, than in honesty they 
 ought; but they sometimes compelled individuals, notwithstanding 
 the alteration, to pay and receive in the old coin, or, if in the new, at 
 the current rate of exchange between the two.* This was a close 
 copy of a Roman precedent. When that republic, in the second 
 Punic war, reduced the as of copper from two oz. to one, the repub- 
 lic paid its creditors 1 as instead of two, that is to say, 50 per cent, 
 on their claims. But private accounts were kept in denarii; and 
 the denarius, which till then was worth 10 asses, was, by law, made 
 to pass for 16 asses; so that individuals paid 16 asses or oz. of cop- 
 per only for every denarius, instead of paying 20 as they should 
 have done to fulfil their engagements: that is to say, 10 asses of 2 
 oz. or 20 of 1 oz. each, for every denarius. Thus, the republic paid 
 a dividend of 50 per cent, only, but compelled private persons to pay 
 one of 80 per cent. 
 
 A bankruptcy, effected by deterioration of the coin, has been 
 sometimes considered in the light of a plain and simple bankruptcy, 
 or mere reduction of the public debt. It has been thought less inju 
 rious to the public creditor to pay him in adulterated coin, that he 
 again may pay over at the same rate as he receives it, than to cui- 
 tail his claim by , -J, or in any other proportion. Let us see how 
 the two methods differ. 
 
 In either case, the creditor is equally a loser in all his purchases 
 posterior to the bankruptcy. Whether his income be abridged by 
 one-half, or whether he find himself obliged to pay for every thing 
 twice as dear as before, is to him precisely the same thing. 
 
 * Vide the several ordinances of Philip le Bel in 1303 ; of Philio de Vaiois in 
 1329 and 1343; of John in 1354; and of Charles VI. in 1421. 
 
240 ON PRODUCTION. BOOK I. 
 
 As to all his own existing debts, he may undoubtedly get rid of 
 them on the same terms as the public has discharged his own claim; 
 but what ground is there for supposing, that the public creditors are 
 always in arrear in their private accounts with the rest of the com- 
 munity? They stand in the same relation to society as all other 
 classes ; and there is every reason to believe that the public creditors 
 have as much owing to them by one set of individuals as they owe 
 themselves to another; in short, that the accounts will square. 
 Thus, the injustice they do to their private claimants is balanced by 
 the injury they receive; and a bankruptcy, in the shape of a dete- 
 rioration of the coin, is to them full as bad, as in any other shape. 
 
 But it is attended with other serious evils, destructive of national 
 welfare and prosperity. 
 
 It occasions a violent dislocation of the money-prices of commo- 
 dities, operating in a thousand different ways, according to the parti- 
 cular circumstances of each respectively, and thereby disconcerting 
 the best planned and most useful speculations, and destroying all 
 confidence between lender and borrower. Nobody will willingly 
 lend when he runs the risk of receiving a less sum than he has 
 advanced ; nor will any one be in a hurry to borrow, if he is in dan- 
 ger of paying more than he gets. Capital is, consequently, diverted 
 from productive investment, and the blow given to production by 
 deterioration of the coin, is commonly followed up by the still more 
 fatal ones of taxation upon commodities, and the establishment of a 
 maximum of price. 
 
 Nor is the effect less serious in respect to national morality. Peo- 
 ple's ideas of value are kept in a state of confusion for a length of 
 time, during which knavery has an advantage over honest simplicity, 
 in the conduct of pecuniary matters. Moreover, robbery and spo- 
 liation are sanctioned by public practice and example: personal inter- 
 est is set in opposition to integrity ; and the voice of the law to the 
 impulse of conscience. 
 
 SECTION VI. 
 Of the reason why Money is neither a Sign nor a Measure. 
 
 Money would be a mere sign or representative, had it no intrin- 
 sic value of its own ; but, on the contrary, whenever it is employed 
 in sale or purchase, its intrinsic value alone is considered. When 
 an article is sold for a dollar piece, it is not the impression or the 
 name that is given or taken in exchange, but the quantity of silver 
 that is known to be contained in it. As a proof of the truth of this 
 position, if the government were to issue crown pieces made of tin 
 or pewter, they would not be worth so much as those of silver. 
 I hough declared by law to be of equal value, a great many more of 
 uiern would be required in purchase of the same commodities; 
 which would not happen if they were nothing but a mere sign. 
 
CHAP. XXL ON PRODUCTION. 241 
 
 Violence, ingenuity, or extraordinary political circumstances have 
 sometimes kept up the current value of a money, after a reduction 
 of its intrinsic value ; but not for any length of time. Personal inter- 
 est very soon finds out whether more value is paid than is received, 
 and contrives some expedient to avoid the loss of an unequal and 
 unfair exchange. Even when the absolute necessity of finding some 
 medium of circulation of value obliges a government to invest with 
 value an agent destitute either of intrinsic value or substantial guar- 
 antee, the value attached to the sign by this demand for a medium, 
 is actual value, originating in utility, and makes it a substantive 
 object of traffic. A Bank of England note, during the suspension of 
 cash payments, was of no value whatever as a representative ; for it 
 then really represented nothing, and was a mere promise without 
 security, given by the bank, which had advanced it to the govern 
 ment without any security ; yet this note, by its mere utility, was 
 possessed of positive value in England, as a piece of gold or silver. 
 
 But a bank-note, payable on demand, is the representative, the 
 sign,(l) of the silver or specie, which may be had whenever it is 
 wanted, on presenting the note. The money or specie, which the 
 bank gives for it is not the representative, but the thing represented. 
 
 When a man sells any commodity, he exchanges it, not for a sign 
 or representative, but for another commodity called money, which 
 he supposes to possess a value equal to the value sold. When he 
 buys, he does so, not with a sign or representative, but with a com- 
 modity of real, substantial value, equivalent to the value received. 
 
 A radical error, in this particular, has given rise to another of very 
 general prevalence. Money having been pronounced to be the sign 
 of all values whatever, it was boldly inferred, that, in every country, 
 the total value of the money, bank and other notes, and credit paper, 
 is equal to the total value of all other commodities. A position that 
 derives some show of plausibility, from the circumstance, that the 
 relative value of money declines when its quantity is increased, and 
 advances when that quantity is diminished. 
 
 (1) The term, " representative," or " sign," of silver or specie, as applied to 
 bank-notes, has no precise or definite meaning. A bank-note, with no sort of 
 accuracy can be said to be " the representative of money ;" and as such loose 
 metaphorical expressions have given occasion to most of the vague and mystical 
 notions respecting paper-money which have been too long current, and only 
 serve to involve the subject in obscurity and confusion, they cannot too soon be 
 discarded. 
 
 We have already seen, that coins are neither more nor less than commodities, 
 which are bought and sold for their value, like other commodities. Bank-notes 
 are not, any more than bills of exchange, or other transferable engagements for 
 the payment of money, the representatives or symbols of these commodities, 
 but are actual obligations for the payment, on demand, or at a stated time, of the 
 quantity of the coins expressed on the face of them, and are themselves received 
 -n payment as readily as specie itself, only when it is perfectly understood, 
 that the specie can be obtained for them, or when it is generally known, thn. 
 they -ill be as readily received in the market as the coins which they specify 
 
 AMERICAN 
 21 2F 
 
242 ON PRODUCTION. BOOK L 
 
 It is obvious, however, that the same fluctuation affects all other 
 commodities whatever. If the vintage be twice as productive one 
 vear as it is another year, the price of wine falls to half what it was 
 the vear preceding. In like manner, one may readily concede, that 
 should the a<rffre<rate of circulating specie be doubled, the prices of 
 all goods would be doubled also; in other words, twice the quantity 
 of specie would go to the purchase of the same articles. But this 
 consequence by no means proves, that the total value of the circu- 
 lating medium'is always equal to the sum total of all the other items 
 of wealth, any more, than that the sum total of the produce of the 
 vintage is equal to the totality of other values. The casual fluctua- 
 tion in the value of silver and of wine, in the eases supposed, is the 
 effect of a difference in quantity of these respective commodities at 
 two different times, and has nothing to do with the quantity of other 
 commodities. 
 
 It has been already remarked, that the total value of the money of 
 any country, even with the addition to the value of all the precious 
 metals contained in the nation under any other shape, is but an 
 atom, compared with the gross amount of other values. Wherefore, 
 the thing represented would exceed in value the representative ; and 
 the latter could not command the presence 0* possession of the 
 former.* 
 
 Nor is the position of Montesquieu, that money-price depends upon 
 the relative quantity of the total commodities to that of the total 
 money of the nationf at all better founded. What do sellers and 
 buyers know of the existence of any other commodities, but thost 
 that are the objects of their dealing? And what difference could 
 such knowledge make in the demand and supply in respect to those 
 particular commodities? These opinions have originated in the 
 ignorance at once of fact and of principle. 
 
 Money or specie has with more plausibility, but in reality \vith 
 no better ground of truth, been pronounced to be a measure of 
 value. Value may be estimated in the way of price; but it can not 
 be measured, that is to say, compared with a known and invariable 
 measure of intensity, for no such measure has yet been discovered. 
 
 Authority, however absolute, can never succeed in fixing the 
 general ratio of value. It may enact, that John, the owner of a sack 
 of wheat, shall give it to Richard for 4 dollars ; and so it may that 
 John shall give his sack of wheat for nothing. This enactment will 
 probably rob John to benefit Richard ; but it can no more make 4 
 
 * If credit-paper be thrown into the scale, it will not help us over this diffi- 
 culty. The agent of circulation, whether in form of specie or of paper, can 
 ieer exceed m amount the total utility vested in it. The expansion of the vo- 
 rtmie of a national money, whether of metal or of paper, is sure to be followed 
 by a proportionate dilution of its value, which disables the whole from being 
 rqual to the purchase of a greater portion of commodities at large : and the 
 value, devoted to the business of circulation, is always a trifle, compared with 
 the value it is employed to circulate. Vide infra, under the head of Bank-notes, 
 t Esprit dcs Lois, liv. xxii. c. 7. 
 
CHAP. XXI. ON PRODUCTION. 243 
 
 dollars the exact measure of the value of a sack of wheat, than it can 
 make a sack of wheat worth nothing, by ordering it to be given for 
 nothing. 
 
 A yard or a foot is a real measure of length ; it always presents 
 to the mind the idea of the self-same degree of length. No matter 
 in what part of the world a man may be, he is quite sure, that a 
 man of 6 feet high in one place is as tall as a man 6 feet high in 
 another. When I am told that the great pyramid of Ghaize is 65Q 
 feet square at the base, I can measure a space of 656 feet square at 
 Paris, or elsewhere, and form an exact notion of the space the pyra- 
 mid will cover ; but when I am told that a camel is at Cairo worth 
 50 sequins, that is to say, about 90 ounces of silver, or 100 dollars 
 in coin, I can form no precise notion of the value of the camel ; 
 because, although I may have every reason to believe that 100 dol- 
 lars are worth less at Paris than at Cairo, I can not tell what may be 
 the difference of value. 
 
 The utmost, therefore, that can be done is, merely to estimate or j 
 reckon the relative value of commodities; in other words, to declare, 
 that at a given time and place, one commodity is worth more or less 
 than another ; their positive value it is impossible to determine. A 
 house may be said to be worth 4000 dollars; but what idea does that 
 sum present to the mind ? The idea of whatever I can purchase 
 with it ; which is, in fact, as much as to say, the idea of value equi- 
 valent to the house, and not of value of any fixed degree of inten- 
 sity, or independent of comparison between one commodity and 
 another. 
 
 When two objects of unequal value are both compared to differ- 
 ent portions of one specific product, still it is a mere estimate of 
 relative value. One house is said to be worth 4000 dollars, another 
 2000 dollars ; which is simply saying, the former is worth two of 
 the latter. It is true, that, when both are compared to a product 
 capable of separation into equal portions, as money is, a more accu- 
 rate idea can be formed of the relative value of one to the other; for 
 the mind has no difficulty in conceiving the relation of 2 integers to 
 1, or 4000 to 2000. But any attempt to form an abstract notion of 
 the value of one of these integers must be abortive. 
 
 If this be all that is meant by the term, measure of value, I 
 admit that money is such a measure ; but so, it should be observed, 
 is every other divisible commodity, though not employed in the 
 character of money. The ratio of the one house to the other will 
 be equally intelligible, if one be said to be worth 1000, and the other 
 only 500, quarters of wheat. 
 
 Nor will this measure of relative value, if we may so call it, 
 convey an accurate idea of the ratio of two commodities one to the 
 other, at any considerable distance of time or place. The 1000 
 quarters of wheat, or 4000 dollars, will not be of any use in the 
 comparison of a house in former, with a house in the present times , 
 for the value of silver coin and of wheat have both varied in the 
 interim. A house at Paris, worth 10,000 crowns in he Jays of 
 
244 ON PRODUCTION. BOOK L 
 
 Henry IV 7 ., would now be worth a great deal more, than another of 
 that value now-a-days. So, likewise, one in Lower Britany, worth 
 4000 dollars, is of much more value than one of that price at Pans; 
 for the same reason that an income of 2000 dollars is a much larger 
 one in Britany than at Paris. 
 
 Wherefore' it is impossible to succeed in comparing the wealth of 
 different eras or different nations. This, in political economy, like 
 squaring the circle in mathematics, is impracticable, for want of a 
 common mean or measure to go by. 
 
 Silver, and coin too, whatever be its material, is a commodity, 
 whose value is arbitrary and variable, like that of commodities in 
 general, and is regulated in every bargain by the mutual accord of 
 The buyer and seller. Silver is more valuable when it will purchase 
 a large quantity of commodities, than when it will purchase a smaller 
 quantity. It can not, therefore, serve as a measure, the first requi- 
 site of which is invariability. Thus, in the assertion of Montes- 
 quieu, when speaking of money, that " what is the common mea- 
 sure of all things, should of all things be the least subject to change,"* 
 there are no less than three errors in two lines. For, in the first 
 place, it has never been pretended, that money is the measure of all 
 things, but merely that it is the measure of values; secondly, it is not 
 even the measure of values ; and lastly, its value can not be made 
 -invariable. If it was the object of Montesquieu to deter governments 
 from altering the standard of their coin, he should have laboured 
 to enforce those sound arguments, which the question would fairly 
 have supplied him with, instead of dealing in brilliant expressions, 
 which serve to mislead and give currency to error. 
 
 It would, however, often be a matter of curiosity, and sometimes 
 even of utility, to be able to compare two values at an interval of 
 time or place ; as, for instance, when there is occasion to stipulate 
 for a payment at a distant place, or a rent for a long prospective 
 term. 
 
 Smith recommends the value of labour as a less variable, and, 
 consequently, more appropriate, measure of absent or distant value; 
 he reasons thus upon the matter: "Equal quantities of labour, at all 
 times and places, may be said to be of equal value to the labourer. 
 In his ordinary state of health, strength, and spirits, in the ordinary 
 degree of his skill and dexterity, he must always lay down the same 
 portion of his ease, his liberty, and his happiness. The price, which 
 he pays, must always be the same, whatever may be the quantity of 
 goods which he receives in return for it. Of them, indeed, it may 
 sometimes purchase a greater and sometimes a smaller quantity; but 
 : is their value which varies, not that of the labour which purchases 
 them. At all times and places, that is dear, which it is difficult to 
 ;ome at, or which it costs much labour to acquire; and that cheap, 
 which is to be had easily, or with very little labour. Labour alone, 
 .herefore, never varying in its own value, is alone the ultimate and 
 
 ' Esprit des Lois, liv. xxii. c. 3. 
 
CHAP. XXI. ON PRODUCTION. 245 
 
 real standard, by which the value of all commodities can at all times 
 and places be estimated and compared."* 
 
 With great deference to so able a writer, it by no means follows, 
 that, because labour in the same degree is always to the labourer 
 himself of the same value, therefore it must always bear the same 
 value as an object of exchange. Labour, like commodities, may 
 vary in the supply and demand ; and its value, like value in general, 
 is determined by the mutual accord of the adverse interests of buyer 
 and seller, and fluctuates accordingly. 
 
 The value of labour is affected materially by its quality. The 
 labour of a strong and intelligent person is worth much more than 
 that of a weak and ignorant one. Again, labour is more valuable 
 in a thriving community, where there is a lively demand for it, than 
 in a country overloaded with population. In the United States, the 
 daily wages of an artificer amount in silver to three times as much 
 as in France, f Are we to infer, that silver has then but ? of its 
 value in France 1 The artificer is there better fed, better clothed, 
 and better lodged ; which is a convincing proof, that he is really 
 better paid. Labour is probably one of the most fluctuating of 
 values, because at times it is in great request, and at others is offered 
 with that distressing importunity occasionally witnessed in cities 
 where industry is on the decline. 
 
 Its value has, therefore, no better title to act as a measure of two 
 values at great distances of time or place, than that of any other 
 commodity. There is, in fact, no such thing as a measure of value, 
 because there is nothing possessed of the indispensable requisite, 
 invariability of value. 
 
 In the absence of an exact measure, we must be content to ap- 
 proximate to accuracy ; and, to this end, many commodities of well 
 known value will serve to give a notion, more or less correct, of the 
 value of any specific product. At the same point of time and place, 
 there is little difficulty in the approximation : the value of any given 
 article may be readily measured by almost all others. To ascertain 
 
 * Wealth of Nations, book i. c. 5. On this pointy Smith observes, that " labour 
 was the first price, the original purchase-money, that was paid for all thing's. It 
 was not by gold or silver, but by labour, that all the wealth of the world was 
 originally purchased." I think I have succeeded in proving that he is mistaken. 
 Nature executes an essential part of the production of values ; and her agency is 
 in most cases paid for, and forms a portion of the value of the product. The 
 profit of land, which is called rent, is paid to the proprietor, who does nothing 
 himself, and stands in place of the original occupant; and it affects the value of 
 the product, raised by the joint agency of nature and industry ; the portion of 
 value contributed by nature is not the product of human labour. Capital also, 
 which is, for the most part, the accumulated product of labour, concurs, like 
 nature, in the business of production, and receives in recompense a portion of 
 the product ; but the gains, accruing to the capitalist, are quite distinct from the 
 accumulated labour vested in the capital itself, which can be expended or con- 
 sumed in tola, by one set of persons ; while its share in the product, in other 
 words, the interest paid for its use, may be consumed by another. 
 
 t Humholdt reckons it at from 3 fr. 50 cents to 4 fr. of our money Essai 
 Pot. sur la Nouvelle Espagnc, torn. iii. p. 105. oct. cd, 
 21 * 
 
ON PRODUCTION. BooKl 
 
 pretty nearV the value of an article amongst the ancients, we must 
 find out some article which there is reason to think has subsequently 
 undergone little change of value, and then compare the quantity of 
 that article given by the ancients and moderns respectively, in ex- 
 change for the article in question. Wherefore, silk would be a bad 
 object of comparison ; because it was, in the time of Caesar, procura- 
 ble from China only, at a most extravagant expense, and, being then 
 nowhere produced in Europe, must of course have been much dearer 
 than at present. Is there any commodity that has varied less in the 
 intervening period? and, if there be any such, how much of it was 
 then given for an ounce of silk ? These are the two points we must 
 inquire into. If any one article can be discovered, that was pro- 
 duced with equal ease and perfection at the two periods, and the 
 consumption of which had a natural tendency to keep pace with its 
 abundance, this article would probably have varied little in value 
 and may be taken as a tolerable measure of other values. 
 
 Ever since the earliest times recorded in history, wheat! has been 
 the staple food of the great mass of the population, in all the princi- 
 pal nations of Europe ; consequently, their relative population must 
 have been influenced by the abundance or scarcity of this article of 
 food, more than of any other : the ratio of the demand to the supply 
 must have been, therefore, at all times nearly the same. There is, 
 besides, no product which I know of, that has undergone less altera- 
 tion in the course of production. The agricultural skill of the an- 
 cients was in most respects equal, and in some, perhaps, superior to 
 our own. Capital, indeed, was dearer amongst them ; but that dif- 
 ference was little felt ; for, in ancient times, the proprietor was com- 
 monly both farmer and capitalist ; and the capital embarked in agri- 
 culture yielded jess return than other investments; because, as more 
 honour was attached to this, than to the other branches of industry, 
 commerce and manufacture, the influx of capital, as well as of labour, 
 into that channel, was greater than into the other two. And, during 
 the middle ages, in spite of the general declension of all the arts, the 
 tillage of arable land was prosecuted with a skill little inferior to that 
 of the present day. 
 
 Whence I infer, that the same quantity of wheat must have borne 
 nearly the same value among the ancients, during the middle ages 
 and at the present time. But, as there has all along been a vast dif- 
 ference in the produce of the harvest in one year and another, grain 
 being sometimes so abundant, as to sell extremely low, and at other 
 .irnes so scarce, as to occasion famine, the value of grain must be 
 
 :en on an average of years, whenever it is made the basis of any 
 calculation. 
 
 So much for the estimation of values at distant periods of time. 
 
 equal difficulty in the estimation at great distances of 
 
 ine staple articles of national food, which, as such, maintain 
 
 latest uniformity in the ratio of the demand and supply, are 
 
 -ery different in different climates. In Europe, wheat is the staple ; 
 
 3i Asia, it is nee: the relative value of neither the one nor the other 
 
CHAP. XXL ON PRODUCTION. 247 
 
 in Asia and Europe is tolerably steady ; nor has the value of rice in 
 Asia any relation to the value of wheat in Europe. Rice is beyond 
 question less valuable in India, than wheat is in this part of the 
 world ; for, besides that the cultivation is less expensive, it yields 
 two crops in the year. This is one reason, why labour is so cheap 
 in India and China. 
 
 The article of food in most general use is, therefore, but a bad 
 measure of value at great distances of place. Nor are the precious 
 metals by any means a correct one : their value is indubitably not so 
 great in North America and the West Indies, as in Europe, and 
 much greater in every part of Asia, as the constant efflux of specie 
 thither sufficiently proves. Yet the frequency of communication 
 between these different parts of the world, and the facility of trans- 
 port, give us reason to suppose them the least liable to fluctuation of 
 value on their passage from one climate to another. 
 
 There is happily no necessity, for the purposes of commerce, to 
 compare the relative value of goods and of metals in two distant 
 parts of the world ; it is quite enough to know their relation to 
 other commodities in each country. When a merchant remits to 
 China half an ounce of silver, it is of little importance to him, whe- 
 ther it has more relative value in China than in Europe. All he 
 wants to know is, whether he can buy with it at Canton a pound of 
 tea of a certain quality, which he can re-sell in Europe, say for two 
 ounces of silver. With these data, and in expectation of receiving, 
 at the close of the speculation, a gross profit of an ounce and a half 
 of silver, he calculates whether that profit will leave him a sufficient 
 net profit, after covering the charges and risk out and home ; and 
 this is all he cares about. If, instead of bullion, he remit goods, it 
 is enough for him to know ; 1. The relation between the value of 
 these goods and silver in Europe; that is to say, how much they 
 will cost ; 2. The relation between their value and that of Chinese 
 products at Canton ; that is to say, what he can get in exchange for 
 them ; and, lastly, the relation between these latter and silver in 
 Europe ; that is to say, what they will be worth when imported. It 
 is evident that every repetition of this operation brings into question 
 nothing more than the relative value of two or more articles at the 
 same time, and at the same place. 
 
 For the common purposes of life, or, in other words, when no- 
 thing more is requisite, than to compare the value of two objects, at 
 no great distance of time or place, most commodities possessed of 
 any value at all may serve as a measure ; and if, in describing the 
 value of an object, even where there is no question of either buying 
 or selling, the estimation is more generally made in the precious 
 metals, or in money, than in any other commodity ; it is simply, be- 
 cause its value is more generally known, than that of other com- 
 modities.* But, in all bargains for a long prospective period, as foi 
 
 * The difference of value in different objects has, throughout this work, been 
 noted in money-price or what they will fetch in money ; extreme correctness nt>i 
 
048 ON PRODUCTION. BOOK I. 
 
 the reservation of a perpetual rent, it is more advisable to reckon in 
 wheat : for the discovery of a single mine might perhaps greatly re- 
 duce the present value of silver ; whereas the tillage of all North 
 America could not sensibly alter the value of wheat in Europe : for 
 the number of mouths to be fed in America, would increase almost 
 in the ratio of the improved cultivation. But long prospective 
 stipulations regarding value must unavoidably, under any circum- 
 stances, be very precarious, and can never give any certain notion 
 of the value that is likely to be received. Perhaps the most im- 
 provident course of all is, to stipulate for a particular denomination 
 of money ; for the same denomination may be fixed to any variation 
 of weight or quality whatever ; and the contracting party r/iay find 
 he has bargained for a name, rather than a value, and that he runs 
 the risk of paying, or being paid, in mere words. 
 
 I have dwelt thus long upon the refutation of incorrect expres- 
 sions, because they appear to have acquired too general a circula- 
 tion,* and because they often confirm people in false notions and ideas 
 which ideas sometimes serve as the basis of erroneous systems, that 
 in their turn give birth to conduct equally erroneous. 
 
 SECTION VII. 
 
 Of a Peculiarity that should be attended to, in estimating the Sums 
 mentioned in History. 
 
 In reducing the money of former ages into money of the present 
 lay, the best informed historians have contented themselves with 
 converting the actual quantity of gold and silver, designated by the 
 term made use of by the authority cited, into the current money of 
 their own times. But this is not enough: the actual sum, the real 
 amount of the metal, can give no correct notion of its then value, 
 which is the very point we want to arrive at. It is, therefore, ne- 
 cessary to reckon, besides, the fluctuations of value that the metal 
 itself has undergone. 
 
 A few examples will best explain my meaning: 
 
 Voltaire tells us, in his Essay on Universal History,! that Charles 
 
 V enacted that the sons of France should have an annual revenue 
 
 1 , n i Of 7 . 12 ' 000 Kvre ' : a "d, as he reckons this sum to be 
 
 1 '0 100 000 hvres of the present day, he naturallv enough ob- 
 
 .jerves that this was no great provision for the sons of tfie monarch. 
 
 t us examine the 'grounds for this calculation of Voltaire. 
 
 Edit, de Kehl, oct. torn. xvii. p. 394. 
 
CHAP. XXI. ON PRODUCTION. 249 
 
 First, he reckons that the mark of fine silver was, in the time of 
 Charles V., worth about 6 Kvres ; at this rate, 12,000 livres will 
 make 2000 marks of silver, which, at their relative value at the date 
 of Voltaire's writing, would in fact amount to 100,000 Hvres, or 
 thereabouts. But 2000 marks of fine silver were worth in the reign 
 of Charles V. much more than in the reign of Louis XV. Of this 
 we shall be convinced, by a comparison of the relative average at the 
 two different periods, of pure silver to wheat, which we will take as 
 one of the least variable. 
 
 Dupre of St. Maur, whose book* is an ample repository of learned 
 information upon the value of commodities, gives it as his opinion, 
 that, from the reign of Philip Augustus, who died A. D. 1223, until 
 about the year 1520, the seller of wheat (Paris measure) was worth, 
 on the average, as much as 1-9 of a mark of fine silver; i. e. about 
 512 grains weight. 
 
 About the year 1536, when the mark of silver was of the value of 
 13 liores tournois, or rather passed under the denomination of 13 
 Hvres tournois, the ordinary price of a seller of wheat was about 3 
 livres tournois, i. e. 3-13 of a mark of fine silver, amounting to 1063 
 grains weight of that metal. 
 
 In 1602, under the reign of Henry IV., the mark of fine silver 
 being at that time equal to 22 livres, the average price of the seller 
 of wheat was 9liv. 16s. 9d. ; i. e. 2060 grains of fine silver.f 
 
 Since that period, the seller of wheat has, one year with another, 
 been constantly worth about the same weight of silver. In 1789, 
 when the mark was equivalent to 54 Kv. 195. the average price of 
 wheat was, according to Lavoisier, 24 Kv. the setter, i. e. 2012 
 grains of fine silver. I have not reckoned the fractions of grains, 
 for in these matters it is enough to approximate to accuracy ; in- 
 deed the price of the seller, taken at the average of Paris and the 
 environs, is itself but loosely calculated. 
 
 The result of this comparative statement is, that the seller of 
 \vhoat, whose relative value to other commodities has varied little 
 from 1520 down to the present time, has undergone great fluctua 
 tions, being worth, 
 
 A. D. 1520 - - 512 gr. of pure silver. 
 
 1536 - - 1063 do. do. 
 
 1602 - - 2060 do. do. 
 
 1789 - - 2012 do. do. 
 
 which shows that the value of pure silver must have varied consi- 
 derably since the first of these dates ; inasmuch as on every act of 
 exchange, four times as much of it must now be given for the same 
 quantity of commodities, as was given three centuries ago. We 
 shall see by-and-by,J why the discovery of the American mines, and 
 
 * Rapport entre V Argent et les Denrees, p. 35. 
 
 f For these calculations I am indebted to the Essai sur les Monnaies, aid tho 
 Variations dans les Prix, both by Dupre de Saint Maur. 
 t Book II. Chap. 4. 
 
 2G 
 
ON PRODUCTION. BOOK 1. 
 
 the influx into the market of about ten times as much silver as 
 before, has operated to reduce its value only m the ratio of 4 to 1. 
 
 Now to the application of this information to the royal stipend in 
 question: if pure silver was worth in the time of Charles V. four 
 Smes as much as in the age of Voltaire, the settlement of 2000 marks 
 imon the sons of France was equivalent to 8000 marks at the pre- 
 sent that is to say, more than 400,000 Jr. of our present currency, 
 or about 75,000 dollars; which makes the observations of Voltaire 
 upon the inadequacy of the provision much less applicable. 
 
 Raynal, though he wrote avowedly upon commercial matters, has 
 committed a similar error, in estimating the public revenue in the 
 reicrn of Louis XII. at 36 millions of our present money (francs) on 
 the ground, that it amounted to 7,650,000 liv. of 11 liv. to the mark 
 of silver. The sum, indeed, was equal to 695,454 marks of silver: 
 but it would not be enough merely to reduce the mark into livres of 
 the present day ; for the same quantity of silver was then worth four 
 times as much as it is now; so that, before reducing them into 
 modern money, they should be multiplied by four, which will swell 
 the public revenue under Louis XII. to a sum of 144 millions of 
 francs of present currency, or nearly 27 millions of dollars. 
 
 Again, we read in Suetonius, that Csesar made Servilius a present 
 of a pearl worth 6 millions of sestertii, which his translators, La 
 Harpe and Levesque, estimate to be equal to 1,200,000/r. present 
 money. But a little lower down, we find, that Caesar, on his return 
 to Italy, disposed of the gold bullion, accruing from the plunder of 
 Gaul, for coin, at the rate of 3000 sestertii to the pound of gold ; 
 which shows the pearl of Servilius to have been much under-rated. 
 The Roman pound, according to Le Blanc, weighed 10 1 of our 
 ounces; and 10 1 oz. of gold in Cassar's time, were worth as much 
 as 32 ounces of that metal at the present day, for it may reasonably 
 be reckoned, that the value of gold has fallen in the ratio of 3 to 1.* 
 Now 32 oz. of gold are worth nearly 3036 fr. which may therefore 
 be looked upon as about the real value of 3000 sestertii ; at which 
 rate the pearl in question must have been worth 6,072,000 fr. 
 (1,129,392 dollars,) and the Roman sestertius, somewhat more than 
 a franc of our money; which is greatly beyond the ordinary esti- 
 mate.f 
 
 * 12 oz. of silver were given for 1 oz. of gold, in Caesar's time. Where- 
 rore, silver having fallen in the ratio of 4 to 1, 1 oz. of gold was worth as much 
 in his days, as 48 oz. of pure silver at the present period. But 48 oz. of silver 
 are now worth 3 oz. of gold or thereabouts: so that gold must have fallen in the 
 ratio of about 3 to 1. 
 
 f The same error of calculation has led these translators involuntarily to 
 underrate the prodigality of the worst of the emperors. Thus we are told, that 
 Caligula, in less than a year, squandered the whole of the treasure accumulated 
 hy Tiberius, amounting to 2700 millions of sestertii, which La Harpe translates 
 .nto no more than 540 millions of livres: whereas, supposing the value of gold 
 to have varied little between the days of Csesar and of Caligula, which is pro- 
 ;*ble enough, it will be found to amount to very nearly 3000 millions of livres. 
 
CUAP. XXI. ON PRODUCTION. 251 
 
 When Caesar laid hands upon the public treasures of Rome, in 
 spite of the opposition of the tribune Metellus, he is stated to have 
 found them to consist of 4130 Ibs. of gold, and 80,000 Ibs.of silver; 
 which Vertot estimates to have amounted to 2,911,100 liv. tourn.; 
 but upon what grounds I am at a loss to imagine. To form a tole- 
 rably correct notion of the treasure seized by Csesar upon his usurp- 
 ation, the 4130 Ibs. of gold should be reduced into oz. of the French 
 standard, at the rate of 10 j oz. to the Roman lb.* which makes 
 44,052 oz. But, as the same weight of gold was then worth three 
 times as much as at present, the value will appear to have been 
 132,156 oz. or 12,530,346 fr. (2,330,644 dollars,) supposing the 
 standard of quality in the gold to have been the same as at present. 
 The 80,000 Ibs. weight of silver also were then worth as much as 
 320,000 Ibs. at the present period, 2. e. 20,915,735 fr., (3,890,327 
 dollars,) reckoning the Roman lb. at 10i oz. and taking the stand- 
 ard of quality to have been the same. Wherefore, the sum appro- 
 priated by the usurper amounted to 33,446,081 fr. (6,232,971 dol 
 lars,) of our money ; which is greatly above Vertot's estimate of 
 about 3 millions only. 
 
 From this specimen we may judge, how little reliance can be 
 placed on the calculations of other historians, of less information and 
 accuracy than those I have been quoting. Rollin, in his Ancient, 
 and Fleury, in his Ecclesiastical History, have reckoned the talen- 
 tum, mina and sestertius, according to the scale made out by some 
 learned persons, under the administration of Colbert. This scale is 
 liable to many objections : 1. It establishes upon very questionable 
 data, the respective quantities of the precious metals contained in 
 the coins of the ancients, which is a primary source of error : 2. The 
 value of the precious metals has considerably varied, between the 
 period of antiquity in question and the ministry of Colbert, which 
 is another source of error : 3. The scale of reduction, drawn up under 
 the direction of that minister, was calculated at the rate of 26 liv. 10 
 sous, to the mark of silver, being the then mint price of silver bul- 
 lion ; but this rate was altered before the days of Rollin, which is a 
 third source of error. Lastly, since the date of his publication, that 
 rate has been still further altered, and a Kvres tournois, conveys to 
 us the idea of a smaller quantity of silver, than it did in his time ; 
 
 Indeed, it seems hardly possible, that a less sum would have sufficed for the 
 monstrous extravagancies recorded of him. 
 
 Horace, Epist. 2. lib. ii. speaks of an estate, that, from the context, must 
 have been a considerable one, as being of the value of 300,000 sestertii, which, 
 according to my view, amounted to 303,600 fr. (about 56,470 dollars) of our 
 present money. His commentator, Dacier, perverts the meaning of the passage, 
 by estimating the estate in question, at 22,500 fr. only, or 4185 dollars. 
 
 * Le Blanc. Traite Monnaies, p. 3. estimates the Roman lb. of 12 oz. at the 
 actual weight of only lOf oz. of our standard, taking as a guide, the weight 
 of some of the coins of the emperors which are in a state of high preservation 
 The valuation I have here given of the oz. of gold, takes it at the mint standard, 
 viz. with a proportion of T V alloy ; for I take it for granted, that the gold, thus 
 laid hands upon by Ceesar, was not pure gold, but coin with a mixture of aiioy. 
 
252 ON PRODUCTION. BOOK L 
 
 and this is a fourth source of error. Thus, whoever now takes up 
 lhat work, relying on the calculations therein contained, will enter- 
 tain a most erroneous idea of the income and expenditure of the 
 states of antiquity, as well as of their commerce, their resources, 
 and every part of their system and organization. 
 
 Not that I would be understood to say, that a writer of history 
 :an ever have sufficient data, to give his readers, in all cases, a cor- 
 rect notion of values in general ; but, for the sake of a closer ap- 
 proximation to accuracy, than has hitherto been effected, in reducing 
 the sums of ancient times, and even of the middle ages, into modern 
 money, I would recommend, what indeed is generally done, first, to 
 inquire from those learned in antiquity, the actual weight of precious 
 metal contained in the coin in question: secondly, as far back as the 
 Emperor Charles V., that is to say, about the year 1520, that 
 quantity, if gold, must be multiplied by 3 only, and if silver, by 4:* 
 because the discovery of the American mines has occasioned a fall 
 in nearly that proportion: and lastly, to reduce that quantity of gold 
 or silver into the current money of the period, at which he may 
 happen to be writing. 
 
 From the year 1520 downwards, the value of silver progressively 
 declined until the latter end of the reign of Henry IV., that is to 
 say, towards the beginning of the seventeenth century. We may 
 judge of the depression of its value by the increasing price of any 
 given commodity, in the manner explained in the preceding section. 
 To acquire a correct notion of the value of the mark of silver during 
 this period, it will be necessary to allow for a diminution in the ratio 
 of the increased real, that is, metal, and not nominal or coin, price 
 of commodilies in general, or of any one, as wheat, for instance, in 
 particular. 
 
 From the beginning of the seventeenth century, there will be no 
 occasion for any further allowance, after having reduced the money 
 of the time being into marks of silver; for there does not appear to 
 have been any further sensible decline in the value of silver, since 
 most commodities have been procurable for the same metal-price. 
 It will be sufficient, therefore, to reduce them into the money current 
 for the time being, according to the then current value of the mark 
 of fine silver.f 
 
 * Until the period specified, the ratio of gold to silver in Europe was 1 to 12. 
 At present, it is in most nations of Europe 1 to 14, or 1 to 15 ; so that taking 
 the average ratio in ancient times at 1 to 11} and in modern times at 1 to 15, 
 pola will have increased in relative value to silver in the proportion of 4 to 3. 
 Wherefore, if gold be multiplied by 3, and silver by 4, the result will be equal. 
 
 1 1 am disposed to believe, that the value of both gold and silver began again 
 to decline about the commencement of the present century ; for more gold and 
 silver are now given for most of the commodities least liable to vary in the 
 r-osts of production. (1) 
 
 (1) In the very able and laborious ''Historical Inquiry into the Production 
 tnd Consumption of the Precious Metals, by William Jacobs, Esq. F. R. S. Lon- 
 Jon, 1^131, we are furnished with a chapter (xxv.) on the production cf old 
 
CHAP. XXI. ON PRODUCTION. 253 
 
 By way of illustration, let us take the statement we find in the 
 Memoirs de Sully, viz. that this minister accumulated, in the vaults 
 of the Bastile, a sum of 36 millions of livres tournois, to further the 
 designs of his master against the house of Austria. If we wish to 
 know the actual value of that hoard, we must, in the first place, 
 examine what weight of fine silver it amounted to. The mark of 
 fine silver was then represented by 22 livres tournois ; consequently 
 36 millions of livres make 1,636,363 marks, 5 oz. of silver. There 
 has been no sensible variation in the value of that metal since the 
 period in question ; for the same quantity of metal would then buy 
 the same quantity of wheat as at present. Now, at the present time, 
 1,636,363 marks 5 oz., or, in other terms, 399,588,018, 5 grammes 
 
 and silver from the end of the year 1809 to the end of 1829. The author re- 
 marks, " that it was at the first named period, 1809, when a great change took 
 place in the production of the mines of gold and silver, in every part of the 
 western continent, after a space of more than three centuries, during the whole 
 of which there had been a constant increase of the quantities obtained ; each 
 succeeding decennial period yielding a larger portion than the similar number 
 of years that preceded it; and though they have in some measure been restored, 
 it has been by slow degrees, and they are yet very far from having approached 
 the copious produce which they yielded before their general abruption from 
 Kuropean government." 
 
 After then examining the productiveness of the mines of Mexico, Colombia, 
 including New Grenada, Peru, Buenos Ayres, Chili, and Brazil, in gold and 
 silver, and also after taking notice of the gold found in North and South Caro- 
 lina and Georgia, from 1824 to 1830, he sums up the whole of the amount of 
 the gold and silver supplied by the late Spanish dominions in America, during 
 the twenty years, from the end of the year 1809 to the end of 1829, thus : 
 
 Divisions. Amount in dollars in twenty years. 
 
 Mexico, 220,043,200 
 
 Guatimala, 2,893,710 
 
 Colombia, 33,564,267 
 
 Peru, 64,688,429 
 
 Buenos Ayres, 30,000,000 
 
 Chili, 16,618,880 
 
 367,808,486 
 
 Or in sterling, at 4*. 3d. the dollar, *. 76,626,768 
 To this may be added the produce of 
 
 Brazil, 4,110,000 
 
 Whole produce of America, - - - 7.80,736,768 
 
 " In Europe," he states, likewise, " the produce of gold and silver has de- 
 clined, when the average of the last twenty years is compared with that of the 
 one hundred and ten years which preceded it. The value of the gold produced 
 in Europe, he estimates about 720,000*. and of the silver 530,000*., being to- 
 gether 1,250,000*. annually, or in the period of twenty years from 18JO to 1829, 
 8 millions; to this the supply from America, 80,736,768*., will make together, 
 03,736,768 pounds sterling." Mr. Jacobs estimates the diminution in the. 
 mass of metallic money, during the twenty years mentioned, at 1? ' 
 
 AMERP 
 22 
 
254 ON PRODUCTION. BOOK I. 
 
 of fine silver, coined into money, will make exactly 88,797,315 fr. 
 or 16,516,300 dollars. A sum, indeed, that would go no great way 
 in modern warfare ; but it must be considered, that war is now con- 
 ducted on a very different principle, and has become infinitely mor< 
 wasteful, in reality as well as in name. 
 
 SECTION VIII. 
 Of Ike Absence of any fixed ratio of Value between one Metal and another. 
 
 The same error, which led public functionaries to believe, that 
 they could fix the relative value of any metal to commodities, has 
 also induced them to determine by act of law the relative value of 
 the metals employed as money, one to the other. Thus, it has been 
 arbitrarily enacted, that a given quantity of silver shall be worth 24 
 liv., and that a given quantity of gold shall likewise be worth 24 liv. 
 In this manner, the ratio of the nominal value of gold to that of sil- 
 ver came to be legally established. 
 
 The pretension of authority was in both cases equally vain and 
 impotent ; and what has been the consequence ? The relative value 
 of the two metals to other commodities has, in fact, been constantly 
 fluctuating, as well as the relative value of the metals themselves, 
 when exchanged one for the other. Before the re-coinage of gold, 
 in pursuance of the arret of 13th October, 1785, the louis (Far was 
 commonly sold for 25 liv. and some sous of the silver coin. Con- 
 sequently, people took good care not to pay in gold coin the sums 
 bargained for in silver ; otherwise they would really have paid 25 
 Ho. and 8 or 10 sous, for every 24 liv. of the sums stipulated. 
 
 Since the re-coinage in 1785, when the quantity of gold in the 
 lends d*or was reduced by one-sixth, its value has nearly kept pace 
 with that of 24 liv. in silver ; so that gold and silver have been paid 
 indifferently. However, it has still continued most customary to 
 pay in silver, partly from long habit, and partly because the gold 
 coin, being more liable to be clipped or counterfeited, was received 
 with more caution and liable to more frequent cavils about the weight 
 and quality. 
 
 In England a different arrangement has produced an effect directly 
 contrary. In the year 1728, the natural course of exchange fixed 
 the relative value of gold to silver as 15 T lr to 1 ; say 15 T V to 1, for 
 the sake of simplicity ; 1 oz. of gold was sold for 15 T V oz. of silver 
 and vice versd,. Accordingly that ratio was established by law 
 1 oz. of gold being coined into the nominal sum of 31 17s. \Q\d. 
 and 15 r V oz. of silver into the same sum. Thus, the government 
 attempted permanently to fix a ratio, that is, in the nature of 
 things, perpetually varying. The demand for silver gradually 
 increased ; its use for plate and other domestic purposes became 
 more general the India trade received an additional stimulus 
 
CHAP. XXI. ON PRODUCTION. 255 
 
 am took off silver in preference to gold, for this reason, that trn 
 relative value of silver to gold is higher in the East than in Europe; 
 so that, by the end of the last century, the ratio of these metals one 
 to the other in England became about 14j to 1 only ; and the same 
 quantity of silver, that was coined into 3/. 17s. 10^<1, would then sell 
 in the market for 4/. in gold. There was thus a profit on melting 
 down the silver, and a loss on payments in that metal ; for which 
 eason, thenceforward, until the parliamentary suspension of specie 
 payments by the Bank of England in 1797, payments of course were 
 commonly made in gold. 
 
 Since 1797, all payments have been made in paper. But, if 
 England shall return to a metallic currency, framed upon the former 
 monetary principles and regulations, it is probable that payments 
 will be made in silver instead of gold, as before the suspension ; for 
 gold has risen in relative price to silver in the English market, pro- 
 bably in consequence of the large export of specie for commercial 
 purposes, and greater difficulty of prevention in gold than in silver. 
 Gold bullion in the English market is now to silver bullion in the 
 ratio of about 1 to 15j, although the mint ratio is still 1 to 15 T V. A 
 payment in gold instead of silver would therefore be a gratuitous 
 sacrifice of the difference between 15rV and 15J. 
 
 Hence may be drawn this conclusion ; that it is impossible in prac- 
 tice to assign any fixed ratio of exchangeable value to commodities 
 whose ratio is for ever fluctuating, and, therefore, that gold and silver 
 must be left to find their own mutual level, in the transactions in 
 which mankind may think proper to employ them.* 
 
 The above remarks upon the relative value of gold and silver are 
 equally applicable to silver and copper, as well as to all other metals 
 whatever. There is no more propriety in declaring, that the copper 
 contained in twenty sous shall be worth the silver contained in a 
 Kvre tournois, than in enacting, that the silver contained in 24 liv. 
 tournois shall be worth the gold in a louis d'or. However, little 
 mischief has been occasioned by fixing the ratio of copper to the 
 precious metals, because the law does not authorize the payment of 
 sums stipulated in Kvres tournois and francs in either copper or 
 the precious metals indifferently; so that, in reality, the only metal 
 money recognised by law as legal tender, for sums above the value 
 of the lowest denomination of silver coin, is silver or gold. 
 
 * The relative position of gold and silver, in respect to value, is by no means 
 determined by the respective supply of each from the mines. Humboldt states, 
 in his Essai Pol. sur la Nouvelle Espagne, torn. iv. p. 222, oct, that silver is 
 produced from the mines of America and Europe jointly, in the ratio to gold, of 
 45 to 1. Now the ratio of their value, instead of being 45 to 1, is only, 
 
 In Mexico, 15| - - - - to 1 
 
 France, 15 1 
 
 China, .... from 12 to 13 - - - - 1 
 
 Japan, 8to9----l 
 
 The difference is probably owing to the superior utility and demand of silver tot 
 the purposes of plate, &c. as well as of money. It would seem, that this causo 
 operates more forcibly in the East than in the West ; for gold jewellery is rela 
 lively cheaper there than in our part of the world. 
 
25e ON PRODUCTION. Boos L 
 
 SECTION IX. 
 Of Money as it ought to be. 
 
 rom all that has been said in the preceding sections may be 
 inferred my opinion of what money ought to be. 
 
 The pre'cious metals are so well adapted for the purposes of 
 money, as to have gained a preference almost universal; and, as no 
 other material has so many recommendations, no change in this 
 particular is desirable. 
 
 So also of their division into equal and portable particles. They 
 may very properly be coined into pieces of equal weight and quality 
 as fias heretofore been the practice among most civilized nations. 
 
 Nor can there be any better contrivance, than the giving them 
 such an impression, as shall certify the weight and quality ; or than 
 the exclusive reservation to government of the right of impressing 
 such certificate, and, consequently, of coining money; for the certifi- 
 cate of a number of coiners, all working together and in competition 
 one with the other, could never give an equal security. 
 
 Thus far, then, and no further, should the public authority inter- 
 meddle with the business of money. 
 
 The value of a piece of silver is arbitrary, and is established by 
 a kind of mutual accord on every act of dealing between one indi- 
 vidual and another, or between the government and an individual. 
 Why, therefore, attempt to fix its value beforehand ? since, after all, 
 the fixation must be imaginary, and can never answer any practical 
 purpose, in the money transactions of mankind. Why give a deno- 
 mination to this fixed, imaginary value, which money can never 
 possess? For what is a dollar, a ducat, a florin, a pound sterling, 
 or a franc ; what, but a certain weight of gold or silver of a certain 
 established standard of quality? And, if this be all, why give these 
 respective portions of -bullion any other name, than the natural one 
 ot their weight and quality? 
 
 Five grammes of silver, says the law, shall be equivalent to a 
 franc: which is just as much as to say, 5 grammes of silver is 
 equivalent to 5 grammes of silver. For the only idea presented to 
 the mind by the word franc, is that of the 5 grammes of silver it 
 Do wheat, chocolate or wax, change their name by the 
 e act of apportioning their weight? A pound weight of bread, 
 i e, or of wax candles is still called a pound weight of bread 
 chocolate,^ wax candles. Why, then, should not a piece of silver] 
 
 ot call 
 
 This slight alteration, verbal, critical, and nugatory as it may 
 m, s t immense practical consequence. Were it onrp aHmitiPrl 
 i would be no longer possible to stipulate in nlinal vahe everv 
 "would be a barter of one suLantialcoZod^foA'notS 
 
CHAP. XXI. ON PRODUCTION. 257 
 
 cf a given quantity of silver for a given quantity of grain, or butcher's 
 meat, of cloth, &c. &c. Whenever a contract for a long prospective 
 L,eriod was entered into, its violation could not escape detection : a 
 person taking an obligation to pay a given quantity of fine silver, 
 ;it a day certain, would know precisely how much silver he would 
 *iave to receive at the period assigned, provided his debtor continued 
 solvent. 
 
 The whole monetary system would thenceforth fall to the ground; 
 a system replete with fraud, injustice, and robbery, and moreover so 
 complicated, as rarely to be thoroughly understood, even by those 
 who make it their profession. It would ever after be impossible to 
 effect an adulteration of the coin, except by issuing counterfeit 
 money ; or to compound with creditors, without an open, avowed 
 bankruptcy. The coinage of money would become a matter of 
 perfect simplicity, a mere branch of metallurgy. 
 
 The denominations of weight, in common use before the introduc- 
 tion into France of the metrical system, that is to say, the once, gros, 
 grain, had the advantage of conveying the notion of portions of 
 weight, that had remained stationary for many ages, and were appli- 
 cable to all commodities whatever, without distinction: so that the 
 once could riot be altered for the precious metals, without altering it 
 at the same time for sugar, honey, and all commodities sold by the 
 weight: but, in this particular, the new metrical system is infinitely 
 preferable. It is founded upon a basis provided by nature, which 
 must remain invariable as long as our world shall last. The gramme 
 is the weight of a cubic centimetre of water : the centimetre is the 
 hundredth part of a metre, and the metre is lv , V oo.oo part of the arc 
 formed by the circumference of the earth, from the pole to the 
 equator. The term gramme may be changed, but no human power 
 can change that portion of weight actually designated by the term 
 gramme; and whoever shall contract to pay at a future date a 
 quantity of silver, equal to 100 grammes weight, can never pay a 
 less quantity of silver, without a manifest breach of faith, whatever 
 arbitrary measures of power may intervene. 
 
 The power of a government to facilitate the transactions of ex- 
 change and contract, wherein the commodity, money, is employed, 
 consists in dividing the metal into different pieces of one or more 
 grammes or centigrammes, in such a manner, as to admit of instant 
 calculation of the number of grammes a given payment will require. 
 
 It has been ascertained by the experiments of the Academy of 
 Sciences, that gold and silver resist friction better with a slight mix- 
 ture of alloy, than in a pure state. People versed in these matters 
 say, besides, that this complete purity cannot be obtained, without 
 a very expensive chemical process, that would add greatly to the 
 expense of coinage. There is no sort of objection to mixing alloy, 
 provided the proportion be signified by the impression, wh'ch should 
 be nothing more than a mere certificate of the weight and quality 
 of the metal. 
 
 I make no mention of the terms franc, dccime, centime, because 
 22* 2H 
 
o-j, ON PRODUCTION. BOOK I. 
 
 ihosc names should never have been given to the coin,^ being, in fact, 
 names indicative of nothing whatever. The laws of France, instead 
 }' enacting that pieces called francs, shall be coined, having the 
 ^ht of 5 grammes of silver, should have simply ordered a coinage 
 of pieces of 5 grammes. In which case, a letter of credit or bill 
 of exchange, instead of being drawn for, say 400/r., would be for 
 2000 grammes of silver of the standard of fg- silver to T V alloy; or 
 if prei'm-ed, for 130 grammes of gold of the same degree of purity : 
 and the payment would be the most simple imaginable ; for the pieces 
 of coin, gold and silver, would be all fractions or multiples of the 
 gramme of metal of that standard. 
 
 However, it would still be necessary to enact, that no sum stipu- 
 lated in grammes of silver or gold should be payable otherwise than 
 in coin, unless under a special proviso; else, the debtor might dis- 
 charge all claims in bullion of somewhat less value than coin. This 
 is obviously matter of practical arrangement; the principle requiring 
 nothing, but that the obligation, after mentioning the metal and 
 standard, should specify on the face of it, whether payable in national 
 coin or bullion. The only object of such a law would be, to save 
 the continual necessity of enumerating many particulars that would 
 thenceforward be implied. 
 
 A government should never coin the bullion of private persons, 
 without charging the profit, as well as the cost, of the operation! 
 The monopoly of coinage will enable it to make this profit some- 
 what high : but it should be varied according to the state of metal- 
 lurgic science, and the demand for circulation. Whenever the state 
 has little to coin on its own account, it had better lower its charges, 
 than let its machinery and workmen remain idle; and, on the other 
 hand, raise its charges, when the influx of bullion is rapid and super- 
 abundant. And in this, it would but imitate other manufacturers. 
 As to the bullion bought and coined by government on its own 
 ttjunt, the com issued would reimburse the charges; and yield a 
 1 by its superior value in exchange; as I have endeavoured to 
 prove above, m Section IV. 
 
 To the marks indicative of weight and quality, should of course 
 superadded every device to prevent counterfeits 
 
 a 
 
 
 iciai, or goods at 
 preference. 
 
CHAP. XXI. ON PRODUCTION. 259 
 
 It would be difficult to calculate the advantage, that would accrue 
 to industry in all its branches, from so simple an arrangement ; but 
 some notion of it may be obtained, by considering the mischiefs that 
 have resulted from a contrary system. Not only has the relative 
 pecuniary position of individuals been repeatedly overset, and the 
 best planned and most beneficial productive enterprises altogether 
 thwarted and rendered abortive ; but the interests of the public, as 
 well as of private persons, are, almost everywhere, subject to daily 
 and hourly aggression. 
 
 A medium, composed sntirely of either silver or gold, bearing a 
 certificate, pretending to none but its real intrinsic value, and, conse- 
 quently exempt from the caprice of legislation, would hold out such 
 advantages to every department of commerce, and to every class 
 of society, that it could not fail to obtain currency even in foreign 
 countries. Thus, the nation, that should issue it, would become a 
 general manufacturer of money for foreign consumption, and might 
 derive from that branch of manufacture no inconsiderable revenue. 
 We read in Le Blanc,* that a particular coin issued by St. Louis, 
 and called agneh d'or, from the figure of a lamb impressed upon 
 them, was in great request even among foreigners, and a favourite 
 money in commercial dealings, for the sole reason that it invariably 
 contained the same quantity of gold, from the reign of St. Louis to 
 that of Charles VI. 
 
 Should France be so fortunate as to make this experiment, I hope 
 none of those who do me the honour to read this work, will feel any 
 regret at the drain of its money, to use the expression of certain 
 persons, who neither know nor choose to learn any thing of the 
 matter. It is quite clear, that neither silver nor gold coin will go 
 out of the kingdom, without leaving behind a value fully equivalent 
 to the metal and the fashion it bears. The trade and manufacture of 
 jewellery for export are considered lucrative to the nation ; yet they 
 occasion an outgoing of the precious metals. The beauty of the 
 form and pattern adds, to be sure, greatly to the price of the metal 
 thus exported ; but the accuracy of assay and weight, and, above all 
 things, the maintenance of the coin at an invariable standard of 
 weight and quality, would be an equal recommendation, and would 
 undoubtedly be just as well paid for. 
 
 Should it be objected, that the same system was adopted by 
 Charlemagne, when he called a pound of silver a lime, and that 
 notwithstanding the coin has been since repeatedly deteriorated, 
 until, at last, what was called a livre, contained, in fact, but 96 gr., 
 I answer: 
 
 1. That, neither in the time of Charlemagne, nor at any subse- 
 quent period, has there ever been a coin containing a pound of 
 silver ; that the livre has always been a money of account, an ideal 
 measure. The silver coin of Charlemagne and his successors, con 
 sisted of sols of silver, the sol being a fractional part of the pourx* 
 weight. 
 
 * Traite Hist, des Monnaies de la France, Prolegom. p. 4. 
 
260 ON PRODUCTION. BOOK I. 
 
 2. None of the coin has ever borne on the face of it the indication 
 of the weight of metal it contained. There are extant in the col- 
 lections of medals many pieces coined in the reign of Charlemagne. 
 The impression was nothing more than the name of the monarch, 
 with the occasional addition of the name of the town where the coin 
 was struck, executed in very rude characters ; which, indeed, is not 
 to be wondered at, considering that the monarch, though an avowed 
 patron of literature, was himself unable to write. 
 
 3. The coin was yet further from bearing any thing indicative 
 of the standard quality of the metal, and this was the thing first 
 encroached upon ; for'the sol in the reign of Philip I. still contained 
 the same fractional weight of the lime as originally ; but it was made 
 up of 8 parts of silver to 4 copper, instead of containing, as under 
 the second race of monarchs, 12 oz. of fine silver, which was the 
 then weight of the livre. 
 
 The very singular state of the actual money of England, and the 
 extraordinary circumstances, that have occurred in respect to it 
 since the first editions of this work appeared, have given a decisive 
 proof, that the mere want of an agent of circulation, or, of the com- 
 modity, money, is sufficient to support a paper-money absolutely 
 destitute of security for its convertibility at a high rate of value, or 
 even at a par with metal, provided it be limited in amount to the 
 actual demand of circulation.* Whence some English writers of 
 great intelligence in this branch of science have been led to con- 
 clude, that, since the purposes of money call into action none of th& 
 physical and metallic properties of its material, some substance less 
 costly than the precious metals, paper, for instance, may be employed 
 in them with good effect, if due attention be paid to ke'ep the amount 
 of the paper within the demands of circulation. The celebrated 
 Ricardo, has, with this object, proposed an ingenious plan, making 
 the Bank or corporate body, invested with the privilege of issuing 
 the paper-money, liable to pay in bullion for its notes on demand. 
 A note, actually convertible on demand into so much gold or silver 
 bullion, cannot fall in value below the value of the bullion it purports 
 to represent; and, on the other hand, so long as the issues of the 
 paper do not exceed the wants of circulation, the holder will have 
 no inducement to present it for conversion, because the bullion, when 
 obtained, would not answer the purposes of circulation. If a casual 
 interruption of confidence in the paper should bring it for conversion 
 | large quantity, the paper remaining in circulation must rise 
 alue, in the absence of any other circulating medium, and there 
 would be an inducement to bring bullion to the bank to be converted 
 into paper.f 
 
 ^ 
 
CHAP. XXL ON PRODUCTION. 26) 
 
 SECTION X. 
 Of a Copper and Base Metal? Coinage. 
 
 The copper coin and that of base metal, are not, strictly speaking, 
 money ; for debts cannot be legally tendered in this coin, except such 
 fractional sums, as are too minute to be paid in gold or silver. Gold 
 and silver are the only metal-money of almost all commercial nations. 
 Copper coin is a kind of transferable security, a sign or representa- 
 tive of a quantity of silver too diminutive to be worth the coinage ; 
 and, as such, the government, that issues it, should always exchange 
 it on demand for silver, when tendered to an amount equal to the 
 smallest piece of silver coin. Otherwise, there is no security against 
 the issue of an excess beyond the demand of circulation. 
 
 Whenever there is such an excess, the holders, finding the base 
 metal less advantageous than the gold and silver it represents but 
 does not equal in value, would strive to get rid of it in every way ; 
 whether by selling to a loss, or by employing it in preference to pay 
 for low-priced articles, which would consequently rise in nominal 
 price ; or by proffering it to their creditors in larger quantity, than 
 enough to make up the fractional part of sums in account. The 
 government, having an interest in preventing its being at a discount, 
 because that would reduce the profit upon all future issues, generally 
 authorizes the latter expedient. 
 
 Before 1808, for instance, it was a legal tender at Paris to the 
 extent of & of every sum due ; which had exactly the same effect, 
 as a partial debasement of the national currency. Every body knew, 
 when a bargain was concluded, that he was liable to be paid in pro- 
 portion of *V copper or brass metal, to silver, and made his cal- 
 culation accordingly, on terms proportionably higher, than if no such 
 regulation had existed. It is with this particular, precisely as with 
 the weight and standard of the silver coin ; sellers do not stop to 
 weigh and assay every piece they receive, but the dealers in gold 
 and silver, and those connected with the trade, are perpetually on 
 the watch to compare the intrinsic, with the current, value of the 
 coin ; and, whenever their values differ, they have an opportunity of 
 gain; their operations to obtain which, have a constant tendency to 
 put the Current value of the coin on a level with its real value. 
 
 The obligation to receive copper in any considerable proportion, 
 has, in like manner, an influence upon the exchange with foreigners. 
 There is no question, that a letter of exchange on Paris payable in 
 francs is sold cheaper at Amsterdam, in consequence of the liability 
 to receive part payment in copper or base metal ; just as it would 
 
 * Billon, a compound of copper and silver, containing \ or only of the latter 
 and the residue of the former. It is used in the fractional coinage of France, to 
 supersede the employment of copper in large quantities. 
 
ON PRODUCTION. BOOK I, 
 
 DC, if the franc were made to contain less of silver and more of 
 
 :t is to be observed, that, on the whole, the value of money 
 is not so much affected by this circumstance, as by the mixture ot 
 alloy ; for the alloy has positively no value whatever, for the reasons 
 al.uVu stated;* whereas, the copper money, payable in the ratio of 
 A had a 'small intrinsic value, though inferior to the sum in silver, 
 is made to pass for: had it been of equal value, there would have 
 been no occasion for an express law to give it currency. 
 
 As long as a government gives silver on demand for the copper 
 and base metal regularly presented, it can with little inconvenience 
 give them very trifling intrinsic value ; the demand for circulation 
 will always absorb a very large quantity, and they will maintain 
 their value as fully, as if really worth the fractional silver represented; 
 on exactly the same principle, as a bank-note passes current, and that 
 too for years together, without any intrinsic value, just as well as if 
 really worth the sum it purports on the face of it to contain. In this 
 manner, such a coinage can be made more profitable to the govern- 
 ment than by any compulsion to receive it in part payment; and the 
 value of thelegal coin will suffer no depreciation. The only danger 
 is that of counterfeits, which there is the strongest stimulus for ava- 
 rice to fabricate, in proportion as the difference between the intrinsic, 
 and the current value, grows wider. 
 
 The last King of Sardinia's predecessor, in attempting to with- 
 draw from circulation a base currency, issued by his father in a 
 period of calamity, had more than thrice the quantity originally 
 issued by the government thrown upon his hands. The same thing 
 happened to the king of Prussia, when, under the assumed name of 
 the Jew Ephraim, he withdrew the base coin he had compelled the 
 Saxons to receive, during his distresses in the seven years' \var;f 
 and for exactly the same reason. Counterfeits of the coin are usually 
 executed beyond the national frontier. In England it was attempted 
 to remedy this evil in the year 1799, by a coinage of half-pence 
 with a very fine impression, and executed with an attention and 
 perfection, that counterfeiters can rarely bestow. 
 
 SECTION XI. 
 Of the preferable Form of Coined Money. 
 
 The wear of the coin by friction is proportionate to the extent of 
 if two p,eces of coin of equal weight and quality, that 
 
 COnlmUaI USG ' Which offers the 
 The spherical or globular forrnj^nsequently, preferable in this 
 * Supra, p. 166. 
 t Mongez, Consider, sur les Monnaies, p. 31. 
 
CHAP. XXL ON PRODUCTION. 20;i 
 
 respect, as least liable to wear; but it has been rejected on account 
 of its inconvenience. 
 
 Next to this form, the cylinder, of equal depth and breadth, is 
 that, which exposes the smallest surface ; but this is fully as incon- 
 venient as the other ; the form of a very flat cylinder has, conse- 
 quently, been very generally adopted. However, from what has 
 been already said, it will appear, that the less it is flattened the bet- 
 ter ; and that the coin should rather be made thick than broad. 
 
 With regard to the impression, the chief requisites are, 1. That it 
 specify the weight and quality of the piece; 2. That it be very dis- 
 tinct, and intelligible to the meanest capacity; 3. That the die oppose 
 all possible difficulties to the defacing or reducing of the coin ; that 
 is to say, that it be so contrived, that neither the ordinary wear nor 
 fraudulent practices should be able to reduce the weight without 
 destroying the impression. The last coined English half-pence have 
 a cord, not projecting, but indented in the thickness of the circum- 
 ference, and occupying the central part of the circumference only, 
 so as to make it liable neither to clipping nor wear. This mode 
 might be adopted in the silver and gold coinage with certainty and 
 success ; and it is of much more consequence to prevent their dete- 
 rioration. 
 
 When the impression is in basso relievo, it should project but 
 little, for the convenience of piling the pieces one upon another, as 
 well as to reduce the friction. On the same account a projecting 
 impression should not be too sharp on the surface, or it would wear 
 away too rapidly. With a view to prevent this, experiments have 
 been made of dies executed in alto relievo ; but it was found that 
 the coin was thereby too much weakened, and liable to be bent or 
 broken. This plan, however, might possibly be practised with advan- 
 tage, if the pieces were secured by greater thickness. 
 
 The same motive of giving to the coin the least possible surface, 
 should induce the government to issue as large pieces as convenience 
 will admit ; for the more pieces there are, the greater is the surface 
 exposed to friction. No more small pieces of coin should be issued, 
 than just enough to transact exchanges of small amount, and to pay 
 fractional sums. All large sums should be paid in large pieces 
 of coin. 
 
 SECTION XII. 
 
 Of the Party, on whom the Loss of the Coin by Wear should properly fall 
 
 It has been a question, who ought to defray the loss, consequent 
 upon the friction or wear of the coin ? In strict justice, the person 
 who had made use of it, in like manner as the wearer of any other 
 commodity. A man, that re-sells a coat after having worn it, sell* 
 it for less than he gave for it when new. So a man, that sells ti 
 
2G4 ON PRODUCTION. BOOK I. 
 
 crown-piece for some other commodity, should sell it for less than 
 he gave ; that is to say, should receive a smaller quantity of goods 
 than he obtained it with. 
 
 But the portion of a specific coin, consumed in its passage through 
 the hands of any one honest person, is less than almost any assigna- 
 ble value. It may circulate for many years together, without any 
 sensible diminution of its weight; and, when the diminution' is dis- 
 covered, it may be impossible to tell, by which of the innumerable 
 holders it was effected. I am aware, that each of them has imper- 
 ceptibly shared the depreciation of its exchangeable value, occasion- 
 ed by the wear ; that the quantity of goods it would purchase has 
 declined bv an insensible gradation ; that, although the depreciation 
 has been imperceptibly progressive, it becomes at last very manifest; 
 and that worn money will not be taken at par with new coin. Con- 
 sequently, I think, that, if an entire class of coin were gradually so 
 reduced as to make a re-coinage necessary, its holders could not in 
 reason expect that their reduced coin should be exchanged for new 
 at par,. pioce for piece. Their money should be received, even by 
 the government, at no more than its real value; the silver it contains 
 is less in quantity than at the first issue; and it has been received by 
 the holders at a lower rate of value ; they have given for it less goods 
 than they would have done in the outset. 
 
 In fact this is the course that rigid justice w' jld prescribe ; but 
 there are two reasons, why it should not be strictly enforced. 
 
 1. Each individual piece of coin is not, if I may be allowed the 
 expression, a substantive article of commerce. Its exchangeable 
 value is calculated, not according to the weight and quality of the 
 identical piece in question, but according to the average weight and 
 quality of the coin in large quantities, as ascertained by common 
 experience. A crown piece of an earlier date, and more worn, is 
 yet freely received in exchange for one more new and perfect ; the 
 difference is sunk in the average. The mint issues new pieces every 
 year of the full weight and standard, which prevents the coin from 
 declining sensibly in value, in consequence of the friction, even for 
 many years after its issue. 
 
 This circumstance is illustrated by the fact, of the French pieces 
 
 2 and 24 sous passing current at par with the crown-pieces of 6 
 
 Iivres without any difficulty; although the same nominal sum, in the 
 
 shape of the worn pieces of 12 and 24 S ., contained in reality alout 
 
 less silver than the crown-piece. 
 
 The subsequent law, which prohibited their being taken bv the 
 
 r P ,t^hp CeiV t e ^ ? r r^? aU : pers ns at more tha " 10 and 20**, 
 rated them at their full intrinsic va ue, but below the rite at whirh 
 
 ^S r 4 h d a 2 d 4 taken them - Fo ; their TOT h^SfiS 
 
 pi up to 12 and 24 sous in spite of the wear, bv reason of theii 
 pasting current at par with the crown-piece. Thus the last holder 
 was sa.l, led with the entire loss of a friction, to wh k-h the innumer 
 ible hands they had passed through had all contributed: 
 
 s impress-on is equally effectual in giving currency at the 
 
. XXII. ON PRODUCTION. 265 
 
 last as at the first, although it becomes in course of time scarcely, 
 if at all visible ; witness the shillings of England. The coin derives, 
 as above explained, a certain degree of value from the mere impres- 
 sion, which value has been admitted and recognised throughout, 
 until it reaches the ultimate holder, who has in consequence received 
 it at a higher rate, than he would a piece of blank bullion of equal 
 weight. To saddle him with the difference, would be to make him 
 lose the whole value of the impression, although it has been equally 
 serviceable to perhaps a million of others. 
 
 On these grounds, I am inclined to think, the loss by wear, and 
 ihat of the impression, should be borne by the community at large ; 
 that is to say, by the public purse : for the whole society derives the 
 benefit of the money; arid it is impossible to tax each individual, in 
 the precise proportion of the use he has made of it. 
 
 To conclude: every individual, that carries bullion to the mint to 
 be coined may be fairly charged the expenses of the process, and, 
 if thought advisable, the full monopoly-profit. Thus far there is no 
 harm done: his bullion is increased in value to the full amount of 
 what he has been charged by the mint; otherwise, he would never 
 have carried it thither. At the same time, I am of opinion, that the 
 mint should always give a new piece in exchange for an old one on 
 demand : which need nowise interfere with the utmost possible pre- 
 cautions against the clipping and debasing of the coin. The mint 
 should refuse such pieces as have lost certain parts of the impression, 
 which are not liable to fair and unavoidable wear ; and the loss in 
 that case should fall on the individual, careless enough to take a piece 
 thus palpably deficient. The promptitude, with which the public 
 would take care to carry injured or suspicious pieces to the mint, 
 would greatly facilitate the detection of fraudulent practices. 
 
 With diligence on the part of the executive, the loss arising fom 
 this source might be reduced to a mere trifle, and the system of na- 
 tional money would be materially improved, as well as the foreign 
 exchange. 
 
 CHAPTER XXII. 
 
 OP SIGNS OR REPRESENTATIVES OP MONEY. 
 
 SECTION I. 
 Of Bills of Exchange and Letters of Credit. 
 
 A BILL of exchange, a promissory note or check, and a fetter oi 
 credit, are written obligations to pay, or cause to be paid, a sum of 
 money, either at a future time, or at a different place. 
 23 21 
 
206 
 
 ON PRODUCTION. BOOK I. 
 
 The ri^ht conveyed by the assignment of these engagements, 
 though not capable of being enforced immediately, or elsewhere 
 than *t the stipulated place, yet gives them an actual value, greater 
 or less, according to circumstances. Thus a bill of exchange for 100 
 dollars, payable at Paris at two months' date, may be negotiated or 
 ure, at the rate of, say 99 dollars, while a letter of credit 
 of like amount, payable at Marseilles in the same space of time, will, 
 perhaps, be worth at Paris but 98 dollars. 
 
 These engagements may be used as money in all transactions of 
 purchase, as soon as they are invested with actual present value, 
 by the prospect of their future value ; indeed, most of the greater 
 operations of commerce are effected through the medium of these 
 securities. 
 
 Sometimes, the circumstance of a bill of exchange being payable 
 at another place will increase, instead of diminishing its value ; but 
 this depends upon the state of commerce for the time being. If the 
 merchants of Paris have large payments to make to those of London, 
 they will readily give more money at Paris for a bill upon London, 
 than it will produce to the holder at the latter place. Thus, although 
 the pound sterling contain precisely as much silver as 24 fr. 74 
 cents, they will, perhaps, give at Paris 25 fr., more or less, for every 
 pound sterling payable in London.* 
 
 This is what is called the course of exchange, being, in fact, a 
 mere specification of the quantity of precious metal people will con- 
 sent to give, for the transfer of a right to receive a given quantity 
 of the same metal at any other specified place. The particulaV 
 locality of the metal reduces or increases its value, in relation to the 
 same metal situated elsewhere. 
 
 The exchange is said to be in favour of any country, France, for 
 
 example, whenever less of the precious metal is there given for, than 
 
 will be produced by, a bill of exchange upon another country; or 
 
 whenever in the foreign country more of the precious metal is given 
 
 for a bill of exchange on France, than it will there produce to the 
 
 The difference is never very considerable, and cannot ex- 
 
 the charge of transporting the precious metal itself; for, if a 
 
 igner, who wants to make a payment at Paris, can remit the sum 
 
 specie at less expense than he could be put to by the existir^ 
 ;e of exchange, he would undoubtedly remit in specie + 
 
 t has been imagined by some people, that all debts to foreigners 
 
 >e paid by bills of exchange; and measures have been frequently 
 
 3sted, and sometimes adopted, for the encouragement of this 
 
 fieWious mode of payment. But this is a mere delusion. A bill 
 
 of exchange has no mtrinsjejr^^ drawn ypon any 
 
CHAP. XXII. ON PRODUCTION. 26? 
 
 place for a sum actually due at that place ; and no sum can be there 
 actually due, unless an equal value, in some shape or other, has beeis 
 remitted thither: the imports of a nation can only be paid by the 
 national export; and vice versa. Bills of exchange are a mere 
 representative of sums due; in other words, the merchants of one 
 country can draw bills on those of another for no more, than the 
 full amount of the goods of every description, silver and gold in- 
 cluded, which they may have sent thither directly or indirectly. If 
 one country, say France, have remitted to another country, Ger- 
 many perhaps, merchandise to the value of 2 millions of dollars, and 
 the latter have remitted to the former to the amount of 3 millions 
 of dollars, France can pay as much as 2 millions by the means of 
 bills of exchange, representing the value of her export ; but the 
 remaining 1 million cannot be so discharged directly, although pos- 
 sibly they may by bills of exchange upon a third country, Italy, for 
 instance, whither she may have exported goods to that extent. 
 
 There is, indeed, a species of bills, called by commercial men, 
 accommodation-paper, which actually represents no value whatever. 
 A merchant at Paris, in league with another of Hamburgh, draws 
 bills upon his correspondent, which the latter pays or provides for, 
 by re-drawing and negotiating or selling bills at Hamburgh upon 
 his correspondent at Paris. So long as these bills are in possession 
 of any third person, that third person has advanced their value. 
 The negotiation of such accommodation-paper is an expedient for 
 borrowing, and a very expensive one ; for it entails the loss of the 
 banker's commission, brokerage and other incidental charges, over 
 and above the discount for the time the bills have to run. Paper of 
 this description can never wipe out the debt, that one nation owes 
 another; for the bills drawn on one side balance and extinguish those 
 on the other. The Hamburgh bills will naturally counterpoise those 
 of Paris, being in fact drawn to meet them ; the second set destroys 
 the first, and the result is absolute nullity. 
 
 Thus it is evident, that one nation cannot otherwise discharge its 
 debts to another, than by remittance of actual value in goods or 
 commodities, in which term I comprise the precious metals, amongst 
 others, to the full amount of what it has received or owes. If the 
 actual values directly remitted thither are insufficient to balance the 
 receipts or imports thence, it may remit to a third nation, and thence 
 transport produce enough to make up the deficit. How does France 
 pay Russia for the hemp and timber for ship-building imported 
 thence? By remittance of wines, brandies, silks, not merely to 
 Russia, but, likewise to Hamburgh and Amsterdam, whence again a 
 remittance of colonial and other commercial produce is forwarded 
 to Russia. 
 
 1 Governments have commonly made it their object to contrive 
 that the precious metals shall form the largest possible portion of 
 the national import from, and the least possible portion of the na- 
 tional export to, foreign countries. I have already taken occasion 
 to remark, with regard to what is improperly called the balance of 
 
ON PRODUCTION. BOOK L 
 
 trade, that, if the national merchant finds the precious metals a more 
 profitable foreign remittance than another commodity, it is likewise 
 the interest of the state to remit in that form ; for the state can only 
 gain and lose in the persons of its individual subjects; and, in the 
 matter of foreign commerce, whatever is best for the individuals in 
 the aggregate, is best for the state also.* Thus, when impediments 
 are thrown in the way of the export of the precious metals by in- 
 dividuals, the effect is' to compel an export in some other shape, less 
 advantageous to the individual and the public too. 
 
 SECTION II. 
 Of Banks of Deposit. 
 
 The constant intercourse between a small state and its neighbours 
 occasions a perpetual influx of foreign coin. For, although the small 
 state may have a national coinage of its own, yet, the frequent neces- 
 sity of taking the foreign instead of the national coin in payment, 
 requires the fixation of the ratio of their relative value, in the current 
 transactions of business. 
 
 There are many mischiefs attending the use of foreign coin, aris- 
 ing chiefly from the great variation of weight and quality. It is 
 often extremely old, worn, and defaced; not having participated in 
 the general re-coinage of the nation that issued it, where, perhaps, 
 it is no longer current ; all which circumstances, though considered 
 in settling its current relative value to the local coin, yet, do not quite 
 reduce it to the natural level of depreciation. 
 
 Bills drawn from abroad upon such a state, being payable in the 
 com thus rendered current, are, in consequence, negotiated abroad 
 
 some loss; and those drawn upon foreign countries, and, conse- 
 
 quently, payable in com of a more steady and intelligible value, are 
 
 tiated in a smaller state at a premium, because the holder of 
 
 n must have purchased them in a depreciated currency. In 
 
 toT 6 g " C0i " 1S alWayS exchan ed for the loca l currency 
 
 The remedy devised by states of this inferior class is the subject 
 
 the present section. They established banks,f where private 
 
 Chants could lodge any amount of local nationa coin, of bullion, 
 
 o. of foreign coin,recko and 
 
 upon the history of the co ties ft*'' W j" throw 
 
 es Wi 
 
 general. At any rate, it was npco-, , m ' and of commerce in 
 
 (to have been riorted ^S ** ' 
 
CHAP. XXIL ON PRODUCTION. 2G<J 
 
 so lodged, was entered as so much money of the legal national 
 standard of weight and quality. At the same time, the bank opened 
 an account with each merchant making such deposit, giving him 
 credit for the amount of the deposit. Whenever a merchant wanted 
 to make a payment, there was no occasion to touch the deposit at 
 all ; it was sufficient to transfer the sum required, from the credit of 
 the party paying, to that of the party receiving. Thus values could 
 be transferred continually by a mere transfer in the books of the 
 bank. The whole operation was conducted without any actual 
 transfer of specie ; the original deposit, which was entered at the real 
 intrinsic value at the time of making it, remained as security for the 
 credit transferred from one person to another ; and the specie, so 
 lodged with the bank, was exempt from any reduction of value by 
 wear, fraud, or even legislative enactment. 
 
 The money still remaining in circulation, wherever it was ex- 
 changed for the bank deposits, that is to say, for entries in the bank 
 books, necessarily lost in proportion to the reduction of its intrin- 
 sic value. And this loss occasioned the difference of value, or 
 agio at Amsterdam, between bank money and circulating money, 
 which was on the average from 3 to 4 per cent, in favour of the 
 former. 
 
 It will easily be imagined, that the bills of exchange, payable in a 
 currency so little liable to injury or fluctuation, must be negotiable 
 on better than ordinary terms. In fact, it was observable, that on 
 the whole, the course of exchange was rather in favour of the coun- 
 tries that paid in bank, and unfavourable to those that paid in circu- 
 lating money only. 
 
 The bank retained the deposities in perpetuity ; for the re-issue 
 would have been attended with serious loss ; inasmuch as it would 
 have been the same thing, as producing good money of the full 
 original value, to be taken at par with the deteriorated circulating 
 coin, which passes current for not its intrinsic, but its average 
 weight. The coin withdrawn from the bank would have been 
 mixed up with the mass of circulation, and passed current at par 
 with the rest. So that the withdrawing such deposits would have 
 been a gratuitous sacrifice of the excess of value of bank above cir- 
 culating money. 
 
 This is the nature of banks of deposit ; most of which combined 
 other operations with the primary object of their institution ; but of 
 them I shall speak elsewhere. They derived their profits, partly 
 from a duty levied upon every transfer, and partly from operations 
 incident to, and compatible with, their institution ; as, for example, 
 advances made upon a deposit of bullion. 
 
 It is evident, that the inviolability of the deposit, confided to 
 them, is essential to the success of such establishments. At Amster- 
 dam, the four burgomasters, or municipal magistrates, were trus- 
 tees for the creditors. Annually, on leaving office, they handed 
 over the trust to their successors, who, after inspecting the account, 
 and verifying it bv the registers of the bank, bound themselves bv 
 23* 
 
ON PRODUCTION. Boon I. 
 
 o the individuals. It would seem to have been afterwards ess 
 scrupulously managed ; for, when the French took possession of that 
 in 1794, and called for a statement of the concern, it was 
 ffito be in advance of no less a sum than .10,624,793 Jiorins to 
 the India company, and to the provinces of Holland and West- 
 Friezeland, which were wholly unable to repay it. In a country 
 governed by a power without control or responsibility, it may be 
 expected, that such a deposit would have been still more exposed to 
 violation, (a) 
 
 SECTION III. 
 
 Of Banks of Circulation or Discount, and of Bank-notes, or 
 Convertible Paper. 
 
 There is another kind of bank, founded on totally different prin- 
 ciples ; consisting of associated capitalists, subscribing a capital in 
 transferable shares, to be employed in various profitable ways, but 
 chiefly in the discount of promissory notes and bills of exchange, 
 that is to say, the advance of the value of commercial paper not yet 
 due, with the deduction of interest for the time it has to run, which 
 is called, the discount. 
 
 These companies, with a view to enlarge their capital and extend 
 their business, commonly issue notes, purporting to bear a promise 
 to pay to the bearer on demand, the gold or silver specified on the 
 face of them. Their security for the due discharge of these engage- 
 ments is, the commercial paper held by the bank, and subscribed 
 by individuals in solvent circumstances ; for the company gives its 
 notes in discount, or, what is the same thing, in purchase of this 
 paper. 
 
 The private commercial paper, indeed, having a term to run 
 before it falls due, can not be available in discharge of notes payable 
 on^demand; for which reason, every well-conducted bank of circu- 
 lation confines its advances of cash, or notes payable in cash on 
 
 (a) Public banks of deposit are now quite obsolete, and will probably never be 
 fired In fact they are clumsy expedients, suited only to the early stages of 
 commercial prosperity, and are liable to many inconveniences. They hold ou* 
 a strong temptation to internal fraud and violence, as well as to external rapaci 
 ty; they withdraw from active utility a large portion of the precious metals, 
 which might perhaps be turned to better account elsewhere ; and they yield a 
 egree of facility of circulation nowise superior to what may be afforded by the 
 -ommon process of banking, except perhaps in security, and infinitely more ex- 
 pensive to the public and to individuals. They have accordingly been every- 
 where supplanted by banks of circulation, or by the expedient of an inconvertible 
 piper-money. T. 
 
CHAP. XXII. ON PRODUCTION. 271 
 
 demand, to the discount of bills at very short dates, and is careful 
 to have always in hand a considerable amount of specie, probably a 
 third, or as much as the half of the total amount of their circulating 
 notes ; and, even with all possible caution, it is at times greatly 
 embarrassed, whenever a want of confidence in its solvency, or any 
 untoward event, causes a sudden run upon the bank for cash. The 
 bank of England has been obliged, on an occasion of this kind, to 
 scrape together as many sixpences as it possibly could find, to gain 
 time by the delay inseparable from payments in such a diminutive 
 coin, until a part of the paper in its possession had fallen due. The 
 discount bank of Paris, in the year 1788, being then under control 
 of government, had recourse to similar paltry expedients. 
 
 The profits of banks of circulation are very considerable ; that 
 portion of the notes, which is issued on the credit of private com- 
 mercial paper, continues running at interest ; for the advances have 
 been made with the deduction of the discount. But the portion of 
 the paper, issued on the credit of the specie in reserve, brings no 
 profit ; the interest lying dormant in the specie thus withdrawn from 
 circulation. 
 
 The banks of England and France make no advances to private 
 persons, except on bills of exchange, and give no credit beyond the 
 funds in hand. They indemnify themselves for the trouble 01 
 receiving and paying on account of individuals by turning to 
 account the floating balance left in their hands. These two estab- 
 lishments have, besides, undertaken the business of paying the inter- 
 est upon the respective national debts, receiving an allowance for 
 their trouble : furthermore, they occasionally make advances to the 
 governments. 
 
 From these various operations, they derive a great increase of 
 their profits. The one last mentioned, however, is completely at 
 variance with the purposes of their establishment, as we shall pre- 
 sently find. The advances made to the old government of France 
 by the then bank of discount, and those of the bank of England to 
 the English government, compelled those bodies to apply to the 
 respective legislatures to give their notes a compulsory circulation ; 
 thus destroying their fundamental requisites of convertibility. The 
 consequence has been, that the former of these banks went all to 
 pieces. 
 
 The establishment of several banks, for the issue of convertible 
 notes, is more beneficial than the investment of any single body 
 with the exclusive privilege ; for the competition obliges each of 
 them to court the public favour, by a rivalship of accommodation 
 and solidity. 
 
 Banks of circulation issue their notes either in the discount ol 
 promissory notes or bills of exchange, that is to say, in giving their 
 notes payable on demand, and circulating like cash, in exchange for 
 private paper payable at a future date, upon which interest is deduct- 
 cd ; which is the course pursued by the present bank of France, anu 
 by all the English banks, public and private; or else in lending at 
 
272 ON PRODUCTION. BOOK 1. 
 
 .ntercst to solvent individuals, like those of Scotland. Merchants of 
 Sod credit are, in the latter way, supplied with the sums necessary 
 r their current expenses and payments, and each of them is thereby 
 enabled to embark his whole capital in his commercial enterprises, 
 without being obliged to reserve any part to meet the calls upon him 
 in the course of business. The merchant of Pans or London must 
 contrive matters, so as to have always on hand either in his private 
 coffers or in the bank, a sum sufficient to face the demands upon 
 him; whereas, the merchant of Edinburgh is relieved from this 
 necessity, and at liberty to invest the whole of his funds, in the con- 
 fidence that the bank will advance him the money he may happen 
 to require, (a) . . 
 
 A bank of circulation affords the advantage of economizing capi- 
 tal, by reducing the amount of the sum, kept in reserve for the cur- 
 rent and contingent expenses of the individuals it accommodates. 
 
 Bank bills or notes, payable on demand, and circulating as cash, 
 play so important a part in the progress of national wealth, and 
 nave engendered such important errors in the brain of many writers 
 of repute and information on other topics, that it will be worth while 
 to examine their nature and consequences in a very particular 
 manner. 
 
 I should premise, that the residue of this section applies ex- 
 clusively to bank-notes, depending solely upon the credit of the 
 bank for their currency, and convertible at pleasure into cash or 
 specie. 
 
 It is a matter of no less curiosity than of importance, to inquire 
 whether bank-notes, or paper destitute of intrinsic value, be any 
 addition to ihe stock of national wealth, and what, if any, is the pos- 
 sible extent of that addition ; for, were there no limits to it, there 
 could be no end to the wealth, that a state might acquire in a short 
 time by the mere fabrication of some reams of paper. The solution 
 of this grand problem may be set down as one of Smith's happiest 
 efforts ; yet it is not every body that comprehends his reasoning ; I 
 will try to render it more generally intelligible. 
 
 The wants of a nation require a certain supply of such particular 
 commodity, and the extent of that supply is determined by the rela- 
 tive prosperity of the nation for the time being. A surplus of each 
 of those commodities beyond this demand is either not produced at 
 all, or, if produced, must occasion a decline of relative local value: 
 it, therefore, naturally finds its way out of the country, and goes in 
 quest of a market, where it may be in higher estimation. 
 
 Money is, in this respect, like all other commodities ; it is a con- 
 
 * (<I U he 5? meth ? d8 resolve th emselves practically into one; for merchant? 
 
 oT od credit can always procure discountable paper; and the sole essential 
 
 Ference is, that, in one case, the credit is individual and unevidenced, in the 
 
 ridenced, and in most cases, joint also. The bank of England requires 
 
 is of more than one firm on the paper it discounts. Country bankers 
 
 c.ften content themselves with the security, or note of hand, of the borrower 
 
CHAP. XXII. ON PRODUCTION. 273 
 
 venient agent, and, therefore, employed as such in all operations of 
 exchange; but the intensity of the demand for it is determined in 
 each community, by the relative extent and activity of the exchanges 
 negotiated within it. As soon as there is a supply of money suffi- 
 cient to circulate all the commodities there are to be circulated, no 
 more money is imported ; or, if a surplus flow in, it emigrates a^ain 
 in quest of a market, where its value is greater, or where its utility 
 is more desired. It is seldom or never that any body keeps in his 
 purse or his coffers more specie than enough to meet the current 
 demands of his business or consumption.* Every excess beyond 
 these demands is rejected, as bearing neither utility nor interest ; 
 and the community at large is fully supplied with specie, as soon as 
 each individual is possessed of the portion suitable to his condition 
 and relative station in society. 
 
 It may be safely left to private interest, to make the best use of 
 the excess of specie beyond the demand for circulation. The notion 
 that every item of specie, that crosses the frontier, is so much dead 
 loss to the community, is just as absurd as the supposition, that a 
 manufacturer is so much the poorer, every time he parts with his 
 money in the purchase of the ingredient or raw material of his manu- 
 facture ; or that individuals, the aggregate of whom makes up the 
 nation, present foreigners gratuitously with all the money they part 
 with. 
 
 Taking it for granted, then, that the specie, remaining in circula- 
 tion within the community, is limited by the national demand for 
 circulating medium ; if any expedient can be devised, for substi- 
 tuting bank-notes in place of half the specie or the commodity, 
 money, there will evidently be a superabundance of metal-money, 
 and that superabundance must be followed by a diminution of its 
 relative value. But, as such diminution in one place by no means 
 implies a contemporaneous diminution in other places, where the 
 expedient of bank-notes is not resorted to, and where, consequently, 
 no such superabundance of the commodity, money, exists, money 
 naturally resorts thither, and is attracted to the spot where it bears 
 the highest relative value, or is exchangeable for the largest quantity 
 of other goods : in other words, it flows to the markets where com 
 modities are the cheapest, and is replaced by goods, of value equal 
 to the money exported. 
 
 The money that can emigrate in this manner, is that part only of 
 the circulating medium, which has a value elsewhere than within the 
 limits of the nation ; that is to say, the specie or metal-money. Since, 
 however, specie does not emigrate without an equivalent return ; 
 and, since its value, which before existed in the shape of specie, and 
 was exclusively engaged in facilitating circulation, thenceforth 
 assumes the form of a variety of commodities, all items of the repro- 
 ductive national capital, there follows this remarkable consequence. 
 that the national capital is enlarged to the full amount of all the spc- 
 
 * No account is here taken of the money hoarded, which, for the national iu- 
 terest, might just as well have remained in the mine. 
 
 2K 
 
. 274 ON PRODUCTION. BOOK L 
 
 rie exported upon the introduction of the substitute. Nor is the 
 internal national circulation at all cramped for want of money by 
 this export; for the functions of the specie, that has been withdrawn, 
 are just as well performed by the paper substituted in its stead. 
 
 However valuable an acquisition the national capital may thus 
 receive, it must not be rated above its real amount. I have supposed, 
 for the sake of simplicity, that half the specie might be replaced by 
 ,-irrulatintr notes: but this is a monstrous proportion ; particularly if 
 it be considered, that paper cannot retain its value as money any 
 Joiner than while it is readily and instantly convertible into specie; 
 I sav, readily and instantly, because otherwise people would prefer 
 specie, which is at all times, and without the least hesitation, taken 
 for money. To insure this requisite convertibility, it is necessary, 
 that, besides having at all times a fund in reserve, in private bills or 
 securities, or in specie, sufficient to meet all the notes that may be 
 presented, the bank itself should be at all times within the reach of 
 the holders of its notes. Therefore, if the territory be of any extent, 
 and the notes so generally circulated, as to form half of the circu- 
 lating medium, the subordinate offices of the bank must be greatly 
 multiplied to place them within reach of all the note-holders. 
 
 But, granting the possibility of such an arrangement, and admit- 
 ting, that paper might supplant as much as half the requisite national 
 currency of specie, let us see what would be the amount of the ac- 
 quisition* to the national capital. 
 
 No writer of repute has ventured to estimate the requisite circu- 
 lating specie of any nation, higher than 1 of the annual national 
 product; some, indeed, have reckoned it as low as ^V Taking 
 the highest estimate, viz. } of the annual product, which, for my 
 own part, I consider greatly above the reality in any case ; a nation, 
 whose annual product should amount to 20 millions, would need but 
 4 millions of specie. Therefore, in case the half, or 2 millions, 
 were supplanted by circulating paper, and employed in augmenting 
 the national productive capital, that capital would be once for all 
 augmented, by a value equal to f^ or T V of the annual product of 
 the nation. 
 
 Again, the annual product of a nation would, probably, be much 
 overrated at T V of the gross national productive capital ; but let it 
 be set down at that rate, allowing 5 per cent, interest on productive 
 capital, and 5 per cent, wages and profits of the -industry it sets in 
 motion. On this calculation, supposing the paper substitute to add 
 to the national capital, in the ratio of T V of its annual product, this 
 addition will not at the highest estimate exceed T ^ of the previous 
 '.upital. 
 
 Although the practicable issue of bank-notes procures to a nation 
 
 f moderate wealth an accession of capital, much less considerable 
 Jhan people may fondly imagine, this accession is, notwithstanding, 
 
 t very great value ; for, unless the productive energy of the nation 
 ie extremely great, as in Great Britain, or the national spirit of 
 frugality very general and persevering, as in Holland, the annual 
 
CHAP. XXIL ON PRODUCTION. 275 
 
 savings withdrawn from unproductive consumption, to be added to 
 productive capital, form, even in thriving states, a very inconsidera- 
 ble portion of the gross annual revenue. Nations, whose production 
 is stationary, as every body knows, make no addition to their pro- 
 ductive capitals; and the consumption of those on the decline an- 
 nually encroaches on their capitals. 
 
 Should the paper-issues of a bank at any time exceed the demands 
 of circulation, and the credit enjoyed by the establishment, there 
 follows a perpetual reflux of its notes, and it is put to the expense of 
 collecting specie, which is absorbed as fast as collected. The Scotch 
 banks, though productive of great benefit, have been obliged, upon 
 such trying occasions, to keep agents in London constantly employ- 
 ed, in scraping specie together at a charge of two per cent., which 
 specie was instantly absorbed. The bank of England, in similar 
 circumstances, was under the necessity of buying gold bullion, and 
 getting it coined ; and this coin was melted again as fast as it was 
 paid by the bank, in consequence of the high price of the metal, 
 which was itself the effect of the constant purchases made by the 
 bank, to meet the calls upon it for specie. In this manner, it sus- 
 tained the annual loss of from 2j to 3 per cent., upon a sum of about 
 850,000/.,* more than 20 millions of our money. I say nothing of 
 the situation of this bank of late years, since its notes have acquired 
 a forced circulation, and, consequently, altered their nature entirely. 
 
 The notes issued by a bank of circulation, even if it have no funds 
 of its own, are never issued gratuitously ; and, therefore, of course, 
 imply the existence, in the coffers of the bank, of a value of like 
 amount, either in the shape of specie, or of securities, bearing in- 
 terest ; upon which latter only the whole real advance of the bank is 
 made ; and this advance can never be made upon securities that have 
 a long time to run; for the securities are the fund, that is to provide 
 for the discharge of another class of securities, in the hands of the 
 public at large, payable at the shortest of all possible notice, namely, 
 on demand. Strictly speaking, a bank can not be at all times in a 
 condition to face the calls upon it, and deserve the entire confidence 
 of the public, unless the private paper it has discounted, be all, like 
 its own notes, payable on demand ; but, as it is no easy matter to 
 find substantial assets, that shall bear interest, and at the same time 
 be redeemable at sight, the next best course is to confine its issues 
 to bills of very short dates; and, indeed, well-conducted banks have 
 always rigidly adhered to this principle. 
 
 From the preceding considerations may be deduced a conclusion, 
 fatal to abundance of systems and projects, viz. that credit-paper can 
 supplant, and that but partially, nothing more than that portion of 
 the national capital performing the functions of money, which cir- 
 culates from hand to hand, as an agent for the facility of transfer; 
 consequently, that no bank of circulation, or credit-paper of any de 
 nomination whatever, can supply to agricultural, manufacturing, or 
 
 * Wealth of Nations, book ii. c. 2. 
 
ON PRODUCTION. BOOK L 
 
 mmercial enterprise, any funds for the construction of ships or 
 "irTry, for the digging" of mines or canals, for the bringing of 
 waste land into cultivation, or the commencement of long-winded 
 ^culations; any funds, in short, to be employed as vested capital. 
 The indispensable requisite of credit-paper is, its instant converti- 
 bility into specie; when the sum total of the paper issued does not 
 exisi in the coffers of the bank, under-the shape of specie, the deficit 
 should at least be supplied by securities of very short dates ; where- 
 as, an establishment, that should lend its funds to be vested in enter- 
 prises, whence they could not be withdrawn at pleasure could never 
 be prepared with such securities. An example will illustrate this 
 position Suppose a bank of circulation to lend 6,000 dollars oi 
 its notes, circulating as cash, to a landholder on mortgage of his 
 land, presenting the amplest security. This loan is destined by the 
 landholder to the construction of necessary buildings, for the culti- 
 vation of the estate; for which purpose he contracts with a builder 
 and pays him the 6,000 dollars of notes advanced by the bank. 
 Now, if the builder, after a short lapse of time, be desirous of turn- 
 ing the notes into specie, the bank can not pay him by a transfer of 
 the mortgage. The only property the bank has to meet the 6,000 
 dollars of notes is a security, ample beyond doubt, but not available 
 at the moment. 
 
 The securities in the hands of a bank, I hold to be a solid basis 
 for the whole of its issues of notes, provided those securities be of 
 solvent persons, and have not too long to run ; for the securities will 
 be redeemed either with specie, or with the notes of the bank itself. 
 In the first case, the bank is supplied with the means of paying its 
 notes; in the second, it is saved the trouble of providing for them. 
 
 If, by any circumstance, the notes be deprived of their power of 
 circulating as specie, the task of replacing the metal for the paper- 
 money does not devolve upon the bank; nor was it at the first sad- 
 dled with the business of turning to account the metal-money its 
 notes rendered superfluous. For, as we have already observed, the 
 bank can extinguish the whole of its paper with the private securi- 
 ties it holds. The inconvenience falls upon the public, which is 
 under the necessity of finding a new agent of circulation, either by 
 a re-import of the metal-money, or by the substitution of private 
 paper; but probably the public would, in such circumstances, apply 
 again to a bank conducted on sound principles.* 
 
 * Since the first publication of this passage, this very circumstance has hap- 
 pened in respect to the bank of Paris, in 18l4 and 1815, when that capital was 
 besieged and occupied by the allied armies. The advances of the bank to the 
 government, and to individuals, which could not be recalled immediately, did 
 not exceed the capital of the establishment, for which the shareholders can not 
 w called upon; and its paper-issues, payable to bearer, were all covered, either 
 bv specie in hand, or by commercial paper of short dates. By this means, not- 
 withstanding the very critical circumstances of the moment, the merchants con- 
 tinued to employ its notes: which they could not well do without; and they 
 wore paid as usual in cash without interruption, during the whole of the hostile 
 occupation : which shows at once the utility of a bank of circulation, and the 
 wantage of leaving inviolate the convertibility of paper-issues. 
 
CHAP. XXII. ON PRODUCTION. 
 
 This will serve to explain, why so many schemes of agricultural 
 banks for the issue of circulating and convertible notes on ample 
 landed security, and so many other schemes of a similar nature, have 
 fallen to the ground in very little time, with more or less loss to the 
 shareholders and the public.* Specie is equivalent to paper of per- 
 fect solidity, and payable at the moment ; consequently it can only 
 be supplanted by notes of unquestionable credit, and payable on de- 
 mand ; and such notes cannot be discharged by a bare security, even 
 of the best possible kind. 
 
 For the same reason, bills of exchange in the nature of accommo- 
 dation-paper, as it is called, can never be a sound basis for an issue 
 of convertible paper. Such bills of exchange are paid when due by 
 fresh bills, that have a further term to run, and are negotiated with 
 the deduction of discount. When the latter fall due, they are met 
 by a third set payable at a still later date, which are discounted in 
 like manner. If the bank discounts such bills, the operation is no 
 more than an expedient for borrowing of the bank in perpetuity ; 
 the first loan being paid with a second, the second with the third, 
 and so on. And the bank experiences the evil of issuing more of 
 its notes, than the circulation will naturally absorb, and the credit of 
 the establishment will support ; for the notes, borrowed upon such 
 bills, do not help to circulate and diffuse real value, because they 
 represent and contain no real value themselves ; consequently, they 
 continually recur to be exchanged for specie. It is on this account, 
 that the discount-bank of Paris, while it continued to be well ad- 
 ministered, did, as the present .tanks of France and England do still 
 refuse, as far as it is able, to discount accommodation-paper. 
 
 The consequences are similar and equally mischievous, when a 
 bank makes advances to government in perpetuity, or even for a 
 very long period, (a) This was the cause of the failure of the bank 
 of England. Not being able to obtain payment from government, 
 it was unable to withdraw the notes in which the loan was made. 
 From that moment its notes ceased to be convertible; and until the 
 resumption of cash payments in 1822, enjoyed a forced circulation. 
 The government, being itself unable to supply the bank with the 
 means of payment, discharged that body from its liability to its own 
 creditors.f 
 
 * In 1803, the land-bank of Paris was, for this reason, obliged to suspend the 
 payment of its notes in cash ; and to give notice, that they would be paid off by 
 instalments out of the proceeds of its real securities. 
 
 t Thornton, in his tract on the Paper Credit of Great Britain, written expressly 
 
 (a) That is to say, advances its notes. A bank, like an individual, may ad- 
 vance its capital, which then becomes more or less vested and fixed. The whole 
 capital of the bank of England has been thus advanced ; and there would have 
 been no danger, had it not advanced its notes also. When the advances of paper 
 are made upon transferable securities, stock, exchequer bills, and the like, those 
 securities may be sold for cash, or for the notes of the bank itself, so long as 
 they retain their value, and thus the safety and solvency of the bank maintained. 
 But this operation is unnecessarily complex; for the government might its el* 
 nave sold, and thus have saved the brokerage or profit accruing upon the opera 
 lion to the bank. T. 
 24 
 
ON PRODUCTION. BOOK L 
 
 The holders of the notes of a bank issuing convertible money run 
 little or no risk, so long as the bank is well administered and inde- 
 pendent of the government. Supposing a total failure of confidence 
 o bring all its notes upon it at once for payment, the worst that can 
 happen to the holders is, to be paid in good bills of exchange at 
 short dates, with the benefit of discount; that is to say, to be paid 
 with the same bills of exchange, whereon the bank has issued its 
 notes If the bank have a capital of its own, there is so much addi- 
 tional security; but, under a government subject to no control, or to 
 nominal contiol only, neither the capital of the bank, nor the assets 
 in its hands, offer any solid security whatever. The will of an arbi- 
 trary prince is all the holders have to depend upon : and every act 
 of credit is an act of imprudence. 
 
 As far as I am capable of judging, such is the effect of banks of 
 circulation and of their paper issues upon individuals and national 
 wealth. This effect is described by Smith in a quaint and ingenious 
 metaphor. The capital of a nation he likens to an extensive tract 
 of country, whereupon the cultivated districts represent the produc- 
 tive capital, and the high roads the agent of circulation, that is to 
 say, the money, that serves as the medium to distribute the produce 
 among the several branches of society. He then supposes a machine 
 to be invented, for transporting the p'roduce of the land through the 
 air; that machine would be the exact parallel of credit-paper. 
 Thenceforward the high roads might be devoted to cultivation. 
 * The commerce and industry of the country, however/ he con- 
 tinues, * though they may be somewhat augmented, cannot be alto- 
 gether so secure, when they are thus, as it were, suspended upon the 
 Dredalian wings of paper-money, as when they travel about upon the 
 
 with a view to justify the suspension of cash-payments by that establishment, 
 has attacked the positions of Smith upon this subject. He tells us, that the 
 extraordinary run upon the bank, which brought about the suspension, was oc- 
 casioned, not by the excess of its issues, but, on the contrary, by their partial 
 contraction. " An excessive limitation of bank-notes," he observes, " will pro- 
 duce failures, failures must cause consternation, and consternation must lead to 
 ft run upon the bank for guineas." By this reference to an extreme case, he en- 
 deavours to support his paradoxical opinions. When a convertible paper has 
 succeeded in driving out of the country too large a portion of the metallic money, 
 and the confidence in the paper happens suddenly to decline, great confusion and 
 embarrassment will doubtless ensue, because the remaining agent of circulation 
 is insufficient to effect the business ; but it is a great mistake to suppose, that 
 the deficiency can be remedied by the multiplication of a paper, not enjoying the 
 confidence of the public. If the bank of England was able to survive the shock, 
 it was because of the indispensable necessity of some agent of transfer, of some 
 money or other, of paper in default of all others, in so commercial a country ; be- 
 cause the government and the bankers of I/)ndon, who were interested in the 
 jafety of the bank, unanimously agreed not to call upon it for cash, until it should 
 be in a condition to pay ; that is to say, until the government should have paid 
 8 advances in actual value. The bank had lent to the government more than 
 [a whole capital ; for to that extent it might have gone with safety, its capital 
 >t being wanted for the discharge or convertibility of its paper; had it not so 
 tone, the short bills in its possession would have been sufficient for the extinc- 
 tion of its convertible paper. 
 
CHAP. XXIL ON PRODUCTION. 279 
 
 solid ground of gold and silver. Over and above the accidents, to 
 which they are exposed from the unskilfulness of the conductors of 
 this paper-money, they are liable to several others, from which no 
 prudence or skill of those conductors can guard them. An unsuc- 
 cessful war, for example, in which the enemy get possession of the 
 capital, and consequently of that treasure, which supported the credit 
 of the paper-money, would occasion a much greater confusion in a 
 country, where the whole circulation was carried on by paper, than 
 in one, where the greater part of it was carried on by gold and silver 
 The usual instrument oi commerce having lost its value, no ex- 
 changes could be made except by barter or upon credit. All taxes 
 having usually been paid in paper-money, the prince would not have 
 wherewithal either to pay his troops, or to furnish his magazines ; 
 and the state of the country would be much more irretrievable, than 
 if the greater part of its circulation had consisted in gold and silver. 
 A prince, anxious to maintain his dominions at all times in the state 
 in which he can most easily defend them, ought upon this account 
 to guard, not only against that excessive multiplication of paper- 
 money, which ruins the very banks which issue it, but even against 
 that multiplication of it, which enables them to fill the greater part 
 of the circulation of the country with it.'* 
 
 Forgery alone is enough to derange the affairs of the best con- 
 ducted and most solid bank. And forgery of notes is more to be 
 apprehended, than counterfeits of specie. The stimulus of gain is 
 greater. For there is more profit to be made by converting a sheet 
 of paper into money, than by giving the appearance of precious 
 metal to another metal, that has some though very little, intrinsic 
 value, especially if it be compounded or covered with a small por- 
 tion of the counterfeited metal ; and perhaps, too, the materials for 
 the former operation are less liable to discovery. Besides, the coun- 
 terfeits of specie can never reduce the value of the specie itself, 
 because the latter has an intrinsic and independent value as a com- 
 modity ; whereas, the mere belief that there are forged notes abroad, 
 so well executed, as to be scarcely distinguishable from the genuine, 
 .s enough to bring both forged and genuine into discredit. For 
 which reason, banks have sometimes preferred the loss of paying 
 notes they know to be forged, to the hazard of bringing the genuine 
 ones into discredit, by the exposure of the fraud. 
 
 One method of checking the immoderate use of notes is, to limit 
 them to a fixed and high denomination of value ; so as to make them 
 adapted to the circulation of goods from one merchant to another, 
 but inconvenient for the circulation between the merchant and the 
 consumer. It has been questioned whether a government has any 
 right to prohibit the issue of small notes, where the public is willing 
 to take them; and whether such limitation be not a violation of that 
 liberty of commerce, which it is the chief duty of a government to 
 protect. But the right undoubtedly is just as complete, as that ol* 
 
 * Wealth of Nations, book ii. chap. 2. 
 
ORO ON PRODUCTION. BOOK I. 
 
 ordering a building to be pulled down, because it endangers the 
 public safety. 
 
 SECTION IV. 
 Of Paper-Money. 
 
 The distinctive appellation of paper-money, I have reserved 
 exclusively for those obligations, to which the ruling power may 
 <rive a compulsory circulation in payment for all purchases, and 
 discharge all debts and contracts, stipulating a delivery of money. 
 I call them obligations, because, though the authority that issues, 
 is not bound to redeem them, at least not immediately, yet they 
 commonly express a promise of redemption at sight, which is abso- 
 lutely nugatory; or of redemption at a date expressed, for which 
 there is no sort of security ; or of territorial indemnity, the value of 
 which we shall presently inquire into. 
 
 Such obligations, whether subscribed by the government or by 
 individuals, can be converted into paper-money by the public au- 
 thority only, which alone can authorise the owners of money to pay 
 in paper. The act is, indeed, an exertion, not of legitimate, but of 
 arbitrary authority; being a deterioration of the national money in 
 the extreme degree. 
 
 Upon the principles above established, it should seem, that a mo- 
 ney destitute of all value as a commodity, ought to pass for none in 
 all free dealing subsequent to its issue ; and this is always the case 
 in practice sooner or later. The notes of what was improperly 
 called Law's Bank, and the assignats issued during the French 
 revolution, were never regularly called in or cancelled ; yet those of 
 the highest denomination would not pass at present for a single sol. 
 How then, came they ever to pass for more than their real value? 
 Because there are many expedients of fraud and violence, which 
 will always have a temporary efficacy. 
 
 In the first place, a paper, wherewith debts can be legally, though 
 fraudulently, discharged, derives a kind of value from that single 
 circumstance. Moreover, the paper-money may be made efficient 
 to discharge the perpetually recurring claims of public taxation. 
 Sometimes a tariff or maximum of price is established ; which, in- 
 deed, soon extinguishes the production of the commodities affected 
 by it, but gives to the paper-money a portion of the value of those 
 actually in existence. Besides, the very creation of a paper-money 
 with forced circulation occasions the disappearance of metallic mo- 
 ney ; for, as it is made to pass at par with paper, it naturally seeks a 
 market, where it can find its true level of value. The paper-money 
 is thus left in the exclusive possession of the business of circulation ; 
 and the absolute necessity of some agent of transfer, in every civil- 
 ixed community, will then operate to maintain its value.* So urgent 
 
 Wherever a paper-money has been established, the difference between its 
 
CHAP. XXII. ON PRODUCTION. 2S1 
 
 is this necessity, that the paper-money of England, consisting of the 
 notes of the bank, has been kept at par with specie, simply by the 
 limitation of the issues to the demands of circulation. 
 
 Nations precipitated into foreign wars, before they have had time 
 previously to accumulate the requisite capital for carrying them on, 
 and destitute of sufficient credit to borrow of their neighbours, have 
 almost always had recourse to paper-money, or some similar expe- 
 dient. The Dutch, in their struggle with the Spanish crown for in- 
 dependence, issued money of paper, of leather, and of many other 
 materials. The United States of America, under similar circum- 
 stances, likewise had recourse to paper-money; and the expedient 
 that enabled the French republic to foil the formidable attack of the 
 first coalition, has immortalized the name of assignats. 
 
 Law has been unjustly charged with the whole blame of the 
 calamities resulting from the scheme that bears his name. That he 
 entertained just ideas respecting money, may be gathered from the 
 perusal of a tract* he published in his native country, Scotland, to 
 induce the Scotch government to establish a bank of circulation. 
 The bank established in France, in 1716, was founded on the princi- 
 ples there set forth. Its notes were expressed in these words: 
 
 " The bank promises to pay the bearer at sight ******* 
 Kvres in money of the same weight and standard as the money of 
 this day. Value received at Paris," &c. 
 
 The bank, which was then but a private association, paid its notes 
 regularly on demand : they were not yet metamorphosed into paper- 
 money. Matters remained on this footing, and \vent on very well, 
 till the year 1719 ;f at which period the king, or rather the regent, 
 repaid the shareholders, and took the management into his own 
 hands, calling it the Royal Bank. The notes were then altered to 
 this form : 
 
 value in the home market, where it has utility, and its value in foreign markets, 
 where it has no utility, has afforded a fruitful field for speculation, that has en- 
 riched many adventurers. In 1811, 100 guineas in gold would purchase at 
 Paris a bill of exchange on London, for 140?. sterling, payable in the paper which 
 was the only currency of England. Yet the difference between gold and paper 
 in the London market at the same period, was only 15 per cent. It was in this 
 way, that the paper was of higher value in England than abroad. Accordingly, 
 I find from returns with which I have been favoured, that gold in guineas or 
 bullion was smuggled into the ports of Dunkirk and Gravelines alone, in the 
 years 1810, 11, 12, and 13, to the amount of 33,875,090 dollars. There was a 
 similar speculation in other commodities at large ; but it was attended with more 
 risk and difficulty ; the import into France being very hazardous, although the 
 export from England was encouraged in every possible way. Yet this traffic 
 would soon have found its level, for it must have produced bills on England in 
 such quantity, as to have brought the exchange to par at least, had not the con- 
 tinental subsidies of England furnished a continual supply of bills on London 
 without any return. 
 
 *This work was translated into French while Law continued in the office of 
 Controller-General of France ; and is entitled Considerations on Commerce and 
 Money. 
 
 f Vide Dutot. torn. ii. p. 200, for a detail of the beneficial effects ot the insti 
 tution, as originally conducted. 
 
 24* 2L 
 
282 ON PRODUCTION. BOOK I. 
 
 " The bank promises to pay the bearer at sight ******* 
 hvres in silver coin. Value received at Paris," &e. 
 
 This alteration, slight as it was in appearance, was a radical one 
 in substance. The first note stipulated to pay a fixed quantity of 
 silver, viz. the quantity contained in the Kvres current at the date 
 of issuing the notes. The second merely engaged to pay tivres, and 
 so opened a door for whatever alterations an arbitrary power might 
 think proper to make in the real value expressed by the word livre. 
 And this was called fixing the rate of the paper-money; whereas, on 
 the contrary, it was unfixing, and making it a fluctuating value ; and 
 the fluctuations were truly deplorable. Law strenuously opposed 
 the innovation; but principle was compelled to give way to power j 
 and the crimes of power, when the consequences began to be felt, 
 were confidently attributed to the fallacy of the principle. 
 
 The assignats issued by the revolutionary government were 
 worth even less than the paper-money of the regency. The latter 
 gave a promise, at least, of paying in silver : and, though the payment 
 might be greatly curtailed by a deterioration of the silver coin, yet 
 sooner or later the paper might have been redeemed, if the govern- 
 ment had but been more moderate in its issues, and more scrupulous 
 in fulfilling its engagements. But the assignats conveyed no right 
 to call for silver; nothing but a right to purchase or obtain the na 
 tional domains. Let us see what this right was really worth. 
 
 The original assignats purported to be payable at sight, at the 
 
 Laisse de ? Extraordinaire, where they were, in fact, never paid at 
 
 all. It is true, they were received in payment for the national 
 
 f\ L amS j ght by individuals at a competition-price; but the value 
 
 of these domains could never give any determinate value to the 
 
 assignats because their nominal value increased exactly in propor- 
 
 tion as that of the assignats declined. The government was not 
 
 wry to find the price of national domains advance, because it was 
 
 thereby enabled to withdraw a greater amount of assignats, and 
 
 consequently, to re-issue new ones, without enlarging the quantity 
 
 - was not aware, that, instead of the national Domains 
 
 Uor a n7thnt P T e V th 7^r^ S J Were undCT going a rapid deprecia- 
 
 >nl m t furthe , rthat depreciation was" pushed, the more 
 
 supplies 1SSU6d m Payment f an e ^al quantity of 
 
 to that amount TV H e oan e wt an 
 
CHAP. XXII. ON PRODUCTION. 
 
 quantity of land could no more be obtained, even from the govern- 
 ment, by an assignal of 100/r. than 100/r. in specie. The domains 
 were disposed of at public auction for as many assignuts as they 
 would fetch; and the value of this paper had latterly so far declined, 
 that one of 100 fr. would not buy an inch square of land. 
 
 In short, setting aside all consideration of the discredit attached to 
 that government, the sum expressed in an assignat presented the 
 4 dea of no definite value whatever ; and those securities could not but 
 have fallen to nothing, even had the government inspired all the con- 
 fidence, of which it was so eminently destitute. The error was dis- 
 covered in the end, when it was impossible any longer to purchase 
 the most trifling article with any sum of assignats, whatever might 
 oe its amount. The next measure was to issue mandats, that is to 
 say, papers purporting to be an order for the absolute transfer of the 
 specific portion of the national domains expressed in the mandat : 
 but, besides that it was then too late, the operation was infamously 
 executed 
 
BOOK II. 
 
 OF THE DISTRIBUTION OF WEALTH 
 
 CHAPTER L 
 
 OF THE BASIS OF VALUE ; AND OF SUPPLY AND DEMAND. 
 
 THE principal phenomena of production have been investigated 
 n the first book; wherein I have shown how human industry, with 
 .he aid of capita] and of natural agents and properties, creates every 
 kind of utility, which is the primary source of value ; and in what 
 way social institutions and public authority operate to the benefit or 
 the prejudice of production. This second book will be devoted to 
 the consideration of the distribution of wealth : to which end it will 
 be necessary, first, to analyze the nature of value, the object of dis- 
 tribution ; secondly, to ascertain the laws, which regulate the dis- 
 tribution of value, when once created amongst the various members 
 of society, so as to constitute individual revenue. 
 
 The valuation of an object is nothing more or less than the affirma- 
 tion, that it is in a certain degree of comparative estimation with some 
 other specified object ; and any ot\ier object possessed of value may 
 serve as the point of comparison. A house, for instance, may be 
 valued in corn or in money. To say that it is worth 4000 dollars 
 conveys a more accurate notion of 'its value, than to say that it is 
 worth 4000 bushels of wheat, solely because the habit of reckoning 
 the value of all commodities in coin makes it easier for the mind to 
 form an idea of the value of 4000 dollars in other commodities, that 
 is to say, of the quantity of other commodities obtainable for that 
 sum, than of that obtainable for 4000 bushels of wheat. Yet, if 
 wheat be 1 dollar a bushel, the degree of value expressed by each is 
 the same. 
 
 In every act of valuation, the object valued is the fixed datum. 
 In the instance first given, the house is the datum : it is a definite 
 amount of materials, put together in a definite manner, upon a defi- 
 nite site. But the point of comparison is variable in amount, ac- 
 cording to the degree of estimation in the mind of the valuer. If 
 /allied at 4000 dollars, the house is reckoned to be equivalent to so 
 many pieces of silver coin of the weight of 416 grains, with a mix- 
 
CHAP. I. ON DISTRIBUTION. 
 
 ture of 179-1664 parts of alloy ; if at 4500 dollars, or 3500 dollars, 
 it is but a variation of the quantity of the commodity, that is the 
 specific point of comparison. So likewise, if that point be wheat, the 
 variable quantity of that commodity would express the degree of value. 
 
 Valuation is vague and arbitrary, when there is no assurance that ^/ 
 it will be generally acquiesced in by others. The owner of the 
 house may reckon it worth 4500 dollars, while an indifferent per- 
 son would value it at no more than 3500 dollars, and probably nei- 
 ther would be right. But if another, or a dozen other persons be 
 willing to give for it a specific amount of other commodities, say 
 4000 dollars, or 4000 bushels of wheat, we may conclude the esti- 
 mate to be a correct one. A house that will fetch 4000 dollars in 
 the market is worth that sum.* But if one bidder only will give 
 that price, and he is unable to re-sell it without loss, he will give 
 more than it is worth. The only fair criterion of the value of an 
 object is, the quantity of other commodities at large, that can be 
 readily obtained for it in exchange, whenever the owner wishes to 
 part with it; and this, in all commercial dealings, and in all money 
 valuations, is called the current price. 1 ] 
 
 What is it, then, that determines this current price of commodities ? 
 
 The want or desire of any particular object depends upon the 
 physical and moral constitution of man, the climate he may live in, 
 v the laws, customs, and manners of the particular society, in which 
 he may happen to be enrolled. He has wants, both corporeal and 
 intellectual, social and individual ; wants for himself and for his 
 family. His bear-skin and reindeer are articles of the first necessity 
 to the Laplander ; whilst their very name is unknown to the lazza- 
 rone of Naples, who cares for nothing in the world if he get but his 
 meal of macaroni. In Europe, courts of justice are considered in- 
 dispensable to the maintenance of social union ; whereas the Indian 
 of America, the Tartar, and the Arab, feel no want of such establish- 
 ments. It is not our business here to inquire, wherein these wants fv 
 originate ; we must take them as existing data, and reason upon 
 them accordingly. 
 , . 
 
 * My brother, Louis Say, of Nantes, has attacked this position in a short tract 
 entitled, Principales Causes de la Richesse et de la Misere des Peuples et des 
 Particuliers, 8vo. Paris. Deterville. He lays down the maxim, that objects are L & ' 
 items of wealth, solely in respect of their actual utility, and not of their admitted 
 or recognised utility. In the eye of reason, his position is certainly correct ; but 
 in this science relative value is the only guide. Unless the degree of utility be 
 measured by the scale of comparison, it is left quite indefinite and vague, and, 
 even at the same time and place, at the mercy of individual caprice. The losi- 
 tive nature of value was to be established, before political economy could pre- 
 tend to the character of a science, whose province it is to investigate its origin, 
 and the consequences of its existence. 
 
 f In the earlier editions of this work, I had described the measure of value 
 to be the value of the other product, that was the point of comparison, which 
 was incorrect. The quantity and not the value of that other product, is the mea- 
 sure of value in the object of valuation. This mistake gave rise to much ambi- 
 guity of demonstration, which the severity of criticism, both fair and unfair, hu 
 taught me to correct. Fas est et ab hoste doceri. 
 
286 ON DISTRIBUTION. BOOK II. 
 
 Of these wants, some are satisfied by the gratuitous agency ot 
 natural objects; as of air, water, or solar light. These may be deno 
 minated natural wealth, because they are the spontaneous offering 
 of nature ; and, as such, mankind is not called upon to earn them by 
 any sacrifice or exertion whatever; for which reason, they are never 
 possessed of exchangeable value. Other wants there are, that can 
 only be satisfied by the employment of objects possessed of an 
 utility, which they could not have been invested with without some 
 modification by human agency, without having undergone some 
 change of condition, and without some difficulty having been sur- 
 mounted for the purpose. Of this kind are the products of agricul- 
 ture, commerce, and manufacture, in all their infinite ramifications. 
 To them alone is any value attached ; and for a very obvious reason; 
 ^because the very act of production implies an act of mutual exchange, 
 PI in which the producer has given his personal agency for the product 
 \ obtained by its exertion. Wherefore, he will hardly resign it with- 
 ( out receiving what is, in his estimation, an equivalent. These may 
 be called social wealth, both because an act of exchange is in itseff 
 a social act, and because exclusive property in the product obtained 
 by personal exertion, or by an act of exchange, can only be secured 
 by social institutions. Social wealth, it is to be observed, is the only 
 part of human wealth, that can form the subject of scientific research. 
 Because it is the only part that is the object of human estimation, 
 least of such estimation, as is not altogether arbitrary and men- 
 tal 2. Because it is the only one which is created, distributed, and 
 destroyed, according to any rules that can be assigned by human 
 science. J 
 
 The knowledge of the ground-work of the quality, value, or 
 
 rath< r exchangeable value, leads to the perception of its origin. 
 
 items of social wealth are invested with value by the necessity 
 
 f giving something to obtain them; and that something is produc- 
 
 tive exertion. W i^n !,*:, .,i :-c_: .1- * , F 
 
 - 
 
 eX th n ' ^' ien " C ! obtained -"hen this sacrifie has been 
 
 l more wealth he 
 
 where vitht .' s rea y more weat y! e 
 
 aor ifi~ I ^ T re W3ntS; and ' if the ob J ect obtained by 
 
 lake ~f ft "T d *? the P ersonal want * of & owner, he may 
 bvlhe 7,v rf I atta i nment of some object of personal desire, 
 duct win YJf h^h ange f r r. other Product; which other pro- 
 infao he ^ f S ' m ' lar P roduc <"'e exertion; so that, 
 
 the productive 
 
 
CHAT. I. ON DISTRIBUTION. 287 
 
 Wherefore, there is a current value or price established for pro- 
 ductive service as well as for products. For, if the agency exerted 
 in the creation of a bushel of wheat can obtain, as its reward, in the 
 way of exchange, either a bushel of wheat or seven pounds of coffee 
 indifferently, what is there to prevent its obtaining in the same way 
 any other equivalent product, say a yard of colton cloth, 5 yards of 
 ribbon, a dozen plates, or any thing else? Should the bushel of 
 wheat be exchangeable for a less amount of any of these commodi- 
 ties respectively, the productive agency exerted in the creation of 
 wheat would be proportionately less rewarded, than that exerted in 
 the creation of the specific commodity ; and a portion of the former 
 would be attracted to the latter branch of production, until the 
 recompense of labour in each department should find its fair level. 
 
 Each class of productive agency has a current price peculiar to 
 itself. If the productive agency exerted in the production of a 
 bushel of wheat can obtain for itself but 1-15 of its own product, it 
 will be entitled to no more than 1-15 of the value of any other pro- 
 duct obtainable by exchange for that quantity of wheat ; for instance 
 to 1-15 of a dollar: and so of other products. 
 
 Thus it is obvious, that the current value of productive exertion 
 is founded upon the value of an infinity of products compared one 
 with another ;* that the value of products is not founded upon that of 
 productive agency, as some authors have erroneously affirmed ;f and 
 that since the desire of an object, and consequently its value, origin- 
 ates in its utility, it is the ability to create the utility wherein ori- 
 ginates that desire, that gives value to productive agency; which 
 value is proportionate to the importance of its co-operation in the 
 business of production, and forms, in respect to each product indivi- 
 dually, what is called, the cost of its production. 
 
 The utility of a product is not confined to one human being, but 
 applies to a whole class of society at the least, as in the case of parti- 
 cular articles of clothing ; or to a whole community, as in that of 
 most of the articles of food that are adapted to human consumption 
 in general, without distinction of sex or age. For this reason, the 
 demand for a specific object, or product, or act of productive exer- 
 tion, has a certain degree of extent. The aggregate demand for sugar 
 in France is said to exceed 500,000 quintals per annum. Even the 
 individual demand of a specific product for individual consumption 
 may be more or less urgent. Whatever be its intensity, it may be 
 
 bartered for the coffee, and the money that has intervened has withdrawn itself 
 as completely, as if it had never appeared at all in the transaction. Wherefore 
 it is quite correct to say, that relative value is determined by the relation of com- 
 modities one to another, and not solely by that of each commodity to money. 
 
 * It must not be inferred from this passage, that I mean to say, that the pro- 
 ductive agency exerted in raising 1 a product, whose charges of production have 
 amounted to a dollar, although it is saleable for 75 cents only, is therefore wortu 
 but 75 cents. My position merely implies, that this amount of productive ser- 
 vice has, in such case, raised a value of 75 cents only, though it might hav 
 raised a value of a dollar. 
 
 f Ricardo, Prin. Pol Econ. and Taxation. 
 
a88 "ON DISTRIBUTION. BOOK H 
 
 called by the general name of demand ; and the quantity attainable 
 at a riven time, and ready for the satisfaction of those who are in 
 want of the specific article, may be called the supply or amount m 
 
 circulation. . r , 
 
 But this must be understood with some limitation ; for there is no 
 object of pleasure or utility, whereof the mere desire may not be 
 unlimited, since every body is always ready to receive whatever can 
 contribute to his benefit or gratification. There must, therefore, be 
 some bounds to demand ; and the most effectual limitation is, the 
 ability to give some other equivalent product for the object of desire. 
 All the porters in a commercial city might desire to have a coach 
 and six for the more comfortable execution of their business, without 
 rakfag the price of horses and carriages a tittle. The objects, which 
 each individual has to give as an equivalent for the object of his 
 desire, are no other than the products of his own productive means, 
 which are limited even in the case of the most wealthy member of 
 societv. 
 
 WeaH is, in all countries, distributed in every degree of grada- 
 tion, frum the populous level of mediocrity to the solitary pinnacle 
 of extreme affluence. Accordingly, the products most generally 
 desirable are really demanded by a limited number only, because 
 they alone have wherewithal to obtain them ; and even their ability 
 may be more or less according to circumstances. Whence it may 
 be further concluded, that the same product or products may be in 
 greater demand at a lower scale of price, arid when attainable by less 
 productive exertion, although nowise increased in utility, merely 
 because accessible to a greater number of consumers; and, on the 
 contrary, less in demand at a higher scale of price, because accessible 
 to a smaller number. 
 
 Suppose that, in a severe winter, a method should be hit upon of 
 manufacturing knit-waistcoats of woollen at2 dollars each; probably 
 all who should have 2 dollars left, after satisfying more urgent wants, 
 would provide themselves with these waistcoats; but those who 
 should have but a dollar and a half left must still go without. If the 
 same article could be produced at one dollar and a half, these latter 
 also might all be provided and become consumers ; and the consump- 
 tion would be still further extended, if they should be produced at 
 one dollar only. In this manner, products formerly within reach of 
 the rich alone have been made accessible to almost every class of 
 society, as in the case of stockings. 
 
 When a product is raised in price, whether by taxation or other- 
 wise howsoever, the contrary effect is experienced ; the number of 
 its consumers is reduced ; for it can only be obtained by such as can 
 afford to pay for it; and the ability to purchase is not increased by 
 t/ie same causes, that operate to raise the price. Thus, in England, 
 the great majority of the population is wholly precluded from the 
 consumption of vinous liquors, and of many other articles ; for their 
 ttamment involves so large a sacrifice of products, or of productive 
 agency, tnat those only can attempt it, who have a great deal of 
 
CHAP. I. ON DISTRIBUTION. 289 
 
 either to spare. In such cases, not only is the number of consumers 
 diminished, but the consumption of each consumer is reduced also. 
 Though a consumer of coffee may not be compelled, by a rise of its 
 price, to relinquish that beverage altogether, he must at all events 
 curtail the amount of his consumption ; which is then like that of 
 two individuals, of whom one discontinues, and the other remains 
 able and willing to continue the use of the article. 
 
 In commercial speculation, as the purchaser does not buy for his 
 own consumption, he proportions his purchases to what he expects 
 to sell. Since, then, the quantity he can sell depends upon the 
 price he can afford to sell at, he will buy less according as the price 
 rises, and more according as it falls. 
 
 In poor countries, objects of even the commonest use, and of infe- 
 rior pi ice, frequently exceed the means of a great proportion of the 
 population. There are countries, where shoes, though cheap, are 
 out of teach of tr\ost of the inhabitants. The price of this commo- 
 dity does noi fall to a level with the means of the people ; because 
 that level is Still bekw the bare cost of production. But, shoes of 
 leather not being absolutely necessary to existence, those who are 
 unable to procure these, wear wooden shoes, (sabots) or go barefoot. 
 When this is unhappily the case with an article of primary neces- 
 sity, part of the population must perish, or at least cease to be 
 renewed. These are the causes of a general nature, that limit the 
 demand for each product, and for all products in general. 
 
 In respect to supply, it consists of *Jie whole of any commodity 
 which the owners for the time being <*re disposed to part with for 
 an equivalent, in other words, to sell at the current rate, and not 
 merely 6f what is actually on sale at tfie time. The whole of this is 
 also called the circulating or floating stock. Yet, strictly speaking, 
 no commodity is in circulation, except during the act of transit from 
 the seller to the purchaser, which is almost instantaneous. But the 
 bare act of transit has no influence on the terms of the bargain, to 
 which it is commonly subsequent ; it is a mere matter of executive 
 detail. The point of real importance is, the inclination of the 
 owner to part with the object of property. A commodity is in cir- 
 culation, whenever it is in quest of a purchaser, which it may be in 
 the most urgent need of, without altering its locality in the least. 
 Thus, the stock in a shop or warehouse is in circulation; thus too, 
 lands, rent-charges, houses, and the like, are said to be in circulation, 
 and the expression is intelligible enough. Even industry is some- 
 times in circulation and sometimes not, according as it is either in 
 quest of employment, or already employed. 
 
 For the same reason, an object ceases to be in circulation, me 
 moment it is set apart, either for consumption or for export to an- 
 other market, or accidentally destroyed, or withdrawn by the ca- 
 price of its owner, or held back at a price, which amounts to a 
 refusal to sell. 
 
 Inasmuch as supply consists of those commodities only, wmcnj 
 are to be had at the current price or ordinary rate of the market, a } 
 25 2M 
 
, J() ON DISTRIBUTION. BOOK II 
 
 nmodity raised by the cost of prodoctioYi above that level will 
 ixjase to be produced, or to form part of the supply. Wherefore, 
 ! the supply will be more abundant, when the current price is high, 
 1 and mnro scanty when that price has declined. 
 
 Besides these universal and permanent limitations ot supply and 
 demand, there are others of a casual and transient nature, which 
 always operate concurrently with the former. 
 
 The prospect of an abundant vintage will lower the price of all 
 the wine on hand, even before a single pipe of the expected vintage 
 has been brought to market; for the supply is brisker, and the sale 
 duller, in consequence of the anticipation. The dealers are anxious 
 to dispose of their stock in hand, in fear of the competition of the 
 new vintage; while the consumers, on the other hand, retard their 
 fresh purchases, in the expectation of gaining in price by the delay. 
 A large arrival and immediate sale of foreign articles all at once, 
 lowers their price, by the relative excess of supply above demand. 
 On the contrary, the expectation of a bad vintage, or the loss of 
 many cargoes on the voyage, will raise prices above the cost of 
 production. 
 
 Moreover, there are some particular products, which nature or 
 human institutions have subjected to monopoly, and thus prevented 
 from being supplied in equal abundance with those of a similar de- 
 scription. Of this kind are the wines of particular and celebrated 
 vineyards, the soil of which cannot be extended by the extended 
 demand. So the postage of letters is, in most countries, charged at 
 a monopoly-price. 
 
 Finally, whatever be the general or particular causes, that operate 
 / ] to determine the relative intensity of supply and demand, it is that 
 intensity, which is the ground-work of price on every act of ex- 
 i change: for price, it will be remembered, is merely 'the current 
 '( value estimated in money. The demand for all objects of pleasure, 
 nr utility, would be "unlimited, did not the difficulty of attainment, 
 or price, limit and circumscribe the supply. ^ On the other hand, 
 the supply would be infinite, were it not restricted by the same cir- 
 cumstance, the price, or difficulty of attainment: for there can be no 
 doubt, that whatever is producible would then be produced in un- 
 limited quantity, so long as it could find purchasers at any price at 
 all. Demand and supply are the opposite extremes of the beam, 
 whence depend the scales of dearness and cheapness ; the price is 
 the point of equilibrium, where the momentum of the 'one ceases, 
 and that of the other begins. 
 
 This is the meaning of the assertion, that, at a given time and 
 place, the price of a commodity rises in proportion to the increase 
 of the demand and the decrease of the supply, and vice versa ; or in 
 other words, that the rise of price is in direct ratio to the demand, 
 and inverse ratio to the supply. 
 
 The utility of an object, of, what is the same thing, the desire to 
 Mftintt, may possibly be unable to raise its price to a level with its 
 
 st or production. In this case it is not produced, because its pro- 
 
CHAP. I. ON DISTRIBUTION. 291 
 
 duction would cost more than the product would be worth. Pro- 
 bably the price that caviar* would fetch at Paris would hardly 
 equal the charge of producing it there ; for it is so little in request 
 there, that it scarcely would bring the lowest price that it could be 
 procured for, and consequently it is not produced; but elsewhere, it 
 ^s both produced and consumed in great quantities. 
 
 When the price of any object is legally fixed below the charges of 
 its production, the production of it is discontinued, because nobody 
 is willing to labour for a loss : those, who before earned their liveli- 
 hood by this branch of production, must die of hunger, if they find 
 no other employment; and those, who could have purchased the 
 product at its natural price, are obliged to go without it. The 
 establishment of the fixed rate, or maximum, is a suppression of a 
 portion of production and consumption ; that is to say, a diminution 
 of the prosperity of the community, which consists in production 
 and consumption. Even the produce already existing is not so pro- 
 perly consumed as it should be. For, in the first place, the pro- 
 prietor withholds it as much as possible from the market. In the 
 next, it passes into the hands, not of those who want it most, but of 
 those who have most avidity, cunning, and dishonesty; and often 
 with the most flagrant disregard of natural equity and humanity. A 
 scarcity of corn occurs; the price rises in consequence; yet still it is 
 possible, that the labourer, by redoubling his exertions, or by an in- 
 crease of wages, may earn wherewithal to buy it at the market 
 price. In the mean time, the magistrate fixes corn at half its natura, 
 price : what is the consequence f Another consumer, who had al- 
 ready provided himself, and consequently would have bought no 
 more corn had it remained at its natural price, gets the start of the 
 labourer, and now, from mere superfluous precaution, and to take 
 advantage of the forced cheapness, adds to his own store that por 
 tion, which should have gone to the labourer. The one has a dou- 
 ble provision, the other none at all. The sale is no longer regulated 
 by the wants and means, but by the superior activity of the pur- 
 chasers. It is, therefore, not surprising, that a maximum of price 
 on commodities should aggravate their^scarcity. 
 
 A law, that simply fixes the price of commodities at the rate they 
 would naturally obtain, is merely nugatory, or serves only to alarm 
 producers and consumers, and consequently to derange the natural 
 proportion between the production and the demand ; which propor- 
 tion, if left to itself, is invariably established in the manner most 
 favourable to both. 
 
 Hope, fear, malevolence, benevolence, in short, every human pa 
 sion or virtue may influence the scale of price. But it is the pro- 
 vince of moral science to estimate the intensity of their effect upon 
 actual price in every instance, which is the only thing we are here 
 to attend to. Neither need we advert to the operation of me causes 
 of a nature purely political, that may operate to raise the pi ice of a 
 
 * A pickle made of the roe of sturgeons, a favourite condiment of Russian diet 
 
292 ON DISTRIBUTION. BOOK I) 
 
 product above the degree of its real utility. For these are of the 
 same class with actual robbery and spoliation, which come under the 
 department of criminal jurisprudence, although they may intrude 
 themselves into the business of the distribution of wealth. The 
 functions of national government, which is a class of industry, whose 
 result or product is consumed by the governed as fast as it is pro- 
 duced, may be too dearly paid for, when they get into the hands of 
 usurpation and tyranny, and the people be compelled to contribute 
 a larger sum than is necessary for the maintenance of good govern- 
 ment? This is a parallel case to that of a producer without competi- 
 tors, whether he have got rid of them by force, or by accidental 
 circumstances. He may raise his product to what price he will, 
 even to the extreme limit of the consumer's ability, if his monopoly 
 be seconded by authority. But it is the province of the political 
 philosopher, and not of the political economist, to teach us how this 
 evil may be avoided. In like manner, although it be the province 
 af ethics*, or of the knowledge of the moral qualities of man, to teach 
 the means of ensuring the good conduct of mankind, in their mutual 
 relations, yet, whenever the intervention of a superhuman power 
 appears necessary to effect this purpose, those who assume to be the 
 interpreters of that power must be paid for their service. If their 
 labour be useful, its utility is an immaterial product, which has a 
 real value ; but, if mankind be nowise improved by it, their labour 
 not being productive of utility, that portion of the revenues of so 
 ciety, devoted to their maintenance, is a total loss ; a sacrifice with 
 out any return. 
 
 With the most earnest wish to confine myself within my subject 
 it is impossible to avoid sometimes touching upon the confines of 
 policy and morality, were it only for the purpose of marking out 
 their points of contact 
 
 CHAPTER II. 
 
 THE SOURCES OF REVENUE. 
 
 IT has been shown in Book L, that products are raised by the 
 productive means at the command of mankind, that is to say, by 
 human industry, capital, and natural powers and agents. The pro- 
 ducts thus raised, form the revenue of those possessed of these means 
 of production, and enable them to procure such of the necessaries 
 rforts of existence, as are not furnished gratuitously, either 
 by nature, or by their fellow-creatures. 
 
 The exclusive right to dispose of revenue is a consequence of tha 
 ,*7lusive right, or property, in the means of production; and such 
 ot them, a, are not the subject ofhuman appropriation, are not either 
 
CHAP. II. ON DISTRIBUTION. 
 
 items of productive means, or sources of revenue ; they form no part 
 of human wealth, which implies appropriation and exclusive pos- 
 session ; for there is no such thing as wealth, unless where property 
 is known and established, and where possession is both acknow 
 ledged and secured. ^ 
 
 The origin or the justice of the right of property, it is unnecessary 
 to investigate, in the study of the nature, and progress of human 
 wealth. ' Whether the actual owner of the soil, or the person from 
 whom he derived its possession, have obtained it by prior occu 
 pancy, by violence, or by fraud, can make no difference whatever 
 in the business of the production and distribution of its product or 
 revenue. 
 
 Perhaps it is scarcely necessary to remark, that property in that 
 class of productive means, which has been called human industry, 
 and in that distinguished by the general name of capital, is far more 
 sacred and indisputable, than in the remaining class of natural 
 powers and agents. The industrious faculties of man, his intelli- 
 gence, muscular strength, and dexterity, are peculiar to himself and 
 inherent in his nature. And capital, or accumulated produce, is the ^ 
 mere result of human frugality and forbearance to exerc'se the j 
 faculty of consuming, which, if fully exerted, would have destroyed ) 
 products as fast as they were created, and these never could have \ 
 been the existing property of any one ; wherefore, no one else, but ) 
 he who has practised this self-denial, can claim the result of it with / 
 any show of justice. Frugality is next of kin to the actual creation / 
 of products, which confers the most unquestionable of all titles to 
 the property in them. 
 
 These several sources of production are some of them alienable, 
 as land, implements of arts, &c. ; and some inalienable, as personal 
 faculties. Some also are consumable, as are all the items of floating 
 capital ; others, inconsumable, as land. Some, too, there are, that 
 are neither alienable nor consumable, yet are capable of destruction , 
 as the human faculties, intellectual and corporeal, which vanish with 
 human existence. 
 
 Such as are capable of consumption, as, for instance, the floating 
 values, whereon production expends its energies, may be consumed 
 either in such manner as to occasion a re-production, in which case 
 they will still constitute a part of the means of production ; or in 
 such manner as to yield no further production, in which case they 
 cease to form any part of those means, and are devoted to pure de- 
 struction, more or less rapid. 
 
 Although revenue, as well as the sources of production, is a con- 
 stituent part of individual wealth, yet no one is reputed to reduce 
 his fortune by the consumption of his revenue only, provided that 
 he does not encroach upon his productive means; because revenue 
 is a regenerating product, whereas the means of production, so long 
 as they continue to exist, are a constant and perpetual source of new 
 products. 
 
 The current value of these appropriable sources of production is \ 
 25* * 
 
294 ON DISTRIBUTION. BOOK II. 
 
 established on the same principles, as that of all other objects ; that 
 is to say, by the conflicting influence of supply and demand. The 
 only remark that need be made upon it is, that the demand does not 
 originate in the enjoyment anticipated from the immediate use of 
 the particular source; for a field or an implement of trade yields to 
 the owner no direct enjoyment, which is capable of estimation; their 
 value has reference to the value of the product they are capable of 
 raising, which itself originates in the utility of that product, or the 
 satisfaction it may be capable of affording. 
 
 With regard to those sources, that are inalienable, as are the 
 human faculties of mind and body, they can never be the subject of 
 actual exchange, and their value is a matter of mere mental estima- 
 tion, grounded upon the value they may be capable of producing 
 Thus the productive means of this description, which yield to an 
 artisan the wages of 1 dollar a day, or of 365 dollars a year, rnav 
 be reckoned equivalent to a vested capital yielding an equal annua 1 
 revenue. 
 
 And now that we have taken this general and cursory view of 
 the sources of production and of revenue in the abstract, we may 
 enter upon a more minute analysis of their nature, which will lead 
 us into the labyrinth of the science of political economy, and furnish 
 us with a clue to some of its most intricate windings. 
 
 The immediate result of these sources is not, strictly speaking, a 
 product, but a productive service that helps us to a product. Pro- 
 ducts should, therefore, be considered as the result of an interchange 
 f productive service on the one hand, and the actual products on 
 the other, subsequently to which, revenue appears for the first time 
 
 the shape of products; and these again may be exchanged for 
 >ther products, into which latter form the same revenue will then 
 he converted. 
 
 The conception of this matter will be rendered clearer by a prac- 
 
 ical Ration A piece of arable land yields an annualproduct, 
 
 sa> of 300 bushels of wheat, whereof 200 bushels more or less, may 
 
 Considered as resulting from the agency of the capital and in- 
 
 stry employed in its cultivation, and the remaining 100 bushels 
 
 esultmg frorn the natural productive powers of the soil. The 
 
 revenue yielded by the land to the proprietor, will have appeared 
 
 first , n the way of concurring productive service afforded by the 
 
 ttliESf^i^ 1/ln ? : w i ich productive service wil1 ^ 
 
 f whont tn7t! r M l 1 ^ CUltivat r f r the sum of 100 bushels 
 us to s of xvho T Vl11 ^ the , fil ' St act f excha ^ e - If these 100 
 
CHAP. II. ON DISTRIBUTION. -295 
 
 then, is the object of transfer, for which revenue is given in ex- 
 change I why, the productive service of those means, that the re- 
 ceiver of revenue may be possessed of. And what is obtained by 
 the primary act of exchange, which we designate production? why, 
 products. Wherefore, the value of revenue is large in proportion, 
 not to the value, but to the quantity of the product obtained, to the 
 sum total of utility created. 
 
 Thus we find, that the ratio of national revenue, in the aggregate, 
 is determined by the amount of the product, and not by its value.* 
 It is not so with individual revenue ; because a variation in the rela- 
 tive value of different products will operate to swell that of one 
 individual, or class, at the expense of another. 
 
 Could each member of society live on the primary products 
 whereof his revenue is composed, the relative degree of revenue 
 would, like that of nations, in the aggregate, depend upon the 
 amount of the product, upon the sum of utility created, and not 
 upon its exchangeable value. But, in a state of society at all 
 elevated above barbarism, this is impossible; each individual 
 consumes a much less quantity of his own peculiar product, than 
 of those of other people, which he buys with his own. The grand 
 point, therefore, of individual importance to the producer, is, the 
 quantity of product not of his own creation, which he may be able 
 to procure with his own productive means, or with the products 
 created by their agency. Suppose, for instance, the land, capital, 
 and personal faculties of a particular individual to be engaged in the 
 cultivation of saffron; as he will probably himself consume little or 
 no saffron, his revenue will consist of such other objects, as his 
 annual crop of saffron can be exchanged for; and the ratio of that 
 revenue will be elevated by a rise in the price of saffron; while that 
 of the consumers of that article will be proportionately reduced to 
 the full extent of the rise of its price. On the contrary, their reve- 
 nue will be augmented in like manner by a fall of its price, to the 
 prejudice of the revenue of the grower. 
 
 *yl 
 
 Every saving in the charges of production, that is to say, every 
 
 saving in the productive agency exerted to raise the same product, is[ i 
 an increase of the revenue of the community to an equal extent; as, / 
 for example, the contrivance to raise as much upon one acre of land 
 as before upon two, or to effect with two days' labour, what before 
 required as much as four; for the productive agency thus released 
 may be directed to the increase of production, (a) And this acces- 
 
 * Hence the futility of any attempt to compare the wealth of different nations, 
 of France and England for instance, by comparison of the value of their respective 
 national products. Indeed, two values are not capable of comparison, when placed ' 
 at a distance from each other. The only fair way of comparing the wealth of 
 one nation with that of another, is> by a moral estimate of the individual welfare 
 in each respectively. 
 
 (?) And will be so for the most part, though not entirely, wherever the mem 
 hers of the community have no other hope of subsistence, than from the product 
 
U ) G ON DISTRIBUTION. BOOK 1L 
 
 sion of revenue will accrue to the individual benefit of the contriver, 
 =50 lonu as the contrivance can be confined to his own knowledge; 
 but uTlhat of consumers at large, as soon as the notoriety shall have 
 awakened competition, and obliged him to limit his profits to the 
 actual charges of production. 
 
 However revenue may be transformed by the various acts of 
 exchange, commencing with the productive agency, which is the 
 primitive exhibition of revenue, it remains the same in substance, 
 until the moment of its ultimate consumption. The revenue yielded 
 by an acre of arable land remains, in reality, the same, both after its 
 primary exchange, by the act of production, into the form of wheat, 
 and after its secondary transformation into silver coin, even although 
 the wheat have been consumed by the purchasers. But, as soon as 
 the rcvenued individual converts his silver coin into an object of 
 consumption, and that object is simply consumed, the value of his 
 revenue thenceforth ceases to exist, and is destroyed and lost, 
 although the silver coin, whose form it once assumed, continue in 
 existence. It must not be imagined still to exist in the hands of the 
 temporary holder of the coin, although lost to the receiver of reve- 
 nue; but is equally lost to mankind at large; for the actual holder 
 of the coin must have obtained possession of it by the transfer of 
 other revenue of his own, or of some source of revenue before in 
 his own possession. 
 
 When revenue is added to capital, it thenceforth ceases to be 
 revenue, or, as such, to be capable of satisfying the wants of the 
 proprietor; it can only yield an increased revenue, being an item of 
 productive capital, consumable in the manner of capital, that is to 
 say, in such way as to yield a product in exchange and return for 
 the value consumed. 
 
 When capital or land, or personal service, is let out to hire, its 
 productive power is transferred to the renter or adventurer in pro- 
 duction, in consideration of a given amount of products agreed upon 
 beforehand. It is a sort of speculative bargain, wherein the renter 
 Res the risk of profit and loss, according as the revenue he may 
 j r r ,| he P roduct obtained by the agency transferred, shall ex- 
 11 short of the rent or hire he is to pay. Yet one revenue 
 e realised ; and, though a borrowed capital may yield to 
 
 thus created, is 
 
 ws sas 
 
 of 
 
 
CHAK III. ON DISTRIBUTION. 297 
 
 the adventurer an annual product of 10 per cent, instead of 5 per 
 cent, which he pays in the shape of interest, yet the revenue of the 
 capital, the productive service it affords, will not be 10 percent.; for 
 in that gross product is included the recompense of the productive 
 agency, both of the capital and of the industry that has turned it to 
 account. 
 
 The actual revenue of each individual is proportionate to the 
 quantity of products at his disposal, being either the immediate fruit 
 of his productive means, or the result of those transformations from 
 its primitive state, which his revenue may have undergone, until it 
 have assumed the shape of the ultimate object of his consumption. 
 The ratio of that quantity, or of utility inherent in it, can only be 
 estimated from its current price in the dealings of mankind. In 
 this sense, the revenue of an individual is equal to the value derived 
 from his productive means ; which value, however, is the greater, 
 in respect to the objects of his consumption, in proportion to the 
 cheapness of those objects, which augments his command of other 
 than his own immediate products. 
 
 In like manner, the revenue of a nation is the more considerable, 
 in proportion to the intensity of the value whereof it consists, i. e. 
 of the value of its aggregate productive powers, and to its high rela- 
 tive degree to the value of the objects of external attainment. The 
 value of productive agency must be high, even where that of pro- 
 ducts is low ; for it should be always recollected, that, since the in- 
 tensity of value depends upon the quantity of objects obtainable in 
 exchange, revenue, or, in other words, the agency of the national 
 sources of production, is large, in proportion to the abundance and 
 cheapness of the products derived from them. 
 
 CHAPTER EL 
 
 OF REAL AND RELATIVE VARIATION OF PRICE. 
 
 THE price of an article is the quantity of money it may be worth; 
 current price, the quantity it may be sure of obtaining at the par- 
 ticular place. Its locality is material, for the desire of a specific 
 object varies in relation to the quantity procurable according to the 
 locality. 
 
 The price obtained upon the sale of an artic|e represents all other 
 articles procurable with that price. To say, that the price of an el! 
 of broad-cloth is 8 dollars, implies, that it is exchangeable either for 
 so much coined silver, or for so much of any other product or pro 
 ducts as may be procurable with that sum. Money-price is selected 
 for the purposes of an illustration, in preference to price in com 
 modifies at large, merely for greater simplicity ; but the real and ulti 
 mate object of exchange is, not money, but commodities. 
 
 2N 
 
298 ON DISTRIBUTION. BOOK II. 
 
 Price, in this sense, may be divided into buying price and selling 
 price ; that is to say, the price given to obtain possession of an object, 
 and the price obtainable for the relinquishment of its possession. 
 \ The price paid for every product, at the time of its original attain- 
 ment or creation, is, the charge of the productive agency exerted, 
 or the cost of its production.* Tracing upwards to this original 
 price of a product, we unavoidably come to other products ; for the 
 charge of productive agency can only have been defrayed by other 
 products. The daily wages of the weaver engaged 'in producing 
 broad-cloth are products; they consist either of the articles of his 
 daily subsistence, or of the money wherewith he may procure them . 
 both which are equally products. Wherefore the* production, as 
 well as the subsequent interchange of products, may be said to re- 
 solve itself into a barter of one product for another, conducted upon 
 a comparison of their respective current prices. But there is one 
 important particular, that requires the most assiduous attention, the 
 neglect or oversight of which has led to abundance of error and 
 misrepresentation, and has made the works of many writers calcu- 
 lated only to mislead the students in this science. 
 ~ An ell of broad-cloth, that has, in the production, required the 
 j purchase of productive agency at the price of 8 dollars, will have 
 cost that sum in the manufacture; but if three-fourths only of that 
 productive agency can be made to suffice for its production ; if, sup- 
 posing one kind of productive agency only to be requisite, 15 in- 
 tead of 20 days' labour of a single workman be enabled to complete 
 the product, the same ell of broad-cloth will cost 6 dollars to the 
 producer, at the same rate of wages. In this case the current price 
 tuman productive agency will have remained the same, although 
 
 ?wp 8t /f u n i TJ 1 n aVG Varied in the ratio of the difference 
 etween 6 dollars and 8 dollars. But, as this difference in the rela- 
 
 Mi between the cost of production and the current price of the 
 
 P rficu ar U { ^Ti! f ***** P r fit than ordi 7 in this 
 rticular channel, it naturally attracts a larger proportion of oro 
 ductive agency, the exertion of which, bv enlarX the 
 reduce^again the current price to a level with the Sa>e cost of^rl' 
 
 'ar^tion 1 ^ f Vari K ti0n ln - the Price f a P rodllct T ^all call real 
 
 
 Vide Wealth of Nations, book i. c 5 
 
 oe 
 
 hat has been said above, that eve t of bartp , "' But U res " lts from 
 
 iP^A*^ 
 
CHAP. III. ON DISTRIBUTION. 299 
 
 It is otherwise with regard to the variation of price of products 
 already in existence one to another, without reference to their re- 
 spective cost of production. When the wine of the last vintage 
 that a month before sold at 40 dollars the tun, will fetch no more 
 than 30 dollars, money and all other objects of desire to the wine- 
 vender have actually advanced in price to him ; for the productive 
 agency exerted in raising the wine, receives a recompense of but 30 
 dollars, instead of 40 dollars in money, and of commodities in a like 
 uroportion, which is an abatement of \ ; whereas, in the instance 
 above cited, an equal amount of productive agency will receive an 
 equal recompense in all other products ; for a degree of agency, 
 which has both cost and received 6 dollars, will be equally well paid 
 with one that cost and received 8 dollars. 
 
 In the former case, then, of a real variation, the wealth of the 
 community will have received an accession ; in the latter, of relative \ 
 variation, it will have remained stationary ; and for this plain reason r 
 because, in the one case all the purchasers of cloth, will be so much 
 the richer, without the seller being any poorer ; while in the other, 
 the gain of the one class will be exactly equipoised by the cor- 
 responding loss of the other. In the former case, a larger amount 
 of products will be procured with an equal charge of production, 
 and without any alteration in the revenues of either buyers or sellers: 
 there will be more actual wealth, more means of enjoyment, with- 
 out any increased expenditure of productive means ; the aggregate 
 utility will be augmented; the quantum of products procurable for 
 the same price will be enlarged ; all which are but varied expres- 
 sions of the same meaning. **~ 
 
 But whence is derived this accession of enjoyment, this larger / 
 supply of wealth, that nobody pays for? From the increased com- ' 
 mand acquired by human intelligence over the productive powers 
 and agents presented gratuitously by nature. A power has been 
 rendered available for human purposes, that had before been not 
 known, or not directed to any human object; as in the instance of 
 wind, water, and steam-engines: or one before known and available 
 is directed with superior skill and effect, as in the case of every im- 
 provement in mechanism, whereby human or animal power is as- 
 sisted or expanded. The merit of the merchant, who contrives, by 
 good management, to make the same capital suffice for an extended 
 business, is precisely analogous to that of the engineer, who simpli- 
 fies machinery, or renders it more productive. 
 
 The discovery of a new mineral, animal, or vegetable, possessed 
 of the properties of utility in a novel form, or in a greater degree of 
 abundance or perfection, is an acquisition of the same kind. The 
 productive means of mankind were amplified, and a larger product 
 rendered procurable by an equal degree of human exertion, when 
 indigo was substituted for woad, sugar for honey, and cochineal for 
 the Tyrian dye. In all these instances of improvement, and those 
 of a similar nature that may be hereafter effected, it is observable. 
 Jiat, since the means of production placed at the disposal of man- 
 
300 ON DISTRIBUTION. BOOK II 
 
 kind become in reality more powerful, the product raised always 
 increases in quantity, in proportion as it diminishes in value. We 
 shall presently see the consequences of this circumstance.* 
 
 A lull of price may be general and affect all commodities at once ; 
 or it may be partial and affect certain commodities only ; as I shall 
 endeavour to explain by example. 
 
 Suppose that, when stockings were made by knitting only, thread- 
 stockings, of a given quality, amounted to the price of 1 dollar the 
 pair. Hence, we should infer, that the rent of the land whereon the 
 flax was grown, the profits upon the labour and capital of the culti- 
 vators, those of the flax-dresser and spinner, with those likewise of 
 the stocking-knitter, amounted altogether to the sum of a dollar for 
 each pair of stockings. Suppose that, in consequence of the inven- 
 tion of a stocking-machine, 1 dollar will buy two pair of stockings 
 instead of one. As the competition has a tendency to bring the 
 price to a level with the cost of production, we may infer from this 
 reduced price, that the outlay in land, capital, and labour, necessary 
 to produce two pair of stockings, is still no more than 1 dollar; thus, 
 with equal means of production, the product raised is doubled in 
 quantity. And what is a convincing proof that this fall is positive, 
 is the fact, that every person, of what profession soever, may thence- 
 forward obtain a pair of stockings with half the quantity of his own 
 particular product. A capitalist, the holder of 5 per cent, stock, was 
 before obliged to devote the annual interest of 20 dollars to the pur- 
 chase of a pair of stockings; he now gives the interest of 10 dollars 
 only. A tradesman selling his sugar at 33J cents per Ib. must be- 
 fore have sold 3 lb. of sugar to buy a pair of stockings, now he need 
 ut se l lb.: he therefore sacrifices in the pair of stockings only 
 half the means of production he formerly devoted to the acquisition 
 of the same object. 
 
 We have hitherto supposed this product alone to have fallen in 
 
 price Let us suppose two products to fall, stockings and sugar: 
 
 IS * n !7 roveme T nt of commerce, 1 lb. of sugar cost 22 cents 
 
 mstead of 33 cents. In this case all purchasers of sugar, including 
 
 n t s het ng r f : vl ?r r duct has likewise fa en w ^^ 
 
 vh ch thov hT 1 Sr S T r * but half the Productive means 
 wnich hey before allotted for that purpose 
 
 c truth of this position may be easily ascertained. When sugar 
 33 i^ nt lP!L] b ^^ stolk- 
 
 to of\^ 
 
 The pressure oftiarLI J e 06ethey ""** 
 
 e e n Hedt i ' 
 
 yet population has increased in most cluntriT f p P ' L CTen 1 uadra P le d ! 
 a portion at least of the increase of nr , , I of r ^ lr P e ' wh "=h '" sign, that 
 nd the relation, besides 0^^ L^ " ' " S " b J Wt ' 
 
 no co,K,it, UI1 =d and I believe beite/S t^'than it^'al 
 
('HAP. III. ON DISTRIBUTION. SO] 
 
 ing-maker was obliged to sell one pair of stockings, before he could 
 buy 3 Ibs. of sugar : and, as the charges of producing this pair of 
 stockings were one dollar, he in reality bought 3 Ibs. of sugar at the 
 price of a dollar value in his own productive means; in like manner 
 as the grocer bought a pair of stockings for 3 Ibs. of sugar, that is 
 to say, in his case also, for one dollar value of his peculiar produc- 
 tive means. But when both these commodities have fallen to half 
 their price, one pair only, or productive means equivalent to 50 
 cents, would buy 3 Ibs. of sugar ; and 3 Ibs. of sugar, procurable at 
 a charge of production amounting to 50 cents, will suffice to pur- 
 chase a pair of stockings. Wherefore, if two kinds of products, 
 which we have set one against the other, and supposed to pass in 
 exchange the one for the other, can both have fallen in price at the 
 same time, are we not authorised to infer, that this fall is a positive 
 fall, and has no reference or relation to the prices of commodities 
 one to another 7 ? that commodities in general may fall at one and the 
 same time, some more, some less, and yet that the diminution of 
 price may be no loss to any body ? 
 
 It is for this reason, that, in modern times, although wages stand 
 in nearly the same relation to corn as they did four or five hundred 
 years ago, yet the lower classes now enjoy many luxuries, that were 
 then denied them ; many articles of dress and household furniture, 
 for instance, have suffered a real diminution of value ; and that the 
 same individuals are more scantily supplied with others, as with 
 butcher's meat and game,* because they have sustained a real in- 
 crease of value. 
 
 Every saving in the cost of production implies the procurement, 
 either of an equal product by the exertion of a smaller amount of 
 productive agency, or of a larger product by the exertion of equal 
 Agency, which are both the same thing ; and it is sure to be followed 
 by an enlargement of the product. It may be thought, perhaps, 
 that this increase of production may possibly take place without any 
 corresponding increase of demand ; and, therefore, that the price 
 
 * I find in the Recherckes of Dupre de Saint Maur, that in 1342, an ox was 
 sold from 10 to 11 livres tournois. This sum then contained 7 02. of fine silver, 
 which was worth about 28 oz. of the present day ; and 28 oz. of our present mo- 
 ney are coined into 171 fr. 30 c., (32 dollars,) which is lower than the price of 
 an ordinary ox. A lean ox bought in Poitou for 300 fr., and afterwards fatted in 
 Lower Normandy, will sell at Paris for from 450 to 500 fr. (84 to 93 dollars.; 
 Butcher's meat has, therefore, more than doubled in price since the 14th cen- 
 tury ; and probably most other articles of food likewise ; and, if the labouring 
 classes had not at the same time been greatly benefited by the progress of indus- 
 jy, and put in possession of additional sources of revenue, they would be worse 
 fed than in the time of Philip of Valois. 
 
 This may be easily explained. The growing revenues of the industrious 
 classes have enabled them to multiply, and consequently to swell the demand for 
 all objects of food. But their supply can not keep pace with the increasing de- 
 mand, because, although the same surface of soil may be rendered more produc- 
 tive, it can not be so to an indefinite degree ; and the supply of food by the chan- 
 nel of external commerce, is more expensive than by that of internal agricultuif* 
 On account of the bulky nature of most of the articles of aliment. 
 26 
 
302 ON DISTRIBUTION. BOOK II. 
 
 current of the product may fall below the cost of its production, 
 even on its reduced scale. But this is a groundless apprehension ; 
 for the fall of price tends so strongly to expand the sphere of con- 
 sumption, that, in all the instances I have been able to meet with ; 
 the increase of demand has invariably outrun the increasing powers 
 of an improved production, operating upon the same productive 
 means; so that every enlargement of the power of productive agency 
 has created a demand for more of that agency, in the preparation 
 of the product cheapened by the improvement. 
 
 Of this a striking example has been afforded by the invention of 
 the art of printing. By this expeditious method of multiplying the 
 copies o. a literary work, each copy costs but a twentieth part of 
 what was before paid for manuscript; an equal intensity of total 
 demand, would, therefore, take off only twenty times the number of 
 copies ; but probably it is within the mark to say, that a hundrea 
 times as many are now consumed. So that, where there was for- 
 merly one copy only of the value of 12 dollars of present money, 
 there are now a hundred copies, the aggregate value of which is 60 
 dollars, though that of each single copy be reduced to 1-20. Thus 
 the reduction of price, consequent upon a real variation, does not 
 occasion even a nominal diminution of wealth.* 
 
 On the other hand, and by the rule of contraries, as a real ad- 
 vance of price must always proceed from a deficiency in the product 
 raised by equal productive means, it is attended by a diminution in 
 
 e general stock of wealth; for the rise of price upon each portion 
 >s not counterpoise the reduction that takes place in the tota 
 
 lantity of the commodity; to say nothing of the greater relative 
 
 earness of the object of consumption to the consumer, and of his 
 
 onsequent impoverishment in comparison. 
 
 Suppose a murrain, or a bad system of management to PIMCA o 
 scarci ty of any kind of live s,oc{ of sheep SH^^S 
 lTT^. P /r rt " . to i he red -' io <* 'he supply ? be- 
 
 probable th.i , " Umber of shee P> * is ve ^V 
 
 then- price would advance to no more than double f so, tha. 
 
 4 dollars Jlh A**' ^'u might tO ^ ether be worth 20 dollars at 
 ^ dollars each, there would remain but one valued gt 8 dollar 
 
 too few to enable 
 subject will ^tot.ik^^^^^ the 
 
 Ihe reasoning The statistic researches of th , make - dlfference ! " 
 lntnrp affos with more accurate means nfV I i P re ^ nt ff ene ration will provide 
 of the principles u^n wSltl maSe "' ""' "" "^^ the 
 
 n v 
 
 ind,vKl,,al a.,sessed. The F M * of its eff ^ "Pon the 
 
 are abated t 
 
OHAP. III. ON DISTRIBUTION. 303 
 
 Thus, it may be affirmed, that every real reduction of price, 
 instead of reducing the nominal value of produce raised, in point of 
 fact, augments it; and that a real increase of price reduces, instead 
 of adding to the general wealth; to say nothing of the quantum of 
 human enjoyment, which in the former case is multiplied, and in the 
 latter abridged. Besides it would be a capital error to imagine, that 
 a real fall of price, or in other words, a reduction in the price paid 
 to productive exertion, occasions as much loss to the producer as 
 gain to the consumer. A real depreciation of commodities is a 
 benefit to the consumer, without curtailing the profits of the pro- 
 ducer. The stocking-maker, who for one dollar manufactures two 
 pair of stockings instead of one, gains as much upon that sum as if 
 it were the price of a single pair. The landed proprietor receives 
 the same rent, although, by a better rotation of crops, the tenant 
 should multiply and cheapen the produce of his land. Whenever, 
 without additional fatigue to the labourer, means are devised to 
 double the quantity of work he can perform, the ratio of his daily 
 gains is not reduced, although his product is sold at a lower price.* 
 
 This will serve to confirm and explain a maxim, which has been 
 hitherto imperfectly understood, and even disputed by many writers, 
 and sects of political reasoners ; namely, that a country is rich and 
 plentiful, in proportion as the price of commodities is low.f 
 
 For argument's sake, I will put the matter in the most favouraole 
 light for those who dispute this maxim, and suppose them to urge an 
 extreme rase, namely, that, by successive economical reductions,' the 
 charges of production are at length reduced to nothing ; in which 
 case, it ij evident there can no longer be rent for land, interest upon 
 
 * I have met with persons, who imagined themselves adding to national wealth, 
 by favouring the production of expensive, in preference to that of cheaper articles. 
 In their opinion, it is better to make a yard of rich brocade than one of common 
 sarsenet. They do not consider, that, if the former costs four times as much as 
 the latter, it is because it requires the exertion of four times as much productive 
 agency, which could be made to produce four yards of the latter, as easily as one 
 of the former. The total value is the same ; but society derives less benefit; for 
 a yard of brocade makes fewer dresses than four yards of sarsenet. It is the 
 grand curse of luxury, that it ever presents meanness in company with magnifi- 
 cence. 
 
 f Dupont de Nemours (Pliysiocratie. p. 117.) says, that " it must not be sup- 
 posed, that the cheapness of commodities is advantageous to the lower classes ; 
 for the reduction of prices lessens the wages of the labourer, curtails his com- 
 forts, and affords him less work and lucrative occupation." But theory and 
 practice both controvert this position. A fall of wages, occasioned solely by a 
 fall in the price of commodities, does not diminish the comforts of the labourer, 
 and, inasmuch as the low price of wages enables" the adventurer to produce at a 
 less expense, it tends powerfully to promote the vent and demand foi Jie pro 
 duce of labour. 
 
 Melon, Forbonnais, and all the partisans of the exclusive system, or balance 
 of trade, concur with the economists in this erroneous opinion ; and it has been 
 re-affirmed by Sismondi, in his Nouveaux Prin. d'Econ. Pol. liv. iv. c. 6. . 
 where the lower price of products is treated as an advantage gained by the con- 
 sumer upon the producer, in despite of the obvious impossibility of any loss to the 
 labouring or other productive classes, by a reduction tantamount only to th* 
 saving in the cost of production. 
 
304 ON DISTRIBUTION. &>o* 11 
 
 capital, or wages on labour, and consequently, no longer ny revenue 
 to the productive classes. What then > Why then, I say, these 
 classes would no longer exist. Every object oi human want would 
 stand in the same predicament as the air or the water, which are 
 consumed without the necessity of being either produced or pur- 
 chased. In like manner as every one is rich enough to provide him- 
 self with air, so would he be to provide himselt with every other 
 imaginable product. This would be the very acme of wealth. Po- 
 litical economy would no longer be a science ; we should have no 
 occasion to learn the mode of acquiring wealth ; for \ve should find 
 it ready made to our hands. 
 
 Although there be no instance of a product falling to nothing in 
 vrizc, and becoming worth no more than mere water, yet some 
 kinds have undergone prodigious abatements; as fuel in those places 
 where coal-pits have been discovered; and such abatements are so 
 many approximations to that imaginary state of complete abundance, 
 * have just been speaking of. 
 
 If different commodities have fallen in different ratios, some more, 
 others less, it is plain they must have varied in relative value to 
 each other. That which has fallen, stockings, for instance, has 
 changed its value relatively to that which has not fallen, as butcher's 
 meat ; and such as have fallen in equal proportion, like stockings 
 ind sugar in our hypothesis, have varied in real though not in rela- 
 tive value. 
 
 There is this difference between a real and a relative variation of 
 price : that the former is a change of value, arising from an altera- 
 tion of the charges of production ; the latter, a change, arising from 
 an alteration of the ratio of value of one particular commodity to 
 other commodities. Real variations are beneficial to buyers, with- 
 out injury to sellers; and vice versa; but in relative ones, what is 
 gained by the seller is lost by the purchaser, and vice versa. A 
 dealer, having in his warehouse 100,000 Ibs. of wool at 20 cents per 
 lb., is worth 20,000 dollars ; if, by reason of an extraordinary de- 
 mand, wool should rise to 40 cents per lb., that portion of his capi- 
 tal will be doubled, but all goods brought to be exchanged for wool 
 will lose as much in relative value as the wool will gain. A person 
 in want of 100 Ibs. of wool, who could before have obtained it by 
 disposing, say of 20 bushels of wheat valued at 20 dollars, must now 
 dispose of twice that quantity. He will lose the 20 dollars gained 
 by the wool-dealer; and the nation be neither enriched nor im- 
 poverished.* 
 
 * The Earl of Lauderdale published in 1807, a work, entitled, " Researches on 
 
 he Nature and Origin of Public Wealth, and on the Causes which concur in 
 
 * Increase; the whole reasoning of which is built on this erroneous proposition, 
 
 that the scarcity of a commodity, though it diminish the wealth of society in the 
 
 imegate, augments that of individuals, by increasing the value of that commo- 
 
 Jity in the hands of its possessors. Whence the author deduces the unsound 
 
 conclusion, that national, differs in principle from individual wealth. He has 
 
 ot perceived, that, whenever a purchaser is obliged to make the acquisition by 
 
 sacrifice of a greater value, he loses just as much as the seller gains; ana 
 
. TIL ON DISTRIBUTION. 305 
 
 When sales of this kind take place between one nation and an- 
 other, the nation, that sells the commodity, which has advanced in 
 relative price, gains to the amount of the advance, and the purchas- 
 ing nation loses precisely to the same extent. Such a rise of price 
 adds nothing to the general stock of wealth, existing in the world, 
 \vhich can only be enlarged by the production of some new utility, 
 that may become the object of price or estimation ; whereas, in other 
 cases, one always loses what another gains : and so jt is with all 
 kinds of jobbing transactions, founded upon the fluctuations of prices 
 one upon another. 
 
 In all probability, the time is not very distant, when the Euro- 
 pean states, awake at length to their real interests, will renounce the 
 costly rights of colonial dominion, and aim at the independent colo- 
 nization of those tropical regions nearest to Europe ; as of some 
 parts of Africa. The vast cultivation of what are called colonial 
 products, that would ensue, could not fail to supply Europe in the 
 greatest abundance, and probably at most moderate prices. Such 
 merchants as shall then have stock on hand, purchased at the old 
 prices, certainly will make a loss upon that stock ; but their loss will 
 be a clear gain to the consumer, who will for a time enjoy this kind 
 of produce, at a price inferior to the charge of production ; the mer- 
 chants will gradually replace their dear-bought produce, by other of 
 equal quality, raised with superior intelligence ; and the consumer 
 will then reap the advantage of superior cheapness and multiplied 
 enjoyment, with no loss to any body; for the merchant will both buy 
 and sell cheaper ; and human industry will have made a rapid stride, 
 and opened a new road to affluence and abundance.* 
 
 that every operation, designed to procure this kind of benefit, must occasion to 
 one party a loss, equivalent to the gain of another. 
 
 He likewise refers this imaginary difference between the principle of public 
 and of private wealth to this circumstance ; that the accumulation of capital, 
 which is an advantage to individual, is detrimental to national wealth, by ob- 
 structing the consumption, which is the stimulus of industry. He has fallen into 
 the very common error of supposing, that capital is, by accumulation, withdrawn 
 from consumption ; whereas, on the contrary, it is consumed, but in a re-produc- 
 tive way, and so as to afford the means of a perpetual recurrence of purchase, 
 which can occur but once in the case of unproductive consumption. Vide Book 
 III. infra. Thus it is, that a single error in principle, vitiates a whole work. 
 The one in question is built upon this unsound foundation ; and, therefore, serves 
 only to multiply, instead of reducing the intricacies of the subject, (a) 
 
 * The vast means at the disposal of Napoleon might have been successfully 
 directed to this grand object, and then he would have left the reputation of hav- 
 ing contributed to civilize, enrich, and people the world ; and not of having been 
 
 (a) The error of Lauderdale is analogous to that of Sismondi and of Malthus , 
 and arises from the notion, that an extension of productive power makes an 
 extension of unproductive consumption necessary ; whereas, it is thereby ren- 
 dered possible, or at the utmost probable only. The state, as well as its sub- 
 jects, may consume in a way conducive to the further extension of productive 
 power, and the state, like an individual, is powerful and wealthy in proportion 
 to the extent of the productive sources in its possession, and to tr e feitility uf 
 those sources. T. 
 
 26* 2O 
 
300 ON DISTRIBUTION. Boos 
 
 CHAPTER IV. 
 
 OF NOMINAL VARIATION OF PRICE, AND OF THE PECULIAR VALUE 
 OF BULLION AND OF COIN. 
 
 IN treatino- of the elevation and depression of the price of com- 
 modities, although value has been expressed in money, no notice 
 has been taken of the value of money itself; which, to say the truth, 
 plays no part in real, or even in relative variation of the price of 
 other commodities. One product is always ultimately bought with 
 another, even when paid for in the first instance m money. When 
 the price of wool is doubled, it is purchased with twice the quantity 
 of every other commodity, whether the exchange be made directly, 
 or through the intermediate agency of money. The baker, who 
 could have bought 1 Ib. of wool with 6 Ibs. of bread, or, with its 
 price in money, say 20 cents, will be obliged to sacrifice 12 Ibs. of 
 bread to obtain the 40 cents necessary to purchase 1 Ib. of wool at 
 its advanced price. But, if it be proposed to compare together the 
 relative value, not of stockings, meat, sugar, wool, bread, &c., but of 
 any one of those articles with that of money itself, we shall find, that 
 money, like all other commodities, may undergo, and often has, in 
 fact, undergone a real variation ; that is to say, a variation in the 
 cost of its production ; and a relative one, that is to say, a change of 
 value, in comparison with other products. 
 
 Since the discovery of the American mines, silver, having fallen 
 to about a fourth of its former value, has lost three-fourths of its 
 relative value to all other products, whose price has, meanwhile 
 remained stationary; as to that of corn, for instance ; consequently, 
 one must give 4 oz. of silver for 1 seller (about 43 bushels) of wheat, 
 which, in the year 1500, was to be had for 1 oz. or thereabout. A 
 commodity, which, since that period, may have fallen to half its 
 price, while silver was falling to one-quarter, will, therefore, have 
 doubled its relative value to silver, for this commodity then cost 1 
 oz., and would now be worth 4 oz. of silver, had it not fallen itst;lf 
 in value; but having itself lost one-half its value, it is sold for but 2 
 oz. ; that is to say, for twice as much silver as at the former period. 
 
 Such is the effect of real and of relative variation in the price of 
 silver. But, independently of these variations, there have been vast 
 alterations in the denomination given, at different periods during 
 the interim, to the'same quantity of pure metal, which should make 
 us place very little reliance on the accuracy of our estimate of real 
 uul relative variation. 
 
 In 1514, an ounce of silver would purchase 1 setter of wheat, 
 
 iis scourge and devastator. When the Barbary shore shall be lined with peace- 
 ful, industrious, and polished inhabitants, the Mediterranean will be an immense 
 lake, furrowed by the commerce of the wealthy nations, peopling its shores on 
 rvery side. 
 
CHAP. IV. ON DISTRIBUTION. 307 
 
 which is now worth 4 oz. ; this was a relative variation of silver to 
 wheat. This quantity of silver then was denominated 30 sous ;* 
 and, had the same quantity of silver still preserved the same denom- 
 ination, 4 oz. would now be called 120s. or 6/r. Thus, wheat at 6 
 fr. the setier would have risen in relation to silver, or silver have 
 fallen in comparison with wheat. There would, however, have 
 been no nominal variation. But 4 oz. of silver are now denominated 
 24 fr. instead of Gfr. ; so that there has been a nominal as well as a 
 relative variation, a mere verbal alteration. The real and relative 
 variation has been in the ratio of 4 to 1 ; but the nominal value of 
 money has declined in the ratio of lt> to 1, since 1514. 
 
 It i*s obvious, therefore, that one cannot form an idea of the value 
 of a commodity from its estimate of money price, except during a 
 space of time, and within a space of territory, in which neither the 
 denomination of the coin, nor the value of its material, has under- 
 gone any change ; else the valuation will be merely nominal, and 
 convey no fixed idea of value whatever. To say that the setter of 
 wheat sold for 30 sous in 1514, without explaining the then value 
 of 30 sous, is giving us a price, that conveys either no idea at all, or 
 a fallacious one, if it be meant to affirm, that the setier of wheat was 
 then worth 30 sous of present money. In comparing values, the 
 denomination of coin is useful only inasmuch as it designates the 
 quantity of pure metal contained in the sum specified. It may serve 
 to denote the quantity of the metal ; but never serve as an index of 
 value at any distance of time, or of place. 
 
 It is scarcely necessary to point out the effects of an alteration in 
 the quantity of metal, to 'which a fixed denomination is given, upon 
 national and individual property. Such an expedient can neither 
 increase nor diminish the real, or even the relative value, either of 
 the metal or of any other commodity. If 1 oz. of silver be struck 
 into two crowns instead of one, two crowns will be paid wherever 
 one was given before ; that is to say, 1 oz. of silver will be given in 
 either case : so that the value of silver will not have varied. But 
 when a sale has been made on credit for a given time, and payment 
 stipulated in crowns, the seller may be liable to receive ^ oz. in each 
 crown, instead of 1 oz. according to the intention of the contract- 
 ing parties. This transfer of the old denomination to a different 
 portion of metal will, therefore, unjustly benefit the one party, to 
 the injury of the other. For every profit to one individual is a loss 
 to another, unless it arise from actual production, or from greater 
 economy in the charges of production, which is equivalent to actual 
 production. 
 
 With regard to the peculiar and inherent value of bullion or of 
 money, it originates, like that of all other commodities, in the uses 
 to which it is applicable, as we have before observed. The degree 
 of that value is greater or less, according as its use is more or less 
 
 * Traite Historique, Leblanc : and, Essai sur les Monnaies, by Dupre de 
 Saint Maur 
 
308 ON DISTRIBUTION. BOOK II. 
 
 extensive, its employment more or less necessary, and its supply 
 more or less abundant. . 
 
 Gold and silver, though the most common materials of money 
 can not act as such while in an uncoined state ; they are then not 
 money, but the raw material of money. In the present condition 
 of society, every individual can not turn bullion into com at his 
 pleasure; and, therefore, coin may be of considerably higher value 
 than bullion of the same standard of weight and quality, if the de- 
 mand for coin be more urgent than the demand for bullion. But 
 bullion can never be perceptibly higher in value than com of equal 
 weight and quality; because the latter may be readily converted 
 into & the former. The reason why coin so seldom much exceeds 
 bullion in value is, that the avidity of governments, which are 
 monopolists of the business of coinage, to profit by the difference 
 between coin and bullion, has led them into the error of overstock- 
 ing the market with their manufacture of coin. Thus it is, that coin 
 isnever depressed in value below, and rarely much elevated above 
 bullion. Wherefore, the detail of the circumstances, that have 
 hitherto been, or may hereafter be, the occasion of variations in the 
 intrinsic value of gold or silver bullion, will serve at the same time 
 to explain the variations of their value in the peculiar character of 
 money. 
 
 It has already been noticed,* that the ten-fold supply of those 
 metals, poured into the market in consequence of the discovery of 
 America, did not effect a corresponding reduction of their value to 
 ,-V of what it had before been. For, the demand for them was at 
 the same period greatly enlarged by the contemporaneous increase 
 of commerce, manufacture, and luxury. All the leading states of 
 Europe had before been wholly destitute of industry : the circulation 
 of products, whether as capital or for mere consumption, was very 
 trifling in amount. Industry and productive energy made a sudden 
 and simultaneous effort all over Europe ; and the commodity em- 
 ployed as the material of money, the agent of exchange, could not 
 but come more in demand, upon the greater extent and frequency 
 of mutual dealings. About the same time, the new route to the 
 Eastern ocean, by rounding the Cape of Good Hope, was discover- 
 ed, and drew abundance of adventurers into that direction; the 
 products of the East obtained a more general consumption; but 
 Europe, having no other products of her own to offer in exchange, 
 was compelled to give the precious metals, of which India absorbed 
 an immense quantity. Nevertheless, the multiplication of products 
 tended to the increase and diffusion of wealth ; mere higlers grew up 
 into opulent merchants, and the fishing, towns of Holland already 
 reckoned amongst their citizens individuals worth 200,000 dollars. 
 The costly objects, that none bat princes could before aspire to 
 possess, became attainable by the commercial classes ; and the in 
 t.'reasing taste for plate and expensive furniture created a greater 
 
 * Supra, book i. chap. 21. sect. 7. 
 
CHAP IV. ON DISTRIBUTION. 309 
 
 demand for gold and silver to be employed on those objects. 
 Beyond all question, the value of those metals would have prodi- 
 giously advanced, had not the mines of America been then oppor- 
 tunely discovered. 
 
 Their discovery completely turned the scales. The rapid increase 
 of the use and demand for gold and silver was far more than coun- 
 terbalanced by the increasing supply, which completely glutted the 
 market. Hence the great reduction of their value, which has been 
 before observed upon, and which would have been far greater still, 
 but for the concurrence of the circumstances just stated, whereby the 
 value of silver, or its price in commodities at large, was checked in 
 its fall, and limited to one-fourth, instead of being depressed in equal 
 ratio with the increased supply, that is to say, to one-tenth. 
 
 This counteracting force must have escaped the penetration of 
 Locke, or he would not have said, that the tenfold increase of silver, 
 since the year 1500, necessarily raised the price of commodities in 
 a tenfold degree. The few instances he might have cited in support 
 of his position, were by no means sufficient to establish its accuracy ; 
 for a far greater number and variety of products might be mentioned, 
 for which, as well as for silver, the demand compared with the sup- 
 ply had increased in the ratio of 2$ to 1, between 1500 and the date 
 of the work of Locke in question.* But, although this may be true 
 of some particular products, it may not be so of abundance of others, 
 for some of which the demand has not advanced at all since 1500, 
 while the supply of others has kept pace with the progressive 
 demand, and consequently the ratio of their value remained station- 
 ary, with the exception of trifling temporary variations arising from 
 causes of a nature wholly distinct ; which, by the way, should teach 
 us the necessity, in this science, of submitting insulated facts to the 
 test of reasoning : for fact will not subvert theory, unless the whole 
 of the facts applicable be taken into consideration, as well as the 
 whole of the circumstances, that may vary the nature of those facts 
 which is hardly possible in any case. 
 
 * The increased intensity of the demand for silver compared with its supply, 
 consequent upon the discovery of America, is stated at 2 to 1, because, but 
 for this increase of demand, the tenfold supply would have reduced its value to 
 one-tenth of what it had been previously to that event, and given to 100 oz. the 
 value of 10 oz. only. But 100 oz. were only reduced to one-fourth of their 
 former value, i. e. to the value of 25 oz. ; which bears to 10 oz. the ratio of 24 
 to 1. This could not have been the case, unless the demand for silver, compared 
 with the supply, had advanced in that proportion. But the supply having 
 increased tenfold in the same interval, if we would find the ratio of the actual 
 increase of the demand for silver, whether for the purposes of circulation, of 
 luxury, or of manufacture, since the first discovery of the American mines, we 
 must multiply 2j by 10, which will give 25. And probably this estimate will 
 not exceed the truth, although 25 times may seem a prodigious advance. How- 
 ever, it would doubtless have been infinitely less considerable, but for the in- 
 flux of supply from America; for the excessive dearness of silver would have 
 greatly curtailed the use of it. Silver plate would probably be as rare as gold 
 plate is now ; and silver coin would be less abundant, because it would go fiir 
 ther, and be of higher value 
 
310 ON DISTRIBUTION. BOOK IL 
 
 The writers of the Encyclopedic have fallen into the same error, 
 in stating,* that a household establishment, wherein the silver plate 
 should not have varied in quantity or quality from the middle of the 
 sixteenth century to the present time, would be but one-tenth as rich 
 in plate now as at the former period. Whereas, its comparative 
 wealth would be reduced to one-fourth only; since, although the 
 increase of supply has depressed that value to AV, the increase of 
 demand, on the other hand, has raised it to r<nr.f 
 
 It is deserving of attention, that the major part of the coin is in 
 constant circulation, in the appropriate sense of the word, as defined 
 above. In this respect it differs from most other commodities; for 
 they are in circulation only so long as they are in the hands of the 
 dealers, and retire from it as soon as transferred to the consumer. 
 Money, even when employed as capital, is never desired as an object 
 of consumption, but merely as one of barter; every act of purchase 
 is an offer of money in barter, and a furtherance of its circulation. 
 The only part withdrawn from circulation is what may be hoarded 
 or concealed, which is always done with a view to its re-appearance. 
 Gold or silver, in the shape of plate, embroidery, or jewellery, is 
 in circulation only while in quest of, or in readiness for a purchaser; 
 Mrhich it ceases to be, when it reaches the possession of the con- 
 
 sumer. 
 
 The general use of silver amongst all the civilized nations of the 
 world, coupled with its great facility of transport, makes it a commo- 
 dity of such extensive demand, that none but a very large influx of 
 fresh supply can sensibly affect its value. Thus, when Xenophon, 
 in his essay on the revenues of Athens, urges his countrymen to 
 give more assiduous attention to the working of the mines of Attica 
 by the suggestion, that silver does not, like other commodities! 
 
 dine in value with the increase in quantity, he must be understood 
 to say, that it does not perceptibly decline. Indeed, the mines of 
 Attica were too inconsiderable in their product, to influence the 
 value of the stock of that metal then existing in the numerous arid 
 flourishing states upon the borders of the Mediterranean Sea, and in 
 interL Indm ' be ! we ? n *" which and Greece the commercial 
 SUffiCientlaCtKe ' t0 kee the Iue of tor sta- 
 
 mrv ' 
 
 y " market * The driblet of 
 
 trickling into an ocean of 
 
 * Art. Monnuicx. 
 
 ^^ >- no effect upon 
 
 have perceived, that it is demand t^af maTes n^T seems " ot to 
 
 appreciation. A diminution of the dema fr r pr I ductl k ve n a enc >' an object of 
 those mines out of work, of which thtTJ 1 T bulll n Would throw alj 
 
 "<e charges of kinging the ^uct to rLaTet?' f P * WaS n0t a< ^ Uate * 
 
CHAP. IV. ON DISTRIBUTION. 31 1 
 
 supply would not have lowered its value ; for the strong impulse of 
 the human race, towards the multiplication of their species to a level 
 with the means of subsistence, would have made the demand keep 
 pace with the increase of supply. The tenfold multiplication of 
 corn would be followed by a tenfold increase of the demand for it ; 
 inasmuch as it would engender new mouths to consume it ; and corn 
 would maintain nearly the same average of relative value to other 
 commodities. 
 
 This will explain, why the variations of the value of silver aro 
 both slow in operation, and considerable in amount. Their slow- 
 ness is owing to the universality of the demand, which prevents 
 a moderate variation of supply from being sensibly felt ; and their 
 magnitude to the limited uses of the metal, which prevent the in- 
 crease of demand from keeping pace with a rapid increase of supply 
 
 Silver has utility for the purposes of plate, furniture, and orna- 
 ment, as well as for those of money ; and is the more copiously 
 employed on those objects, in proportion to the degree of national 
 wealth. Its use in the peculiar character of money is proportionate 
 to the quantity of moveable and immoveable objects of property, thai 
 there may be to be circulated ; wherefore, coin would be more abun- 
 dantly required in richer than in poorer nations, were not the follow- 
 ing circumstances to control this general rule. 
 
 1. The superior rapidity of circulation, both of money and com- 
 modities in a state of national opulence, which makes a smaller 
 quantity of money requisite, in proportion to the total of commer- 
 cial dealings. The same sum in a rich country will effect perhaps 
 ten successive operations of exchange in the same space of time, as 
 one in a poor country.* Wherefore, the multiplication of commo- 
 dities to be circulated is not necessarily attended with a co-extensive 
 increase of the demand for money. The business of circulation is 
 extended ; but the agent of circulation becomes more active and 
 efficient. 
 
 2. In a state of national opulence, credit is a more frequent sub- 
 stitute for money. In Chap. XXII, of the preceding book, it has 
 been shown how a portion of the national money may be dispensed 
 with by the employment of convertible paper, without any resulting 
 inconvenience/)" By this expedient, the use of metal money, and, 
 consequently, the demand for silver for the purposes of money, is 
 considerably diminished. Nor is convertible paper the sole expe- 
 
 * In a poor country, after a dealer has disposed of his wares, he is sometimes 
 a long while before he can provide himself with the returns he has in view ; and, 
 during the interval, the money-proceeds remain idle in his hands. Moreover, 
 in a poor country, the investment of money is always difficult. Savings are 
 slow and gradual, and are seldom turned to profitable account, until after a lapse 
 of many years ; so that a great deal of money is always lying by in a state of 
 inaction. 
 
 f Ricardo, whom I look upon as the individual in Europe the best acquainted 
 with the subject of money, both in theor}' and in practice, has shown, in his 
 Proposal for an economical and secure Currency, that, when the good govern- 
 ment of the state may be safely reckoned upon, paper may be substituted for th 
 whole of a metallic money ; and a material possessed of no intrinsic value bv 
 
312 ON DISTRIBUTION. BOOK II. 
 
 dicnt of substitution amongst an industrious and commercial people ; 
 every kind of private obligations and covenants, as well as sales on 
 credit, transfers of money-credit, and even mere debtor and creditor 
 accounts current, have an effect precisely analogous. 
 
 Thus the necessity, and consequently the demand, for metal mo- 
 nev never advances in equal ratio with the progressive multiplica- 
 tion of other products; and it may be truly said, that the richer a 
 nation is, the smaller is the amount of its coin, in comparison with 
 other nations. 
 
 Were the quantum of the supply alone to determine the exchange- 
 able value of a commodity, silver would stand to gold in the ratio of 
 1 to 45 ; for silver and gold are produced by metallurgy as 45 to 1.* 
 But the demand for silver is greater than for gold ; its uses are both 
 far more genera] and far more various ; and thus its relative value 
 is prevented from falling lower than 1 to 15. 
 
 A portion of the demand for the precious metals is occasioned by 
 their gradual destruction by use; for, although less subject to decay 
 than most products, they are still perishable in a certain degree ; and 
 doubtless the wear, though slow, must be considerable upon the im- 
 mense quantity of gold and silver in constant use, as well in the 
 character of money, as in the various objects of spoons, forks, gob- 
 lets, dishes, and jewellery of all sorts. There is likewise a large 
 consumption in plating and gilding. Smith asserts, that the manu- 
 facturers of Birmingham alone, in his time, worked up annually, as 
 much as the worth of 50,000/. in these ways.f A further allowance 
 
 skilful management, be made to supplant a dear and cumbrous one, whose me- 
 tallic properties are never called into play by the functions of money. 
 
 * Humboldt. Essai Pol. sur la Nouvelle Espagne, 8vo. torn. iv. p. 222. 
 
 t Wealth of Nations, book i. c. 11. The manufacturing 1 consumption of Bir- 
 mingham and other towns has greatly increased since the date of that work.(l) 
 
 (1) Mr. Jacobs, in his work on the precious metals, to which we have already 
 had occasion to refer, has shed much light on the consumption, as well as on 
 the production, of gold and silver, both before and since the discovery of the 
 American continent. His twenty-sixth chapter is devoted to an inquiry into the 
 consumption of the precious metals from 1810 to 1830. This chapter abounds 
 with highly instructive and curious details, which it would be here impossible 
 to present, but which furnish the grounds of the following statements, also taken 
 from the same chapter, and which fully demonstrate the great increase in the 
 consumption of gold and silver, in what our author, in this note, calls " the 
 manufacturing consumption," since the date of Dr. Adam Smith's work on the 
 Wealth of. Nations, to which he refers. 
 
 According, then, to Mr. Jacobs, the annual consumption of the precious 
 metals, from 1810 to 1830, in their application to ornamental and luxurious pur- 
 joses, he estimates as follows : 
 
 In Great Britain, .... 2,457,221*. 
 
 France, 1,200,000 
 
 Switzerland 350,000 
 
 The rest of Europe, . . 1,605,490 
 
 America, 280,630 
 
 Making the whole amount, .... 5,893,34U. equal to 28,288,036 dollars. 
 
 AMERICAN EDITOR. 
 
CHAP. IV. ON DISTRIBUTION. 313 
 
 must be made for the consumption of embroidery, tissue, book-bind- 
 ing, &c,, all which may be set down as finally lost to other purposes. 
 Add to this the buried hoards, the knowledge of which dies with 
 the possessor, and the quantity lost by shipwreck. 
 
 If the nations of the world go on increasing their wealth, as most 
 of them certainly have done for the last three centuries, their want 
 of the precious metals will progressively advance, as well in conse- 
 quence of the gradual wear, which will be greater in proportion to 
 their increasing use, as of the multiplication and increased aggregate 
 value of other commodities, which will create a larger demand for 
 the purposes of transfer and circulation. If the produce of the 
 mines do not keep pace with the increasing demand, the precious 
 metals will rise in value, and less of them be given in exchange for 
 other products in general. If the progress of mining shall keep 
 pace with the advances of human industry, their value will remain 
 stationary, as it seems to have done for the last two centuries ; during 
 which the demand and supply have regularly advanced together.* 
 
 * We are assured by Humboldt, that the produce of the mines of Mexico has, 
 in the last 100 years, been increased in the ratio of 110 to 25 ; also, that such is 
 the abundance of silver ore, in the chain of the Andes, that, reckoning the num- 
 ber of veins either worked superficially, or not worked at all, one would be led 
 to imagine, that Europe has hitherto had a mere sample of their incalculable 
 stores. Essai Pol. sur la N. Espagne, 8vo. torn. iv. p. 149. 
 
 The very slight and gradual depreciation of gold and silver, effected by their 
 immense and increasing annual supply, is one amongst many proofs of the rapid 
 and general advance of human wealth, whereby the demand is made to keep 
 pace with the supply. Yet I am inclined to think, that their value, after remain- 
 ing nearly stationary for a century, has within the last thirty years begun again 
 to decline. The setier of wheat, Paris measure, which was for a long time, on 
 an average, sold for 4 oz. of silver, has now risen to 4 oz., and rents are 
 raised upon every renewal of lease. All other things seem to be rising in the 
 like proportion : which indicates, that silver is undergoing a depreciation of rela- 
 tive value. (1) 
 
 (1) in a former note we referred to the great decline, since the year 1809, in 
 the productiveness of the whole mines, both in this and in the eastern continent, 
 on the authorities which Mr. Jacobs has given, in his learned work on the pre- 
 cious metals. From the same work, we here extract his concluding observations 
 of the twenty-sixth chapter, in relation to the stock of coin now in existence, 
 by which it will appear, that during the twenty years from 1810 to 1830, 
 the diminution of gold and silver coin amounted to nearly one-sixth part of the 
 whole stock. 
 
 " We have estimated," says Mr. Jacobs, " the stock of coin in existence at 
 the end of the year 1809 to have been 380 million pounds ; and the additions 
 made to it between that period and the year 1829, at the rate of 5,186,800 
 pounds annually, would make it 103,736,00"0 pounds. 
 From the 380,000,000 of coin left in 1809, we deduct for loss 
 by abrasion, at the rate of 1 part in 400 in each year, which 
 in the 20 years would amount to 18,095,220^., thus leaving 
 
 in 1829, 361,904,780*. 
 
 To which may be added the supply from the mines, .... 103,736,000 
 
 Thus showing . 465,640,780: 
 
 27 2 P 
 
3]4 ON DISTRIBUTION. BOOK II. 
 
 And, if the supply of those metals outrun the progress of general 
 wealth, as it seems to be doing at this moment, they will fall in re- 
 spect to other commodities at large. Metal-money will thereby be 
 rendered more cumbrous; but the other uses of gold and silver will 
 be more widely diffused. 
 
 It would be a long and tedious task to expose ah the ialse reason- 
 in^ and erroneous views, originating in the perpetual confusion of 
 the different kinds of variation, that it has cost so much time to ana- 
 lyze and distinguish. It is enough to put the reader into a condition 
 himself to discover their fallacy, and estimate the tendency of mea- 
 sures avowedly directed to influence public wealth, by operating 
 upon the scale of value. 
 
 CHAPTER V. 
 
 OP THE MANNER IN WHICH REVENUE IS DISTRIBUTED AMONGST SOCIETY. 
 
 THE causes, which determine the value of things, and \vhich ope 
 rate in the way described in the preceding chapters, apply without 
 exception to all things possessed of value, however perishable; 
 amongst others, therefore, to the productive service yielded by in- 
 dustry, capital, and land, ki a state of productive activity. Those, 
 who have had at their disposal any one of these three sources of 
 
 From which must be deducted that converted 
 
 into utensils and ornaments, .... 5,612,611 
 And that transferred into Asia, . . . 2,000,000 
 
 7,612,611 annually. 
 Or in twenty years, 152,252,220 
 
 This would show the estimated amount at the end of 1829 to be, 313,888,5601 
 
 Or less than at the end of 1809, 66,61 1,4401. 
 
 Or a diminution of nearly one-sixth part in the twenty years."' 
 
 During the period we have been considering, and indeed for many years 
 before, the comparative value of gold to silver had scarcely experienced any 
 
 ation According to the view here taken, the amount of gold applied to 
 purposes of luxury had far exceeded that of silver, perhaps in the prouortion of 
 
 to one; but, on the other hand, the treasure transferred to India and China 
 has consisted chiefly of silver, and much more gold had been brought to Europe 
 from those countries than had been conveyed to them. It has before (twenty- 
 litlh chapter of this inquiry) been attempted to be shown that the durability of 
 foW in com is in the proportion of four to one greater than that of silver". It 
 ma, too, been shown that the recently increased produce of the mines of Russia 
 has consisted chiefly of gold These circumstances, on which our limits do not 
 adm,t of enlargement might be shown to be sufficient to account for the equable 
 rateof value which has been preserved between the two metals during I long 
 
 AMERICAN EDITOR. 
 
CHAP. V. ON DISTRIBUTION. 313 
 
 production, are the venders of what we shall here denominate pro- 
 ductive agency; and the consumers of its product are the purchasers. 
 Its relative value, like that of every other commodity, rises in direct 
 ratio to the demand, and inverse ratio to the supply. 
 
 The wholesale employers of industry, or adventurers, as they 
 have been called, are but a kind of brokers between the venders and 
 the purchasers, who engage a quantum of productive agency upon a 
 particular product, proportionate to the demand for that product.* 
 ' The farmer, the manufacturer, the merchant, is constantly occupied 
 in comparing the price, which the consumer of a given product will 
 and can give for it, with the necessary charges of its production ; if . 
 that comparison determine him to produce it, he is, the organ of a 
 demand for all the productive agency applicable to this object, and 1 
 Uhus furnishes one of the bases of the value of that agency. 
 
 On the other hand, the agents of production, animate and inani- 
 mate, land, capital, and human labour, are supplied in larger or 
 smaller quantity, according to the action of the various motives, that 
 will be detailed in the succeeding chapters; thus forming the other 
 bases of the value at which their agency is rated.f 
 / Every product, when completed, repays by its value the whole 
 / amount of productive agency employed in its completion. A great 
 part of this agency has been paid for before the entire completion of 
 1 the product, and must have been advanced by somebody: other part 
 \ has been remunerated on its completion; but the whole is always 
 paid for ultimately out of the value of the product. 
 
 By way of exemplifying the mode, in which the value of a pro- 
 duct is distributed amongst all that have concurred in its produc- 
 tion, let us take a watch, and trace from the commencement, the 
 manner in which its smallest parts have been procured, and in which 
 their value has been paid to every one of the infinite number of 
 concurring producers. 
 
 In the first place we find, that the gold, copper, and steel, used in 
 its construction, have been purchased of the miner, who has received 
 in exchange for these products, the wages of labour, interest of capi- 
 tal, and rent paid to the landed proprietor. 
 
 The dealers in metal, who buy of the original producer, re-sell to 
 those engaged in watchmaking, and are thus reimbursed their ad- 
 vance, and paid the profits of their business into the bargain. 
 
 * It has been already seen, that the demand for every product is great, in 
 proportion to the degree of its utility, and to the quantity of other products pos- 
 sessed by others, and capable of being given in exchange. In other words, the 
 utility of an object, and the wealth of the purchasers, jointly determine the extent 
 of the demand. 
 
 fin digesting the plan of this work, I hesitated for a long time, whether or 
 no to place the analysis of value before that of production ; to explain the nature 
 of the quality produced, before entering upon the investigation of the mode of 
 its production. But it appeared to me, that to make the foundation of value 
 intelligible, it was necessary to have a previous knowledge of wherein the cost 
 of production consists ; and for that purpose to have a just and enlarged 'oncep- 
 tion of the agents of oroduction, and of the service they are capable of yielding 
 
ON DISTRIBUTION. BOOK II. 
 
 interest upon that advance ; and pays, besides, the wages of laboui 
 hitherto incurred. This very complex operation of payment may- 
 be dflbctcd by a single sum, equal to the aggregate of those united 
 values. In the same way, the watchmaker deals with the me- 
 chanic's that furnish the diaf-plate, the glass, &c., and such ornaments 
 as he may think fit to add, diamonds, enamel, or any thing he 
 
 pleases. 
 
 Last of all, the individual purchaser of the watch for his own use 
 refunds to the watchmaker the whole of his advances, together with 
 interest on each part respectively, and pays him besides, a profit on 
 his personal skill and industry. 
 
 We find, then, that the total value of the watch has been shared 
 amongst all its producers, perhaps long before it was finished; and 
 those producers are much more numerous than I have described or 
 than is generally imagined. Among them, probably, may be found 
 the unconscious purchaser himself, who has bought the watch, and 
 wears it in his fob. For who knows but he may have advanced his 
 own capital to a mining adventurer, or a dealer in metal ; or to the 
 director of a large factory ; or to an individual who acts himself in 
 none of these capacities, but has underlent to one or more such per- 
 sons a part of the funds he has borrowed at interest from the iden- 
 tical consumer of the watch ? 
 
 It has been observed, that it is by no means necessary for a pro- 
 duct to be perfected for use, before the majority of its concurring 
 producers can have been reimbursed that portion of value they have 
 contributed to its completion ; in a great many cases, these producers 
 have even consumed their equivalent long before the product has 
 arrived at perfection. Each successive producer makes the advance 
 to his precursor of the then value of the product, including the 
 labour already expended upon it. His successor in the order of 
 production, reimburses him in turn, with the addition of such value 
 as the product may have received in passing through his hands. 
 Finally, the last producer, who is generally the retail dealer, is com- 
 pensated by the consumer for the aggregate of all these advances, 
 plus the concluding operation performed by himself upon the 
 product. 
 
 The whole revenues of the community are distributed in one and 
 the same manner. 
 
 That portion of the value produced, which accrues in this manner 
 to the landed proprietor, is called the profit of land; which is some- 
 limes transferred to the farmer, in consideration of a fixed rent. 
 
 the profit relinquished on condition of a stipulated interest 
 
 The portion assigned to the mere mechanic or labourer is called 
 
CH\P. V. ON DISTRIBUTION. 317 
 
 the profit <//* labour ; which is sometimes relinquished for certain 
 wages* 
 
 Thus, each class receives its respective share of the total value 
 produced ; ana this share composes its revenue. Some classes re-y 
 ceive their share piecemeal, and consume as fast as they receive 
 it ; and these are the most numerous, for they comprise most of the 
 labouring classes. The land-holder and the capitalist, who do not 
 themselves turn their means to account, receive their revenue period- 
 ically, once or twice, or perhaps four times a year, according to the 
 terms of the contract with the transferee. But, in whatever manner 
 a revenue may be derived, it is always analogous in its nature, and 
 must oiiginate in actual value produced. Whatever value an indi- 
 vidual receives in satisfaction of his w r ants, without having either 
 directly or indirectly concurred in production of some kind or other, 
 must be wholly either a gratuitous gift or a spoliation ; there is m 
 other alternative. 
 
 It is in this way, that the total value of products is distributed 
 amongst the members of the community; I say, the total value, 
 because such part of the whole value produced, as does not go to one I 
 of the concurring producers, is received by the rest. The clothier ' 
 buys wool of the farmer, pays his workmen in every department, 
 and sells the cloth, the result of their united exertion, at a price that 
 reimburses all his advances, and affords himself a profit. He never 
 reckons as profit, or as the revenue of his own industry, any thing 
 more than the net surplus, after deducting all charges and outgoing ; 
 but those outgoings are merely an advance of their respective reve- 
 nues to the previous producers, which are refunded by the gross 
 value of the cloth. The price paid to the farmer for his wool, is the 
 compound of the several revenues of the cultivator, the shepherd, 
 and the landlord. Although the farmer reckons as net produce only 
 the surplus remaining after payment of his landlord and his servants 
 in husbandry, yet to them these payments are items of revenue, 
 rent to the one, and wages to the other ; to the one, the revenue of 
 his land, to the other, the revenue of his industry. The aggregate 
 of all these is defrayed out of the value of the cloth, the wholef of 
 which forms the revenue of some one or other, and is entirely ab- 
 sorbed in that way. 
 
 * In the above instance of the watch, many of the artisans are themselves the 
 adventurers in respect to their own industry; in which case their receipts are 
 profits, not wages. If the maker exclusively of the chain himself, buys the 
 steel in its rude state, works it up, and sells the chain on his own account, he is 
 the adventurer in respect to this particular part of the manufacture. A flax- 
 spinner buys a few penny-worth of flax, spins it, and converts her thread into 
 money. Part of this money goes to the purchase of more flax; this is hei eap- 
 ital ; another portion is spent in satisfying- her wants ; this is the joint profit of 
 her industry and her little capital, and forms her revenue. 
 
 f Even that portion of the gross value, which is absorbed in the maintenance 
 or restoration of the vested capital or machinery. If his works need repair.*,, 
 which are executed by the proper mechanic, the sum expended in them forma 
 the revenue of that mechanic, and is to the clothier a simple advance, which b 
 refunded, like any other, by the value of the product when completed. 
 
 27* 
 
3l8 ON DISTRIBUTION. BOOK II. 
 
 Whence it appears, that the term net produce applies only to the 
 
 individual revenue of each separate producer or adventurer in 
 
 industrv; but that the aggregate of individual revenue the total 
 
 evenue of the community, is equal to the gross produce of its land, 
 
 capital, and industry. Which entirely subverts the system of the 
 
 economists of the last century, who considered nothing but the net 
 
 produce of the land as forming revenue, and therefore concluded 
 
 that this net produce was all that the community had to consume , 
 
 instead of admitting the obvious inference, that the whole of what 
 
 * has been created, may also be consumed by mankind.* 
 
 If national revenue consisted of the mere excess of value produced 
 above value consumed, this most absurd consequence would be ine- 
 vitable, namely, that, where a nation consumes in the year the total 
 of its annual product, it will have no revenue whatever. Is a man 
 possessed of an income of 2000 dollars a year, to be said to have no 
 revenue, because he may think proper to spend the whole of it ? 
 
 The whole amount of profit derived by an individual from his 
 land, capital, and industry, within the year, is called his annual 
 revenue. The aggregate of the revenues of all the individuals, 
 whereof a nation consists, is its national revenue.f Its sum is the 
 gross value of the national product, minus the portion exported ; for 
 the relation of one nation, is like that of one individual to another. 
 The profits of an individual are limited to the excess of his income 
 above his expenditure, which expenditure, indeed, forms the reve- 
 nue of other persons, but, if those persons be foreigners, must be 
 reckoned in the estimate of the revenue of the respective nations 
 they may belong to. Thus, for instance, when a consignment of 
 ribbons is made to Brazil to the amount of 2000 dollars, and the 
 returns received in cotton, in estimating the resulting product to 
 France from this act of dealing, the export made to Brazil in pay- 
 ment of the cotton must be deducted. Supposing the investment of 
 ribbons to procure, say 40 bales of cotton, which, when they reach 
 France, will fetch 2400 dollars, 400 dollars only of that sum will 
 go to the revenue of France, and the residue to that of Brazil. 
 
 Did all mankind form but one vast nation or community, it would 
 be equally true in respect to mankind at large, as to the internal pro- 
 duct of each insulated nation, that the whole gross value of the 
 product would be revenue. But so long as it shall be necessary to 
 consider the human race as split into distinct communities, taking 
 
 * Part of the value created is due to natural agency, amongst which that of 
 land is comprised. But, as stated above in Book L, land is treated as a machine 
 or instrument, and its appropriator as the producer that sets it in motion; in like 
 rnanner as the productive quality of capital is said to be the productive quality 
 
 the capitalist to whom it belongs. Mere verbal criticism is of little moment, 
 when once the meaning is explained ; it is the correctness of the idea, and not 
 of the expression, that is material. 
 
 f The term national revenue, has been sometimes incorrectly applied to the 
 hnancinl receipts of the state. Individuals, indeed, pay their taxes out of their 
 cspective revenues; but the sum levied by taxation is not revenue, but rather a 
 'ax upon revenue, and sometimes unhappily upon capital too. 
 
CHAP. V. ON DISTRIBUTION 319 
 
 each an independent interest, this circumstance must be taken into 
 the account. Wherefore, a nation, whose imports exceed its ex- 
 ports in value, gains in revenue to the extent of the excess ; which 
 excess constitutes the profit of its external commerce. A nation 
 that should export to the value of 20,000 dollars, and import to the 
 value of 24,000 dollars wholly in goods, without any money passing 
 on either side, would make a profit of 4000 dollars, in direct contra- 
 diction to the theory of the partizans of the balance of trade.* 
 / The voluminous head of perishable products consumed within the 
 year, nay, often at the very moment of production, as in the case of 
 
 tall immaterial products, is nevertheless an item of national revenue. 
 For what are they but so many values produced and consumed in 
 the satisfaction of human wants, which are the sole characteristics 
 of revenue ? 
 
 The estimation of individual and of national revenue is made in the 
 same way, as that of every collection of values, under whatever 
 varieties of form ; as of the estate of a deceased person. Each pro- 
 duct is successively valued in money or coin. For instance, the 
 revenues of France are said to amount to 1300 millions of dollars 
 which by no means implies, that the commerce of France produces a 
 return of that amount in specie. Probably a very small amount of 
 specie, or none at all, may have been imported. All that is meant 
 by the assertion is, that the aggregate annual products of the nation, 
 valued separately and successively in silver coin, make the total 
 value above stated. The only reason of making the estimate in 
 money is, the greater facility acquired by habit of forming an idea 
 of the unchangeable value of a specific amount of money, than of 
 other commodities. Were it not for that facility, it woufd be quite 
 as well to make the estimate in corn ; and to say, that the revenues 
 of France amounted to 1,300,000,000 bushels of wheat, which at 
 one dollar the bushel, would make precisely the same amount. 
 
 Money facilitates the circulation from hand to hand of the values 
 composing both revenue and capital ; but is itself riot an item of 
 annual revenue, not being an annual product, but a product of 
 previous commerce or metallurgy, of a date more or less remote. 
 
 The same coin has effected the circulation of the former year, 
 possibly of the former century, and has all the while remained the 
 same in amount; nay, if the value of its material have declined in 
 the interim, the nation will even have lost upon its capital existing 
 under the form of money; just in the same way as a merchant 
 would lose upon the fall of price of the goods in his warehouses. 
 
 Thus, although the greater part of revenue, that is to say, of value 
 produced, is momentarily resolved into money, the money, the 
 quantity of silver coin itself, is not what constitutes revence ; reve- 
 nue is value produced, wherewith that quantity of silver coin has 
 
 * Their profit arises from increase of value effected by the transport upon 
 Doth the export and the import, by the time they have reached their destination 
 espectively. 
 
32() ON DISTRIBUTION. BOOK II. 
 
 n bought ; and, as that value assumes the form of money but for 
 a monS the same identical pieces of money are made use of many 
 Umc hi tl e course of a year, for the purpose of paying or receiving 
 specific portions of rev4nue. Indeed some portions of revenue 
 neve assume the form of money at all. The manufacturer that 
 boards his workmen himself, pays part of their wages in food; so 
 that this fai greater notion of the mechanic's revenue is paid, 
 received, and consumed, without having once taken the shape of 
 money, even for an instant. In the United States of America, and 
 in countries similarly circumstanced, it is not uncommon for the 
 colonist to derive from the produce of his own estate, food, lodging, 
 and raiment for the whole of his establishment; receiving and con- 
 suming his whole revenue in kind, without any intervention of 
 money whatsoever. 
 
 I think I have said enough to warn the reader against confound- 
 mo- the money, into which revenue may be converted, with revenue 
 itself; and to establish a conviction that the revenue of an indivi- 
 dual, or of a nation, is not composed of the money received in lieu 
 of the products of his or their creation, but is the actual product or 
 its value, which, by a process of exchange, may undoubtedly arrive 
 at its destination in the shape of a bag of crown pieces, or in any 
 ther shape whatsoever. 
 
 No value, whether received in the shape of money or otherwise, 
 can form a portion of annual revenue, unless it be the product, or 
 je price of a product, created within the year : all else is capital, 
 .5 property passing from one hand to another, either in exchange, as 
 -. gift, or by inheritance. For an item of capital, or one of revenue, 
 .nay be transferred or paid any how, whether in the shape of per- 
 tonal or real, of moveable or imir,<c veable property, or of money 
 But, no matter what shape it assume, revenue differs from capital 
 essentially in this, that it is the result or product of a pre-existing 
 source, whether land, capital, or industry. 
 
 It has with some been a matter of doubt, whether the same value, 
 which has already been received by one individual as the profit or 
 revenue of his land, capital, or industry, can constitute the revenue 
 of a second. For instance, a man receives 100 crow r ns in part of 
 his personal revenue, and lays it out in books ; can this item of 
 revenue, thus converted into books, and in that shape destined to his 
 consumption, further contribute to form the levenue of the printer, 
 bookseller, and all the other concurring agents in the production of 
 the books, and be by them consumed a" second time? The difficulty 
 may be solved thus. The value forming the revenue of the first 
 individual, derived from his land. Capital, or industry, and by him 
 consumed in the sftape of books, was not originally produced in that 
 form. There has been a double production : 1. Of corn perhaps by 
 the land and the industry of the farmer, which has been converted 
 into crown pieces, and paid as rent to the proprietor : 2. Of books by 
 the capital and industry of the bookseller. The two products have 
 I'een subsequently interchanged one for the other, arid consumed 
 
CHAP. VI. ON DISTRIBUTION. 321 
 
 each by the producer of the other : having arrived at the particular 
 form adapted to their respective wants. 
 
 So likewise of immaterial products. The opinion of the lawyer, 
 the advice of the physician, is t u s product of their respective talents 
 and knowledge, which are their peculiar productive means. If the 
 merchant have occasion to purchase their assistance, he gives for it 
 a commercial product of his own converted into money. Each of 
 them ultimately consumes his own revenue respectively, transformed 
 into the object best adapted to his peculiar occasions. 
 
 CHAPTER VI. i 
 
 OP WHAT BRANCHES OF PRODUCTION YIELD THE MOST LIBERAL RECOMPENSE 
 TO PRODUCTIVE AGENCY. 
 
 THE aggregate value of a product, in the way just described, 
 refunds to its different concurring producers the amount of their 
 advances, with the addition in most cases, of a profit, that constitutes 
 the ; r revenue. But the profits of productive agency are not of equal 
 amount in all its branches ; some yielding but a very scanty revenue 
 for the land, capita], or industry, embarked in them ; while others 
 give ui exorbitant return. 
 
 True it is, that productive agents always endeavour to direct their 
 agency t o those employments, in which the profits are the greatest, arid 
 thus, by their competition, have as much tendency to lower price, as 
 demand has to raise it ; but the effects of competition can not always 
 so nicely proportion the supply to the demand, as in every case to 
 ensure an equal remuneration. Some kinds of labour are scantily 
 supplied, in countries where people are not accustomed to them ; and 
 capital is ofteh so sunk in a particular channel of production, that it 
 can never be transferred to any other from that wherein it was 
 originally embarked. Besides, the land may stubbornly resist that 
 kind of cultivation, whose products are in the greatest demand. 
 
 One cannot trace the fluctuation of profit on each particular occa- 
 sion. A wonderful change may be effected by a new invention, a 
 hostile invasion, or a siege. Such partial circumstances may influence 
 or derange the operation of general causes, but can not destroy their 
 general tendency. No dissertation, however voluminous, could be 
 made to embrace every individual circumstance, that by possibility 
 may influence the relative value of objects ; but one may specify 
 general causes, and such as have an uniform activity; thereby 
 enabling every one, \\hen the particular occasion may present itself, 
 to estimate the effect produced by the operation of partial and Iran 
 sicnt circumstances. 
 
 2Q 
 
J2 o ON DISTRIBUTION. BOOK n 
 
 It may appear extraordinary at first sight, but will on inquiry be 
 found generally true, that the largest profit is made, not on the 
 dearest commo'dities or upon those which are least indispensable, but 
 rather on those, which are the most common and least to be dis- 
 pensed with. In fact the demand for these latter is necessarily per- 
 manent; for it is stimulated by actual want, and grows with every 
 increase of the means of production ; inasmuch as nothing tends to 
 increase population more, than providing the means of its subsistence. 
 The demand for superfluities, on the contrary, does not expand with 
 the increased power of producing them. An extraordinary run, 
 which, by the way, can never take place but in large towns, may 
 raise the current'considerably above the natural price ; that is to 
 say, above the actual cost of production ; or a change of fashion 
 may again depress it infinitely below that point. Superfluities 
 are, after all, but objects of secondary want even to the ricli 
 themselves; and the demand for them is limited to the very 
 small number of persons that can indulge in them. YiJ^h^l^-S^Si 
 calamity obliges individuals to reduce their expenditure7*wlierrSeir 
 revenues are" curtailed by the ravages of war, by taxation, or by 
 natural scarcity, the first items of retrenchment are always the arti- 
 cles of least necessary consumption. And this may serve, perhaps, 
 to explain, why the productive agency directed to the raising of 
 superfluities, is generally worse paid than that otherwise employed. 
 
 I say generally, for it is possible enough that, in a great metropolis, 
 where the demand for luxuries is more urgent than elsewhere, and 
 the dictates of fashion, however absurd, more implicitly obeyed than 
 the eternal laws of nature ; where a man will, perhaps, be content 
 to lose his dinner, so he may appear in the evening circle in embroi- 
 dered ruffles, it is possible, that in such a place the price of the gew- 
 gaws may sometimes very liberally reward the labour and capital 
 devoted to their production. But, except in such particular cases, 
 balancing one year's profits with another, and allowing for contin- 
 gent losses, it has been ascertained, that the adventurers in the 
 production of superfluities make the most scanty profits, and that 
 their workmen are the worst paid. The manufacturers of the finest 
 laces in Normandy and Flanders are a very indigent set of people; 
 and at Lyons, the workers of gold-embroidery are absolutely clothed 
 in rags. Not but that very considerable profits have occasionally 
 been derived from such articles. A hat-maker has been known to 
 make a fortune by a fancy hat; but, taking all the profits made on 
 superfluities, and deducting the value of goods remaining unsold, or, 
 (hough sold, never paid for, we shall find that this class of products 
 
 lords, on the whole, the scantiest profit. The most fashionable 
 tradesmen are oftenest in the list of bankrupts. 
 
 Commodities of general use are attainable by a greater number of 
 
 ions and are in demand with almost every class of society. The 
 
 handelicr is to be found only in the mansions of the rich ; but the 
 
 ncanest cottage is furnished with the convenience of a candlestick: 
 
CHAP. VI. ON DISTRIBUTION. 323 
 
 the demand for candlesticks is, therefore, regular, and always more 
 brisk than that for chandeliers ; and, even in the most opulent coun- 
 try, the total value of the candlesticks is far greater than that of the 
 ^hnndeliers. 
 
 The articles of human food are unquestionably those of most 
 indispensable use ; the demand for them recurs daily ; and no occu- 
 pations are so regular as those which minister to human sustenance. 
 Wherefore, it is they that yield the most certain profit, notwithstand- 
 ing the effects of brisk competition.* The butchers, bakers, and 
 porkmen, of Paris, are pretty sure to retire with a fortune sooner or 
 later; indeed, I have it from pretty good authority in such matters, 
 that half the houses and real property sold in Paris and the environs, 
 is bought up by tradesmen in those lines. 
 
 It is on this account, that individuals and nations, who understand 
 their true interest, unless they have very cogent reasons for acting 
 otherwise, apply themselves in preference to the production of what 
 tradesmen call current articles. Mr. Eden, who, in 1706, negotiated 
 on the part of Great Britain the treaty of commerce concluded by 
 M. de Vergennes, went upon this principle, in stipulating the free 
 import of the common English earthenware into France. " The few 
 dozens of plates we may sell you," said the English agent, " will be 
 a poor set-off against the magnificent services of Sevres porcelain we 
 shall take of you." This appeal to the vanity of the French agent 
 was decisive. But, as soon as the English earthenware was admit- 
 ted, its lightness, cheapness, convenience and simplicity of form, 
 recommended it to the most moderate establishments; its regular 
 import, in a short time, amounted to many millions, and continued 
 increasing every year until the war. The exportation of Sevres 
 china, was a mere trifle in comparison. 
 
 The scale for current articles, besides being more considerable, is 
 likewise more steady. A tradesman is never long in disposing of 
 common linen shirting. 
 
 The examples I have selected from the class of manufacture might 
 easily be paralleled in the agricultural and commercial branches. A 
 much larger value is consumed in lettuces than in pine-apples, 
 throughout Europe at large ; and the superb shawls of Cachemere 
 are, in France, a very poor object in trade, in comparison with the 
 plain cotton goods of Rouen. 
 
 Wherefore, it is a bad speculation for a nation to aim at the export 
 of objects of luxury, and the import of objects of general utility. 
 France supplies Germany with fashions and finery, which very few 
 persons can make use of; and Germany makes the return in tapes 
 
 * I speak here of the adventurers, masters, or tradesmen ; the mere labourer 
 or journeyman benefits only, as it were, by re-action. The farmer, who is an 
 adventurer in agriculture, employed in raising products for human sustenance, 
 lies under disadvantages, that very much curtail his profits. His concerns are 
 too much at the mercy of his landlord, and of the financial exactions of public 
 authority, to say nothing of the vicissitudes of seasons, to be very gainful on 
 the average. 
 
3 . >4 ON DISTRIBUTION. BOOK TL 
 
 may 
 
 CHAPTER VII. 
 
 OP THE REVENUE OF INDUSTRY 
 
 SECTION I. 
 Of the Profits of Industry in general. 
 
 THE general motives, which stimulate the demand of products, 
 have been above investigated.* When the demand for any product 
 whatever, is very lively, the productive agency, through whose 
 means alone it is obtainable, is likewise in brisk demand, which 
 necessarily raises its ratio of value : this is true generally, of every 
 kind of productive agency. Industry, capital, and land, all yield, 
 ceteris paribus, the largest profits, when the general demand for 
 products is most active, affluence most expanded, profits most wide- 
 ly diffused, and production most vigorous and prolific. 
 
 In tjje preceding chapter, we have seen that the demand for some 
 products is always more steady and active than for others. Whence, 
 we have inferred, that the agency directed to those particular pro- 
 ducts, receives the most ample remuneration. 
 
 Descending in our progress more and more into particular detail, 
 
 * Book I. c. 15. 
 
 (a) The reasoning of this whole chapter is superfluous and inconclusive. 
 Where value is left to find its natural level, one class of productive agency 
 will, in the long run, be equally recompensed with another, presenting an equi- 
 poise of facility or difficulty, of repute or disrepute, of enjoyment or suffering, in 
 the general estimation of mankind ; this he states fully in the next chapter. If 
 our author means here to say merely, that a large class of productive agency will 
 receive a larger portion of the general product as its recompense or revenue, or 
 that agency in permanent employ will obtain a regular and permanent recom- 
 pense, he has taken a very circuitous mode of expressing a position, which is, 
 uuleed, almost self-evident. The grand division of productive agency is into 
 corporeal and intellectual ; whereof the former is, on the average, the more 
 Amply rewarded by the rest of mankind, because the latter, in some measure, 
 rewards itself. Thus, the profits of printing and bookselling are, on the whole, 
 morejiberal than those of authorship; because the latter is partly paid in wJf 
 jjrat.ncaticn, m vanity or conscious merit. T. 
 
CHAP. VII. ON DISTRIBUTION. 325 
 
 we shall examine in this, and some following chapters, in what cases 
 the profits of industry bear a greater or a less proportion to those of 
 capital and of land, and vice versa ; together with the reasons why 
 certain ways of employing industry, capital, or land, are more profit- 
 able than others. 
 
 To begin, then, with the comparison of the relative profits of in- 
 dustry, to those of capital and land, we shall find these bear the 
 highest ratio, where abundance of capital creates a demand for a 
 great mass of industrious agency ; as it did in Holland before the 
 revolution. Industrious agency was very dearly paid there ; as it ; 
 still is in countries like the United States of America, where popu- 
 lation, and consequently, the human agents of production, spite of -^ 
 their rapid increase, bear no proportion to the demands of an unli- 
 mited extent of land, and of the daily accumulation of capital by the 
 prevalence of frugal habits. 
 
 In countries thus circumstanced, the condition of man is generally 
 the most comfortable ; because those, who live in idleness upon the 
 profits of their capital and land, are better able to live on moderate 
 profits, than those who live upon the profits of their own industry 
 only; the former, besides the resource of living on their capital, can, 
 when they please, add the profits of industry to their other revenue ; 
 but the mere mechanic or labourer can not add at pleasure to the 
 profits of his industry those of capital and land, of which he possesses 
 none. 
 
 Proceeding next to compare the profits of different branches of 
 industrious agency one with another, we shall find them greater or 
 less in proportion, 1st, To the degree of danger, trouble, or fatigue, 
 attending them, or to their being more or less agreeable; 2dly, To 
 the regularity or irregularity of the occupation ; 3dly, To the degree 
 of skill or talent that may be requisite. 
 
 Every one of these causes tends to diminish the quantity of labour 
 in circulation in each department, and consequently to vary its natu- 
 ral rate of profit. It is scarcely necessary to cite examples in support 
 of propositions so very evident. 
 
 Among the agreeable or disagreeable circumstances attending an 
 occupation, must be reckoned the consideration or contempt which 
 it entails. Some professions are partly paid in honour. Of any 
 given price, the more is paid in this coin, the less may be paid in 
 any other, without deducing the ratio of price. Smith remarks, 
 that the scholar, the poet, and the philosopher, are almost wholly 
 paid in personal consideration. Whether with reason or from pre- 
 judice, this is not entirely the case with the professions of a comic 
 actor, a dancer, and innumerable others; they must, therefore, be 
 paid in money what they are denied in estimation. " It seerns 
 absurd at first sight," says Smith, "that we should despise their 
 persons, and yet reward their talents with the most profuse liberality 
 Whilst we do the one, however, we must of necessity do the othei 
 Should the public opinion or prejudice ever alter withVecrard to such 
 occupations, their pecuniary recompense would quickly diminish- 
 28 
 
326 ON DISTRIBUTION. BOOK II. 
 
 More people would apply to them, and the competition would 
 quickly reduce the price of their labour. Such talents, though far 
 from being common, are by no means so rare as is imagined. Many 
 people possess them in great perfection, who disdain to make this 
 use of them ; and many more are capable of acquiring them, if any 
 thing could be honourably made by them."* 
 
 In some countries, the functions of national administration are 
 requited at the same time with high honour and large emolument ; 
 but it is only so, where, instead of being open to free competition, 
 like other occupations and professions, they are in the disposal of 
 royal favour. A nation, awake to its true interest, is careful not to 
 lavish this double recompense upon official mediocrity ; but to 
 husband its pecuniary bounty, where it is prodigal of distinction and 
 authority. 
 
 Every temporary occupation is dearly paid ; for the labourer must 
 be indemnified as well for the time he is employed, as for that 
 during which he is waiting for employment. A job coachmaster 
 must charge more for the days he is'employed, than may appear 
 sufficient for his trouble and capital embarked, because the busy 
 days must pay for the idle ones; any thing else would be ruin to 
 him. The hire of masquerade dresses is expensive for the same 
 reason ; the receipts of the carnival must pay for the whole year. 
 Upon a cross road, an innkeeper must charge high for indifferent 
 entertainment; for he may he some days before the arrival of 
 another traveller. 
 
 However, the proneness of mankind to expect, that, if there be 
 
 single lucky chance, it will be sure to fall to their peculiar lot 
 
 attracts towards particular channels a portion of industry dispropor- 
 
 'lonate to the profit they hold out, 'In a perfectly fair lottery/ 
 
 says the author of the Wealth of Nations, 'those who draw prizes 
 
 ought to gam all that is lost by those who draw blanks. In a pro- 
 
 ssion where twenty fail for one that succeeds, that one ought to 
 
 gam all that should have been gained by the unsuccessful twenty. '+ 
 
 Wow many occupations are far from being paid according to this 
 
 LrTh r Same / Uth r ,f ates Ms belief ' that > how extravagant 
 ver the fees o counsellors at law of celebrity may appease 
 annual gains of all the counsellors of a large town bear but a very 
 Pr n heir ua ' ?*Penae; e so that this profession! 
 
 lts subsistence from some oth 
 
 'ncnr a t Stat6 ' that these several ca ^s of differ- 
 
 * Wealth of Nations, book i. c. 10. 
 
CHAP. VII. ON DISTRIBUTION. 32? 
 
 constant occupation, and is moreover attended with danger, must be 
 indemnified by a double increase of salary. 
 
 The last, and perhaps the principal cause of inequality in the pro- 
 fits of industry in general is, the degree of skill it may require. 
 
 When the skill requisite to any calling, whether of a superior 
 or subordinate character, is attainable only by long and expensive 
 training, that training must every year have involved a certain 
 expense, and the total outlay forms an accumulated capital. In such 
 case, its remuneration includes, over and above the wages of labour, 
 an interest upon the capital advanced in the training, and an interest 
 higher than the ordinary rate ; for the capital advanced has been 
 actually sunk, and exists no longer than the life of the individual. It 
 should, therefore, be calculated as an annuity.* 
 
 It is for this reason, that all employments of time and talents, 
 which require a liberal education, are better paid than those, which 
 require less education. Education is capital which ought to yield 
 interest, independent of the ordinary profits of industry. 
 
 There are facts, it is true, that militate against this principle ; but 
 they are capable of explanation. The priesthood is sometimes very 
 ill paidrf yet a religion, founded upon very complicated doctrines, 
 and obscure historical facts, requires in its ministers a long course of 
 study and probation, and such study and probation necessarily call 
 for an advance of capital; it would seem requisite, therefore, for the 
 continued existence of the clerical profession, that the salary of the 
 minister should pay the interest on the capital expended, as well as 
 the wages of his personal trouble, which the profits of the inferior 
 clergy rarely exceed, particularly in Catholic countries. It must, 
 however, be ascertained, whether the public have not themselves 
 advanced this capital in the maintenance and education of clerical 
 students at the public charge ; in which case, the public advancing 
 the capital, may find people enough to execute the duties for the 
 mere wages of their labour, or a bare subsistence, especially where 
 there is no family to be provided for. 
 
 * Nay, even more than annuity interest on the sums spent in the education of 
 the person who receives the salary ; strictly speaking, it should be annuity inter- 
 est upon the total sum devoted to the same class of study, whether it have or 
 have not been made productive in its kind. Thus the aggregate of the fees of a 
 physician ought to replace not only what has been spent in their studies, but, 
 in addition, all the sums expended in the instruction of the students, who may 
 have died during their education, or whose success may not have repaid the 
 care bestowed upon them ; for the stock of medical industry in actual existence 
 could never have been reared, without the loss of some part of the outlay devoted 
 to medical instruction. However, there is little use in too minute attention to 
 accuracy in the estimates of political economy, which are frequently found at 
 variance with fact, on account of the influence of moral considerations in the 
 matter of national wealth, an influence that does not admit of mathematical esti- 
 mation. The forms of algebra are therefore inapplicable to this science, and 
 serve only to introduce unnecessary perplexity. Smith has not once had recourse 
 to them. 
 
 f I do not mean to include the superior orders of the clergy, whose benefice* 
 pre extremely rich and well paid, though upon principles of state policy. 
 
309 ON DISTRIBUTION. BOOK Ti 
 
 When, besides expensive training, peculiar natural talent is 
 required for a particular branch of industry, the supply is still more 
 limited in proportion to the demand, and must consequently be bet- 
 ter paid. A great nation will probably contain but two or three 
 artists capable of painting a superior picture, or modelling a beau- 
 tiful statue; if such objects, then, be much in demand, those few can 
 charge almost what they please ; and, though much of the profit is 
 but the return with interest of capital advanced in the acquisition of 
 their art, yet the profit it brings leaves a very large surplus, (a) A 
 celebrated painter, advocate, or physician, will have spent, of his 
 own or relations' money, six or eight thousand dollars at most, in 
 acquiring the ability from which his gains are derived ; the interest 
 of this sum calculated as an annuity, is but 800 dollars; so that, if he 
 make COOO dollars by his art, there remains an annual sum of 3000 
 dollars, which is wholly the salary of his skill and industry. If 
 every thing affording revenue is to be set down as property, his for- 
 tune at ten years' purchase may be reckoned 50,000 dollars, even 
 supposing him not to have inherited a sol 
 
 SECTION II. 
 tythe Profits of the Man of Science. 
 
 The philosopher, the man who makes it his study to direct the 
 
 laws of nature to the greatest possible benefit of mankind, receives 
 
 i very small proportion of the products of that industry, which 
 
 derives such prodigious advantage from the knowledge, whereof he 
 
 s at the same time the depository and the promoter. The cause of 
 
 is disproportionate payment seems to be, that, to speak technically, 
 
 throws into circulation, in a moment, an immense stock of his 
 
 product, which is one that suffers very little by wear; so that it is 
 
 long before operative industry is obliged to resort to him for a fresh 
 
 The scientific acquirements, without which abundance of manu- 
 
 p o7^f , c T ld never have been executed > are p bab 'v 
 
 of long study, intense reflection, and a course of experi- 
 h^^ ^^ 1 ^^? 1 are the J int occupation 
 But the f f 1 T Ge f Ch T ica1 ' medical > a d mathematical skill 
 knowledge, acquired with so much difficulty, is probablv 
 m a few pages ; and, through the channel of public lee- 
 
 the T rage T ios , n the 
 
 ^ 
 
 earful commercial enLrprife T been pkced within the reach of 6UC ' 
 
CHAP. VII. ON DISTRIBUTION. 3J9 
 
 tures, or of the press, is circulated in much greater abundance, than 
 is required for consumption; or, rather, it spreads of itself, and, 
 being imperishable, there is never any necessity to recur to those, 
 from" whom it originally emanated. 
 
 Thus, according to the natural laws, whereby the price of things 
 is determined, this superior class of knowledge will be very ill paid ; 
 that is to say, it will receive a very inadequate portion of the value 
 of the product, to which it has contributed. It is from a sense of 
 this injustice, that every nation, sufficiently enlightened to conceive 
 the immense benefit of scientific pursuits, has endeavoured, by spe- 
 cial favours and flattering distinctions, to indemnify the man of sci- 
 ence, for the very trifling profit derivable from his professional occu- 
 pations, and from the exertion of his natural or acquired faculties. 
 
 Sometimes a manufacturer discovers a process, calculated either 
 to introduce a new product, to increase the beauty of an old one, or 
 to produce with greater economy; and, by observance of strict 
 secrecy, may make for many years, for his whole life perhaps, or 
 even bequeath to his children, profits exceeding the ordinary ratio of 
 his calling. In this particular case the manufacturer combines two 
 different operations of industry: that of the man of science, whose 
 profit he engrosses himself, and that of the adventurer too. But few 
 such discoveries can long remain secret; which is a fortunate cir- 
 cumstance for the public, because this secrecy keeps the price of the 
 particular product it applies to above, and the number of con- 
 sumers enabled to enjoy it below, the natural level.* 
 
 It is obvious, that I am speaking only of the revenue a man of 
 science derives from his calling. There is nothing to prevent his 
 being at the same time a landed proprietor, capitalist or adventurer 
 and possessed of other revenue in these different capacities. 
 
 SECTION IIL 
 Of the Profits of the Master-agent, or Adventurer, in Industry. 
 
 We shall, in this section, consider only that portion of the profits 
 of the master-agent, or adventurer, which may be considered as the 
 recompense of that peculiar character. If a master-manufacturer 
 have a share in the capital embarked in his concern, he must be 
 ranked pro tanto in the class of capitalists, and the benefits thence 
 derived be set down as part of the profits of the capital so em- 
 barked.f 
 
 * Such of my readers as may imagine, that the sum of the production of a 
 country is greater, when the scale of price is unnaturally high, are requested to 
 refer to what has been said on the subject, supra, Chap. 3, of this Book. 
 
 f Smith is greatly embarrassed by his neglect of the distinction between the 
 
 profits of superintendency, and those of capital. He confounds them under the 
 
 general head of profits of stock ; and all his sagacity and acuteness have scarcely 
 
 been sufficient to expound the causes, which influence their fluctuations. Weal'H 
 
 28* 2R 
 

 330 ON DISTRIBUTION. BOJK II. 
 
 It very seldom happens, that the party engaged in the manage- 
 ment of any undertaking, is not at the same time in the receipt of 
 interest upon some capital of his own. The manager of a concern 
 rarely borrows from strangers the whole of the capital employed. 
 Jf he have but purchased some of the implements with his own capi- 
 tal, or made advances from his own funds, he will then be entitled 
 to one portion of his revenue in quality of manager, and another in 
 that of capitalist. Mankind are so little inclined to sacrifice any par 
 tide of their self-interest, that even those, who have never analyzed 
 these respective rights, know well enough how to enforce them to 
 their full extent in practice. 
 
 Our present concern is, to distinguish the portion of revenue, 
 which the adventurer receives as adventurer. We shall see by 
 and-by, what he, or somebody else, derives in the character of 
 capitalist 
 
 It may be remembered, that the occupation of adventurer is com- 
 prised in the second class of operations specified as necessary for the 
 setting in motion of every class of industry whatever; that is to say, 
 the application of acquired knowledge to the creation of a product 
 for human consumption.* It will likewise be recollected, that such 
 application is equally necessary in agricultural, manufacturing, and 
 commercial industry; that the labour of the farmer or cultivator on 
 nis own account, of the master-manufacturer and of the merchant, all 
 come under this description ; they are the adventurers in each de- 
 partment of industry respectively. The nature of the profits of 
 these three classes of men, is what we are now about to consider. 
 Jhe price of their labour is regulated, like that of all other objects 
 e ratio of the supply, or quantity of that labour thrown into 
 ulation, to the demand or desire for it. There are two principal 
 causes operating to limit the supply, which, consequently, maintain 
 at a high rate the price of this superior kind of labour. 
 
 is commonly requisite for the adventurer himself to provide the 
 
 jjnecessary funds. Not that he must be already rich; for he may 
 
 El? t r n te ^ ^Pital; but he must at least be solvent, and 
 
 the reputation of intelligence, prudence, probity, and regular- 
 
 h y e loal oT U 'M f 6 ' ^ ^ Mture f his c ions, to procure 
 
 wuishes shm P t may Happen himsdf not to P ssess - These 
 shut out a great many competitors. 
 
 upo'n e^rel? 
 
 W thus 
 
 les - The P rofits of 
 ' exerted; those 
 
CHAP. VII. ON DISTRIBUTION. 331 
 
 number of hands; at another, buy or order the raw material, collect 
 labourers, find consumers, and give at all times a rigid attention to 
 order and economy; in a word, he must possess the art of superin- 
 tendence and administration. He must have a ready knack of cal- 
 culation, to compare the charges of production with the probable 
 value of the product when completed and brought to market. In 
 the course of such complex operations, there are abundance of 
 obstacles to be surmounted, of anxieties to be repressed, of misfor- 
 tunes to be repaired, and of expedients to be devised. Those who 
 are not possessed of a combination of these necessary qualities, are 
 unsuccessful in their undertakings ; their concerns soon fall to the 
 ground, and their labour is quickly withdrawn from the stock in 
 circulation; leaving such only, as is successfully, that is to say, 
 skilfully directed. Thus, the requisite capacity and talent limit 
 the number of competitors for the business of adventurers. Nor is 
 this all: there is always a degree of risk attending such undertak- 
 ings ; however well they may be conducted, there is a chance of 
 failure ; the adventurer may, without any fault of his own, sink his 
 fortune, and in some measure his character ; which is another check 
 to the number of competitors, that also tends to make their agency 
 so much the dearer. 
 
 All branches of industry do not require an equal degree of capa- 
 city and knowledge. A farmer who adventures in tillage, is not 
 expected to have such extensive knowledge as a merchant, who 
 adventures in trade with distant countries. The farmer may do 
 well enough with a knowledge of the ordinary routine of two or 
 three kinds of cultivation. But the science necessary for conduct- 
 ing a commerce with long returns is of a much higher order. It is 
 necessary to be well versed, not only in the nature and quality of 
 the merchandise in which the adventure is made, but likewise to 
 have some notion of the extent of demand, and of the markets 
 whither it is consigned for sale. For this purpose, the trader must 
 be constantly informed of the price-current of every commodity in 
 different parts of the world. To form a correct estimate of these 
 prices, he must be acquainted with the different national currencies, 
 and their relative value, or, as it is termed, the rate of exchange. 
 He must know the means of transport, its risk and expense, the cus- 
 tom and laws of the people he corresponds with ; in addition to all 
 which, he must possess sufficient knowledge of mankind to preserve 
 him from the dangers of misplaced confidence in his agents, corre- 
 spondents, and connexions. If the science requisite to make a good 
 farmer is more common than that which can make a good merchant, 
 it is not surprising, that the labour of the former is but poorly paid, 
 in comparison with that of the latter. 
 
 It is not meant by this to be understood, that commercial industry 
 in every branch, requires a combination of rarer qualifications than 
 agricultural. The retail dealers for the most part pursue the routine 
 of their business quite as mechanically as the generality of farmers, 
 and, in some kinds of cultivation, very uncommon care and sagacitv 
 
332 ON DISTRIBUTION. BOOK II 
 
 nre requisite. It is for the reader to make the application : the busi- 
 ness of the teacher is, firmly to establish general principles; whence 
 ii \vill bo easy to draw a multitude of inferences, varied and modified 
 by circumstances, which are themselves the consequences of other 
 principles laid down in other parts of the subject. Thus, in astro- 
 nomy, when we are told, that all the planets describe equal areas in 
 the same space of time, there is an implied reservation of such 
 derangements, as arise from the proximity of other planets, whose 
 attractive powers depend on another law of natural philosophy; and 
 this must be attended to in the examination of the phenomena of 
 each in particular. It is for him, who would apply general la\vs to 
 particular and isolated cases, to make allowance for the influence of 
 each of those laws or principles, whose existence is already recog- 
 nised. 
 
 In reviewing presently the profit of mere manual labour, we 
 shall see the peculiar advantage, which his character of master wives 
 to the adventurer over the labourer; but it may be useful to observe 
 by the way the other advantages within reach of an intelligent su- 
 perior. He is the link of communication, as well between the va- 
 rious classes of producers, one with another, as between the producer 
 and the consumer. He directs the business of production, and is 
 the centre of many bearings and relations; he profits by the know- 
 edge and by the ignorance of other people, and by every accidental 
 advantage of production. 
 
 Thus, it is this class of producers, which accumulates the largest 
 rtunes, whenever productive exertion is crowned by unusual suc- 
 
 cess. 
 
 SECTION IV. 
 Of the Profits of the Operative Labourer* 
 
 !fei? y L !* eXeCUted b ^ W" Possessed 
 
 na vp h, 1 uantum f ^pplv always re- 
 
 e difficukvli t hedemand; na - V ' ften go^ beyond it; for 
 Whenever fhem '" ac * mnn Z existence, but in supporting it 
 6 is sufficient for^the 
 
 e nut 
 
 like the cobbler inTs JtaH o n ? v S " C , "" " re masters of tlleir m ' n labour, 
 .ere of adventurer St^^SSftXf*!"*"' U " ite " le tw charac - 
 cuinstanccs detailed in the Drlcpd P , T '" part Sfovorncd by tbe cir- 
 
 panly by those dcv I f >ed in 
 
 , 
 
 on that, which uires or'nody SSZ^Jh* 1 " ""? 
 
 talent or personal skill entitles the w nl t t " {'' the aC( J ulsltlon 
 
 .c orinciplo. cxpl.inc.1, ^"^JtT^U chapter PTOfit ' regUla ' Cd Upon 
 
CHAP. VII. ON DISTRIBUTION. 333 
 
 execution of any kind of work, and that work affords the means of 
 supporting existence, the vacuum is speedily filled up. 
 
 There is, however, one thing to be observed. Man does not 
 come into the world with the size and strength sufficient to perform 
 labour even of the rudest kind. He acquires this capability not till 
 the age of fifteen or twenty, more or less, and may be regarded as an 
 item of capital, formed of the growing annual accumulation of the 
 sums spent in rearing him.* By whom, then, is this accumulation 
 effected '? In general by the parents of the labourer, by persons of 
 his own calling, or of one akin to it. In this class of life, therefore, 
 the wages are somewhat more than is necessary for bare personal 
 existence; they must be sufficient to maintain the children of the 
 labourer also. 
 
 If the wages of the lowest class of labour were insufficient to 
 maintain a family, and bring up children, its supply would never be 
 kept up to the complement; the demand would exceed the supplv 
 in circulation; and its wages would increase, until that class were 
 again enabled to bring up children enough to supply the deficiency. 
 
 This would happen, if marriage were discouraged amongst the 
 labouring class. A man without wife or children may afford his 
 labour at a much cheaper rate, than one who is a husband and a 
 father. If celibacy were to gain ground amongst the labouring 
 class, that class would not only contribute nothing to recruit its own 
 members, but would prevent others from supplying the deficiency. 
 A temporary fall in the price of manual labour, arising from the 
 cheaper rate, at which single men can afford to work, would soon 
 be followed by a disproportionate rise; because the number of 
 workmen would fall off. Thus, even were it not more to the inter- 
 est of masters to employ married men, on account of their steadi- 
 ness, they should do so, though at a greater charge, to avoid the 
 higher price of labour, that must eventually recoil on them. 
 
 Every particular line or profession does not, indeed, recruit its 
 own numbers with children nursed among its own members. The 
 new generation is transferred from one class of life to another, and 
 particularly from rural occupations to occupations of a similar cast 
 in the towns ; for this reason, that children are cheaper trained in 
 the country : all I mean to say is, that the rudest and lowest class of 
 labour necessarily derives from its product a portion sufficient, not 
 merely for its present maintenance, but likewise for the recruiting 
 of its numerical strength.f 
 
 When a country is on the decline, and contains less of the means | 
 
 * A full-grown man is an accumulated capital ; the sum spent in rearing him 
 is indeed consumed, but consumed in a reproductive way, calculated to yield the 
 product man. 
 
 f The evidence examined before a committee of the House of Commons of 
 England, in 1815, leads to the conclusion, that the high price of food, at that 
 period, had the effect, of depressing, rather than elevating the scale of wages. I 
 have myself remarked the similar effect of the scarcities in France, of the years 
 1811 and 1817. The difficulty of procuring subsistence either 'breed more 
 
334 ON DISTRIBUTION. BOOK II 
 
 of production and less of knowledge, activity, and capital, the de- 
 mand for raw or simple labour diminishes by degrees; wages far 
 gradually below the rate necessary for recruiting the labouring class 
 its numbers consequently decrease, and the offspring of the other 
 classes, whose employment diminishes in the same proportion, is 
 degraded to the step immediately below. On the contrary, when 
 prosperity is advancing, the inferior classes not only fill up their 
 own complement with ease, but furnish a surplus and addition to 
 the classes immediately above them : and some, by great good for- 
 tune or brilliancy of talent, arrive at a still loftier eminence, and 
 reach even the highest stations in society. 
 
 The labour of persons not entirely dependent for subsistence on 
 the fruits of labour can be afforded cheaper, than that of such as are 
 labourers by occupation. Being fed from other sources, their wages 
 arc not settled by the price of subsistence. The female spinners in 
 country villages probably do not earn the half of their necessary 
 expenses, small as they are : one is perhaps the mother, another the 
 daughter, sister, aunt, or mother-in-law of a labourer, who would 
 probably support her, if she earned nothing for herself. Were she 
 dependent for subsistence on her own earnings only, she must evi- 
 dently double her prices, or die of want; in other words, her in- 
 dustry must be paid doubly, or would cease to exist. 
 
 The same may be said of most kinds of work performed bv 
 females. They are in general but poorly paid, because a large pro- 
 portion of them are supported by other resources than those of their 
 own industry, and can, therefore, supply the work they are capable 
 oi at a cheaper rate, than even the bare satisfaction of their wants, 
 ine work of the monastic order is similarly circumstanced. It is 
 fortunate for the actual labourers in those countries where mona- 
 chism abounds, that it manufactures little else but trumpery for if 
 i industry were applied to works of current utility, the necessi- 
 us labourers in the same department, having families to support 
 would be unable to work at so low a rate, and must absolutely 
 ish by want and starvation. The wages of manufacturing, are 
 often higher than those of agricultural labour; but they are liable to 
 HI llt C mit ^ 1 scillat ! on ' Wa ' or legislative prohibition 
 rroduTfr 8 . suddenl .y extinguish the demand for a particular 
 >roduct and reduce the industry employed upon it to a state of lit 
 
 It 8 '* tr M ? t "^ ^ ? fashion ia ^ ^ ^ 
 tern or'ar ^ Substltutl n of shoe ribands for buckles was a severe 
 
 T^ r wnaHe*T ^ PP u ^ a ^on of Sheffield and Birmingham.* 
 ever h **! V ' atl ?? s m , the P rice f ruc}e or simple labour have 
 
 J? . U ! tl L C nsld , e . red * s se * calamities/In classes of 
 
 arn 
 of profits entails only a 
 
 Malthus, n ou. e iii. c . 13, 
 
CHAP. VII. ON DISTRIBUTION. 335 
 
 reduction of expense, or, at most, but trenches, in some measure, 
 upon the capital those classes generally have at their disposal. But 
 to those, whose whole income is a bare subsistence, a fall of wages 
 is an absolute death-warrant, if not to the labourer himself, to part 
 of his family at least. 
 
 Wherefore, all governments, pretending to the smallest paternal 
 solicitude for their subjects' welfare, have evinced a readiness to aid 
 the indigent class, whenever any unexpected event lias accidentally 
 reduced the wages of common labour below the level of the labour- 
 er's subsistence. Yet the benevolent intentions of the government 
 have too often failed in their efficacy, for want of judgment in the 
 choice of a remedy. To render it effective, it is necessary first to 
 explore the cause of depression in the price of labour. If that de- 
 pression be of a permanent nature, pecuniary and temporary aid is 
 of no possible avail, and merely defers the pressure of the mischief. 
 Of this nature are the discovery of new processes, the introduction 
 of new articles of import, or the emigration of a considerable num- 
 ber of consumers, (a) In such emergencies, a remedy must bo 
 sought in the discovery of some new and permanent occupation for 
 the hands thrown out of employ, in the encouragement of new 
 channels of industry, in the setting on foot of distant enterprises, 
 the planting of colonies, &c. 
 
 If the depression be not of a permanent nature, if it be the mere 
 result of good or bad crops, the temporary assistance should be 
 limited to the unfortunate sufferers by the oscillation. 
 
 Governments or individuals, who attempt indiscriminate benefi 
 cence, will have the frequent mortification of finding their bounty 
 unavailing. This may be more convincingly demonstrated by ex- 
 ample than by argument. 
 
 Suppose in a vine district the quantity of casks to be so abundant, 
 as to make it impossible to use them all. A war, or a statute le- 
 velled against the production of wine, may, perhaps, have caused 
 many proprietors of vineyards to adopt a different cultivation of 
 their lands; this is a permanent cause of surplus cooperage in the 
 market. In ignorance of this cause, a general effort is made to as 
 sist the labouring coopers, either by purchasing their casks withou 
 wanting them, or by making up, in the shape of alms, the loss they 
 have sustained in the diminution of their profits. Useless pur- 
 
 (a) The second and last of these circumstances are neither of them necessa- 
 rily, universally, or permanently, followed by the depression of the rate of wages. 
 When a new object of import does not supersede one of either home or foreign 
 production, it must tend to raise the rate of wages, as it can only be procured by 
 enlarged home production. The emigration of consumers, continuing to draw- 
 subsistence from the country they desert, leaves in activity an equal mass of 
 human labour, though possibly with some variation of employment. Besides 
 it may be temporary only, as that of the English to the continent, and of the 
 Irish both to England and to the continent; who possibly might be brought 
 back by an improvement of domestic finances or of domestic security and conv 
 fort. T. 
 
33G ON DISTRIBUTION. BOOK II. 
 
 chases or eleemosynary aid, however, can not last forever; and, 
 the moment they cease, the poor coopers will find themselves pre- 
 cisely in the same distressful situation, from which it was attemptea 
 to extricate them. All the sacrifices and expense will have been 
 incurred with no advantage, other than that of a little delay m the 
 date of their hopeless sufferings and privations. 
 
 Suppose on the contrary, the cause of the superabundance of casks 
 to be but temporary; to be nothing more than the failure of the an- 
 nual crop. If, instead of affording temporary relief to the working 
 coopers, they be encouraged to remove to other districts, or to enter 
 upon some other branch of industry, it will follow, that the next 
 year, when wine may be abundant, there will be a scarcity of casks 
 to receive it; the price will become exorbitant, and be settled at the 
 suggestion of avarice and speculation; which being unable them- 
 selves to manufacture casks, after the means of producing them have 
 been thus destroyed, part of the wine will probably be spoiled for 
 want of casks to hold it. It will require a second shock and derange- 
 ment of the rate of wages, before the manufacture of the article can 
 be brought again to a level with the demand. 
 
 Whence it is evident, that the remedy must be adapted to the par- 
 ticular cause of the mischief; consequently, the cause must be ascer- 
 tained, before the remedy is devised. 
 
 Necessary subsistence, then, may be taken to be the standard of 
 the wages of common raw labour; but this standard is itself extreme- 
 ly fluctuating ; for habit has great influence upon the extent of human 
 wants. It is by no means certain, that the labourers of some can- 
 tons of France could exist under a total privation of wine. In Lon 
 don, beer is considered indispensable ; that beverage is there so much 
 an article of necessity, that beggars ask for money to buy a pot of 
 beer, as commonly as in France for the purchase of a morsel of 
 bread ; and this latter object of solicitation, which appears to us so 
 very natural, may seem impertinent to foreigners just arrived from a 
 country, where the poor subsist on potatoes, manioc, or other still 
 coarser diet. 
 
 What is necessary subsistence, depends, therefore, partly on the 
 habits of the nation, to which the labourer may happen to" belong. 
 In proportion as the value he consumes is small, his ordinary wages 
 may be low, and the product of his labour cheap. If his condition 
 be improved, and his wages raised, either his product becomes 
 dearer to the consumer, or the share of his fellow producers is 
 diminished. 
 
 The disadvantages of their position are an effectual barrier against 
 any great extension of the consumption of the labouring classes. 
 Humanity, indeed, would rejoice to see them and their families 
 dressed in clothing suitable to the climate and season; houses in 
 roomy, warm, airy, and healthy habitations, and fed with wholesome 
 and plentiful diet, with perhaps occasional delicacy and variety; but 
 fhere are very few countries, where wants, apparently so moderate, 
 an? not considered far beyond the limits of strict necessity, and 
 
CHAP. VII. ON DISTRIBUTION. 337 
 
 therefore not to be gratified by the customary wages of the mere 
 labouring class. 
 
 The limit of strict necessity varies, not only according to the more 
 or less comfortable condition of the labourer, and his family, bu* 
 likewise according to the several items of expense reputed unavoid- 
 able in the country he inhabits. Among these is the one we have 
 just adverted to; namely, the rearing of children; there are others 
 less urgent and imperative in their nature, though equally enforced 
 by feeling and natural sentiments ; such as the care of the aged, to 
 which unhappily the labouring class are far too inattentive. Nature 
 could entrust the perpetuation of the human species to no impulse 
 less strong, than the vehemence of appetite and desire, and the anxiety 
 of paternal love; but has abandoned the aged, whom she no longei 
 wants, to the slow workings of filial gratitude, or, what is even less 
 to be depended upon, to the providence of their younger years. Did 
 the habitual practice of society imperatively subject every family to 
 the obligation of laying by some provision for age, as it commonly 
 does for infancy, our ideas of necessity would be somewhat enlarged, 
 and the minimum of wages somewhat raised. 
 
 It must appear shocking to the eye of philanthropy, that such is 
 not always the case. It is lamentable to think of the little provi- 
 dence of the labouring classes against the season of casual misfortune, 
 infirmity, and sickness, as well as against the certain helplessness of 
 old age. Such considerations afford most powerful reasons for for- 
 warding and encouraging provident associations of the labouring 
 class, for the daily deposit of a trifling saving, as a fund in reserve 
 for that period, when age, or unexpected calamity, shall cut off the 
 resource of their industry.* But such institutions can not be ex- 
 
 * Saving-banks have succeeded in several districts of England, Holland, and 
 Germany ; particularly where the government has been wise enough to withhold 
 its interference. The Insurance Company of Paris has set one on foot, upon the 
 most liberal principles and with the most substantial guarantee. It is to be hoped, 
 that the labouring classes in general will see the wisdom of placing their little 
 savings in such an establishment, in preference to the hazardous investments 
 they have often been decoyed into. There is besides a further national advan- 
 tage in such a practice, namely, that of augmenting the general mass of pro- 
 ductive capital, and consequently extending the demand for human agency. (1) 
 
 (1) [In the principal cities of the United States, Saving-banks have also oeen 
 established, and have been attended with so much benefit, that they are now 
 spreading through every part of the Union. .To the Friendly or Beneficial 
 Societies there are strong objections, to which the Saving-banks are not liable. 
 The Friendly Societies have, undoubtedly, done some good ; but attended with a 
 certain portion of evil. The following extract from a report of the Committee 
 of the Highland Society, places these latter societies in a very proper light. 
 
 " During the last century, a number of Friendly Societies have been estab- 
 lished by the labourers in different parts of Great Britain, to enable them to 
 make provision against want. The principle of these societies usually is, thai 
 the members pay a certain stated sum periodically, from which an allowance is 
 iiade to them upon sickness or old age, and to their families upon their death 
 These societies have done much good ; but they are attended with some disad 
 vantages. In particular, the frequent meetings of the members occasion the 'osti 
 29 2 S 
 
3 36 ON DISTRIBUTION. BOOK II. 
 
 nccted to succeed, unless the labourer be taught to consider these 
 means of precaution as a matter of duty and necessity and hold 
 the obligation to carry his savings to such places of deposit, as equally 
 indispensable with the payment of his rent or taxes: this new duty 
 would doubtless lend in a slight degree to raise the scale of wages, 
 so as to allow of such frugality, but for that very reason it is desirable. 
 How can such establishments thrive in countries where habit and 
 the interested views of the government conspire to make the labourer 
 spend in the public-house not only what he might lay by, but frequently 
 ihe very subsistence of his family, in which all his comforts and plea- 
 sures should be centred. The vain and costly amusements of the 
 rich are not always justifiable in the eye of reason; but how much 
 more disastrous is the senseless dissipation of the poor ! The mirth 
 of the indigent is invariably seasoned with tears; and the orgies of 
 the populace are days of mourning to the philosopher. 
 
 Besides the reasons advanced in this and the preceding sections, 
 to explain why the wages of the adventurer, even if he derive no 
 profit as a capitalist, are generally higher than those of the mere 
 labourer, there are others, not so solid or well founded indeed, but 
 such as nevertheless must not be overlooked. 
 
 The wages of the labourer are a matter of adjustment and compact 
 
 between the conflicting interests of master and workman ; the latter 
 
 endeavouring to get as much, the former to give as little, as he pos- 
 
 ; sibly can ? but in a contest of this kind, there is on the side of the 
 
 i master an advantage, over and above what is given him by the nature 
 
 1 of his occupation. The master and the workman are no doubt 
 
 equally necessary to each other ; for one gains nothing but with the 
 
 other's assistance; the wants of the master are, however, of the two, 
 
 less urgent and less immediate. There are few masters but what 
 
 could exist several months or even years, without employing a single 
 
 labourer; and few labourers that can remain out of work for many 
 
 weeks, without being reduced to the extremity of distress. And this 
 
 circumstance must have its weight in striking the bargain for wages 
 
 between them. 
 
 Sismondi, in a late work* published since the appearance of my 
 
 of much time, and frequently of a good deal of money spent in entertainments. 
 The stated payments must be regularly made ; otherwise, after a certain time, 
 the member (necessarily from its being in fact an insurance) loses the benefit 
 of all that he has formerly paid. Nothing more than the stated payments car 
 he made, however easily the member might be able at the moment to add a little 
 to his store. Frequently the value of the chances on which the societies are 
 formed, is il'. calculated; in which case either the contributors do not receive an 
 equivalent for their payments, or too large an allowance is given at first, which 
 brings ^on the bankruptcy of the institution. Frequently the sums are embezzled 
 by artful men, who, by imposing on the inexperience of the members, get them- 
 selves elected into offices of trust. The benefit is distant and contingent ; each 
 'nember not having beneht from his contributions in every case, but only in the 
 rase of his falling into the situations of distress provided for by the society. 
 And the whole concern is so complicated, that many have hesitation in embark 
 .rig in it their hard-earned savings."] AMERICAN EDITOR. 
 
 * Nouvvaux Prin. (TEcon. Pol. liv. vii. c. 9. 
 
CHAP. VII. ON DISTRIBUTION. 339 
 
 third edition, has suggested some legislative provisions, for the 
 avowed purpose of bettering the condition of the labouring classes. 
 He sets out with the position, that the low rate of their wages ac- 
 crues to the benefit of the adventurers and masters who employ 
 them ; and thence infers, that in the moment of calamity, their claim 
 for relief is upon the masters, and not upon society at large. Where- 
 fore, he proposes to make it obligatory upon the proprietors and 
 farmers of land at all times to feed the agricultural, and upon the 
 manufacturers to provide subsistence for the manufacturing labourer. 
 On the other hand, to prevent the probable excess of population, 
 consequent upon the certain prospect of subsistence to themselves 
 and their families, he would give to their respective masters the 
 right of preventing or permitting marriage amongst their people. 
 
 This scheme, however entitled to favourable consideration by the 
 motive of humanity in which it originated, seems to me altogether 
 impracticable. It would be a gross violation of the right of property, 
 to saddle one class of society with the compulsory maintenance of 
 another; and it would be a violation still more gross, to give one 
 set of men a personal control over another; for'the freedom of per- 
 sonal action is the most sacred of all the objects of property. The 
 arbitrary prohibition of marriage to one class is a premium to the 
 procreation of all the rest. Besides, there is no truth in the posi- 
 tion, that the low rate of wages redounds exclusively to the profit 
 of the maste7.~ Their reduction, followed up by the constant action 
 of competition, is sure to bring about a fall of the price of products; 
 so that it is the class of consumers, in other words, the whole com- 
 munity, that derives the profit. And if it be so great as to throw 
 the subsistence of the labourers upon the public at large, the public 
 is in a great measure indemnified by the reduced prices of the objects 
 of its consumption. 
 
 There are some evils incident to the imperfection of the human 
 species, and to the constitution of nature ; and of this description is / I 
 the excess of population above the means of subsistence. On the / ' 
 whole, this evil is quite as severely felt in a horde of savages, as in / 
 a civilized community. It would be unjust to suppose it a creature 
 of social institutions, and a mere fallacy to hold out the prospect of 
 a complete remedy; and, however it may merit the thanks of man- 
 kind to study the means of palliation, we must be cautious not to 
 give a ready ear to expedients that can have no good effect, and 
 must prove worse than the disease itself. A government ought 
 doubtless to protect the interests of the labouring classes, as far as it 
 can do so without deranging the course of human affairs, or cramp- 
 ing the freedom of individual dealings ; for those classes are less 
 advantageously placed than the masters, in the common course of 
 things; but a wise ruler will studiously avoid all interference 
 between individuals, lest it superadd the evils of administration to 
 those of natural position. Thus, he will equally protect the master 
 and the labourer from the effects of combination. The masters have 
 he advantage of smaller numbers and easier communication; where- 
 
:uo 
 
 ON DISTRIBUTION. BOOK li 
 
 < the labourers can scarcely combine, without assuming the air of 
 ovult and disaffection, which the police is evei> on the watch to 
 repress Nay, the partisans of the exporting system have gone so 
 Tar as to consider the combinations of the journeymen as injurious to 
 national prosperity, because they tend to raise the price of the com- 
 ,s destined" tbr export, and thereby to injure their preference 
 : the furei-ni market, which they look upon as so desirable. But 
 what must be the character of that policy, which aims at national 
 prosperity through the impoverishment of a large proportion of the 
 home producers, with a view to supply foreigners at a cheaper rate, 
 and -rive them all the benefit of the national privation and self- 
 denial ? 
 
 One sometimes meets with masters, who, in their anxiety to 
 justify their avaricious practices by argument, assert roundly, that 
 he labourer would perform less work, if better paid, and that he 
 must be stimulated by the impulse of want. Smith, a writer of no 
 small experience and singular penetration, is of a very different 
 opinion. Let us take his own words. "The liberal reward of 
 labour, as it encourages the propagation, so it increases the industry 
 of the common people. The wages of labour are the encouragement 
 of industry, which, like every other human quality, improves in 
 proportion to the encouragement it receives. A plentiful subsist- 
 
 e increases the bodily strength of the labourer, and the comfort- 
 able hope of bettering his condition, and of ending his days perhaps 
 in ease and plenty, animates him to exert that strength to the utmost. 
 Where wages are high, accordingly, we shall always find the work- 
 
 n more active, diligent, and expeditious, than where they are 
 low; in England, for example, than Scotland; in the neighbourhood 
 of <rre;t towns, than in remote country places. Some workmen, 
 indeed, when they can earn in four days what will maintain them 
 through the week, will be idle the other three. This, however, is 
 by no means the case with the greater part. Workmen, on the con- 
 trary, when they are liberally paid by the piece, are very apt to 
 
 rwork themselves, and to" ruin their health and constitution in a 
 few years."* 
 
 SECTION V. 
 
 Of the Independence accruing to the Moderns from the Advancement 
 of Industry. 
 
 The maxims of political economy are immutable; ere yet observed 
 
 
 * Wealth of Nations, book i. c. 8. 
 
CHAP. VII. ON DISTRIBUTION. 311 
 
 The ancients were not nearly so far behind the moderns in agri- 
 culture, as in the- mechanical arts. Wherefore, since agricuitura 
 products are alone (1) essential to the multiplication of mankind, the 
 unoccupied surplus of human labour was larger than in modern 
 days. Those, who happened to have little or no land, unable to 
 subsist upon the product of their own industry, unprovided with 
 capital, and too proud to engage in those subordinate employments, 
 which were commonly filled by slaves, had no resource but to bor- 
 row, without a prospect of the ability to repay, and were continually 
 demanding that equal division of property, which was utterly im- 
 practicable. With a view to stifle their discontents, the leading men 
 of the state were obliged to engage them in warlike enterprises, 
 and, in the intervals of peace, to subsist them on the spoils of the 
 enemy, or on their own private means. This was the grand source 
 of the civil disorder and discord, which continually distracted the 
 states of antiquity ; of the frequency of their wars, of the corruption 
 of their suffrages, and of the connexion of patron and client, which 
 backed the ambition of a Marius and a Sylla, a Pompey and a 
 Ca3sar, an Antony and an Octavius, and which finally reduced the 
 whole Roman people to the condition of servile attendants upon the 
 court of a Caligula, a Heliogabalus, or some monster of equal enor- 
 mity, whose grand condition of empire was the subsistence of the 
 objects of his atrocious tyranny. 
 
 The industrious cities of Tyre, Corinth, and Carthage, were some- 
 what differently circumstanced; but they could not permanently 
 resist the hostility of poorer and more warlike nations, impelled by 
 the prospect of plunder. Industry and civilization were the continual 
 prey of barbarism and penury ; and Rome herself at length yielded 
 to the attack of Gothic and Vandalic conquerors. 
 
 Thus re-plunged into a state of barbarism, the condition of Europe, 
 during the middle ages, was but a revival of the earliest scenes of 
 Grecian and Italian history, in an aggravated form. Each baron or 
 great landholder, was surrounded by a circle of vassals or clients on 
 his domain, ready to follow him in civil broils or foreign warfare. 
 
 (1) The " multiplication of mankind" is not, as is here asserted by our author, 
 alone dependent upon " agricultural products ;" but, likewise, upon every other 
 description of commodities essential to human maintenance and support. Food, 
 or subsistence, is unquestionably indispensable to the existence of man ; but not 
 more necessary to his prolonged being and health, than raiment, shelter, and 
 fire. The position of Mr. Malthus, which limits population to subsistence only, 
 and which is here taken for granted and adopted by our author, is not accurate 
 or just; and by the more recent political economical inquirers has, therefore, 
 either been modified or abandoned. Professor Senior, in his " Two Lectures 
 on Population, delivered before the University of Oxford in Easter Term, 1823," 
 in considering the general principles, adopts the following, proposition, as wha, 
 appears to him an outline of the laws of population: "That the population of a 
 given district is limited only by moral or physical evil, or by the apprehension 
 of a deficiency in the means of obtaining those articles of wealth; or, in other 
 words, those necessaries, decencies and luxuries, which the habits of the indi- 
 viduals of each class of the inhabitants of that district lead them to require " 
 29 * AMERICAN EDITOR. 
 
ON DISTMBUTION. Bo * IL 
 
 f tVio Historian, were 1 to 
 k thp orovince 01 me * 
 
 | I should trench upon u*= ? ca uses that have aided the 
 
 attempt the delineation o the v a ^ ^ allowed merely 
 
 7 d - T're U c&'that has been eflbcted, and the 
 
 ie v\d), u n ^ ^ Industry has become a means ot sub- 
 
 1 '''' a ' V l ' V' 1L- 1 f the g oouulation, independent of the caprice of 
 
 Q ce t" we lllt - F F , . t tl m a constant source of 
 
 .....pnetors, and w ^^^ capital accumulated by its 
 
 lse rp, an relation of client and vassal has ceaseo! to 
 
 ! 1 ^' ,t individual is his own master, and 
 
 I 1 ,; re to dispense as a 
 
 *A f te^swg prosperity of manufacture and commerce has 
 them in Upscale of estimation The object of war ^hange^ 
 ,e spoliation and destruction of the sources of wealth, to their 
 and exclusive possession. For the last two centuries, where 
 has not been made to gratify the childish vanity of a nation or 
 
 i monarch, the bone of contention has always been, either colonial 
 sovereignty, or commercial monopoly. Instead of a contest ot 
 hnnirrybarbarians against their wealthy and industrious neighbours, 
 it has been one between civilized nations on either side; wherein the 
 victor has shown the greatest anxiety to preserve the resources of 
 the conquered territory. The invasion of Greece by the Turks, in 
 the fifteenth century, appears to have been the final effort of pure 
 barbarism arrayed against civilization. The present preponderance 
 industry and civilized habits amongst the general mass of man- 
 kind seems to exclude all probability of a recurrence of such calami- 
 tous events. Indeed, the improvement of military science takes 
 uvvav all fear of the result of such a conflict. 
 
 :-e is yet one step more to be made ; and that can only be 
 rendered practicable by the wider diffusion of the principles of poli- 
 il economy. They will some day have taught mankind that the 
 of their lives, in a contest for the acquisition or retention of 
 colonial dominion or commercial monopoly, is a vain pursuit of a 
 id delusive good; that external products, even those of the 
 i-ni:il dependencies of a nation, are only procurable with the pro- 
 ;ta of domestic growth: that internal production is, therefore, th. 
 }'i' t of solicitude, and is best to be promoted by politica, 
 
 tranquillity, moderate and equal laws, and facility of intercourse. 
 The f,i!<- <>f nations \vill thenceforth hang no longer upon the preca- 
 Hire of political pre-eminence, but upon the relative degree 
 of mt rm.-itioM and intelligence. Public functionaries will grow 
 and more dependent upon the productive classes, to whom 
 nusl l<>ok lor supplies; the people, retaining the right of taxa- 
 i in their own hands, will always be well' governed ; and the 
 es of ,,,,wer against the current of improvement will end in 
 own subversion; for it will vainly strive against the dispensations 
 ;f nature. 
 
CHAP. VIII. ON DISTRIBUTION. 343 
 
 CHAPTER VIIL 
 
 OF THE REVENUE OF CAPITAL. 
 
 THE service, rendered by capita], in productive operations, estaU 
 lishes a demand for capital to be so employed, and enables the prc 
 prietors of it to charge more or less for that service. 
 
 Whether the capitalist thus employ his capital himself, or lend it 
 to another for that purpose, it yields a profit, that is called the profit 
 of capital, distinct from that of the industry employing it. In the 
 former case, the profit obtained constitutes the revenue of his capi- 
 tal, which is added to that of his personal talent and industry, and 
 often confounded with it. In the latter, the revenue of capital is 
 precisely the interest paid for its use, the proprietor abandoning to 
 the borrower the profit derivable from his personal employment of 
 the capital lent. 
 
 As the investigation of the interest of capital lent will help to 
 throw light on the subject of the profit derivable from its personal 
 employment, it may be as well, in the first instance, to acquire a 
 just idea of the nature and variation of interest. 
 
 * 
 SECTION I. 
 
 Of Loans at Interest. 
 
 The interest of capital lent, improperly called the interest of 
 money, was formerly denominated usury, that is to say, rent for its 
 use and enjoyment; which, indeed, was the correct term; for inter- 
 est is nothing more than the price, or rent, paid for the enjoyment 
 of an object of value. But the word has acquired an odious mean- 
 ing, and now presents to the mind the idea of illegal, exorbitant in- 
 terest only, a milder but less expressive term having been substituted 
 by common usage. 
 
 Before the functions and utility of capita^ were known, it is pro- 
 bable, that the demand of rent for it by lenders was considered an 
 abuse and oppression, an expedient to favour the rich and prejudice 
 the poor ; nay, further, that frugality, the sole means of amassing 
 capital, was regarded as parsimony, and deemed a public mischief 
 by the populace, in whose eyes, the sums not spent by great pro 
 prietors were looked upon as lost to themselves. They could noi 
 comprehend, that money, laid by to be turned to account in some 
 beneficial employment, must be equally spent; for, if it were buried, 
 it could never be turned to account at all ; that it is, in fact, spent in 
 a manner a thousand times more profitable to the poor ;* and that a 
 
 * Vide infra, Book III. on the subject of re-productive consumption. 
 
1M ON DISTRIBUTION. BOOK IL 
 
 'iiriii^ man is never sure of earning a subsistence, except where 
 
 'aptal in reserve for him to work upon. This prejudice 
 
 !i individuals, who do not spend their whole income, still 
 
 orally; formerly it was universal; lenders them- 
 
 ret \\i'iv ti"t altogether free from it, but were so much ashamed 
 
 they were acting, as to employ the most disreputable 
 
 :its in the collection of profits perfectly just, and highly advan- 
 
 society. 
 
 . therefore, not surprising that the ecclesiastical, and at several 
 
 i.xls the civil codes, likewise, should have interdicted loans at 
 
 : : an- 1 that, during the whole of the middle ages, throughout 
 
 the larger states of Europe, this traffic should have been reputed 
 
 famous, and abandoned to the Jews. The little manufacturing or 
 
 ,:i:rivja! industry of those days was kept alive by the scanty 
 
 Capital of the dealers and mechanics themselves: and agricultural 
 
 .:id:r>!ry, which was pursued with somewhat better success, was 
 
 -.1 !>y the advances of the lords and great proprietors, who 
 
 employed their serfs or retainers on their own account. Loans 
 
 were contracted for, not with a view of profitably employing the 
 
 .hut merely to satisfy some urgent want, so that the exactor 
 
 interest was profiting by a neighbour's distress ; and it may easily 
 
 IKJ conceived, that a religion, founded on the principle of fraternal 
 
 is the Christian religion is, must disapprove a calculating 
 
 spirit, that even now is a stranger to generous bosoms, and repuff- 
 
 uint t<> the common maxims of morality. Montesquieu* attributes 
 
 e decline of commerce to this proscription of loans at interest; 
 
 ic-h was undoubtedly one cause, although, indeed, it was one 
 
 amongst many. 
 
 
 te^rta&BiT' the . tr T acti n is ended 
 
 r*u to teTar C uTa^ t te^ S ' 1 > theCaSe f aloan ' 
 wring tl'e whole, or SSSTfi? f I ' m , Cure of never 
 y estimated a, <1 ,*i , nifiH h " Ca R? L The risk is 
 " ''"' '""mo of a prc'n in r, Hn Y ^ addltion of interest - 
 
 -!. I . . " Whenever there hae ^ 
 
 interest of ad van* n r c i 
 
 /{ "' r 'iade between these it t careful 
 
 wavs dan"-er of er ' ;om ponent parts ; .__ _ f 
 
 * Esprit dcs Lois, Jiv. xxi. c. 20. 
 
CI.\P, VIIL ON DISTRIBUTION. 345 
 
 of public authority, will be apt to involve themselves in useless and 
 disastrous operations. 
 
 Thus, the practice of usury has been uniformly revived, whenever 
 it has been attempted to limit the rate of interest, or abolish it alto- 
 gether. The severer the penalties, and the more rigid their exaction, 
 the higher the interest of money was sure to rise; and this is what 
 might" naturally have been expected; for the greater the risk, the 
 greater premium of insurance did it require to tempt the lender. At 
 Rome, while the republican form of government lasted, the interest 
 of money was enormous, as it was natural to suppose, even if it 
 were not a matter of history. The debtors, who are always the 
 plebeians, were continually threatening their patrician creditors. The 
 taws of Mahomet have prohibited loans at interest ; and what is the 
 consequence in the Mussulman dominions? Money is lent at in- 
 terest, but the lender must be indemnified for the use of his capital, 
 and, moreover, for the risk incurred in the contravention of the 
 law. It was the same in Christian cpuntries, so long as loans at 
 interest were illegal : and where the necessity of borrowing enforced 
 the toleration of the practice amongst the Jews, such were the 
 humiliation, oppression, and extortion, to w r hich, on one pretext or 
 another, that nation w T as exposed on this score, that nothing short 
 of a very heavy rate of interest could indemnify for such repeated 
 loss and mortification. Leters patent of the French king John, 
 bearing date in the year 1360, are now extant, which authorises the 
 Jews to lend on pledges at the rate of four denicrs per week for 
 every Rvrc of twenty sous, which is more than eighty-six per cent 
 per annum; but in the year following, the same monarch, though 
 recorded as one of the most scrupulous performers of his royal word 
 that our annals can boast of, caused the quantity of pure metal con- 
 tained in the coin to be reduced ; so that the lenders no longer 
 received back a value equal to what they had lent. 
 
 This explanation will alone suffice to justify the very heavy in- 
 terest demanded, without at all taking into calculation, that at a period, 
 when loans were negotiated; not to forward industrious enterprises, 
 but to support war, to feed extravagance, and to further the most 
 hazardous projects ; at a period when laws were powerless, and 
 lenders unable legally to enforce their claims against their debtors, 
 it required a very ample premium to cover the risk of non-payment. 
 In fact, the premium of insurance absorbed the far greater part of 
 what passed under the name of interest, or usury: and the actual bona 
 fide interest, the rent for the use of capital lent, was reduced to a 
 very trifle; for, though capital was scarce, there is reason to suppose, 
 that productive employment was still more so. Of the 86 per cent 
 interest paid in the reign of king John, perhaps not more than 3 01 j 
 4 per cent, was the equivalent for the productive service of the < 
 capital advanced ; for all productive labour is better paid now, than 
 it was in those days ; and even now-a-days the rent of capital can 
 scarcely be reckoned higher than 5 per cent. ; the excess is so much 
 premium of insurance for the lender's indemnity. 
 
 2 T 
 
340 ON DISTRIBUTION. BOOK II 
 
 Thus, the ratio of the premium of insurance, which frequently 
 forms the greater portion of what is called interest, depends on the 
 degree of security presented to the lender; which security consists 
 chiefly in three circumstances : 1. The safety of the mode of 
 employment; 2. The personal ability and character of the borrower, 
 3. The good government of the country he happens to reside in. 
 We have just seen, how much the hazardous purposes, to which loans 
 were applied in the middle ages, enhanced the premium of insurance 
 necessarily paid to the lender. 
 
 It is the same with all perilous investments of capital, with a dif- 
 ference in degree only. The Athenians of old, made a distinction 
 between marine interest, or interest of capital afloat, and land- 
 interest, or interest on shore; the former was rated at 30 per cent, 
 more or less per voyage, whether to the Euxine, or to any port in 
 the Mediterranean.* As two such voyages were accomplished with 
 ease in the year, the annual marine interest may be rated at about 60, 
 while other interest was commonly not more than 12 per cent. 
 Supposing that, of the 12 per cent, one half was assigned to cover 
 the risk of the lender; we shall find, that the mere annual rent or 
 hire of money at Athens, was 6 per cent, only, which I should still 
 tnink above the mark; yet, supposing it to have been so high, the 
 marine interest allowed 54 per cent, for insurance of the lender's 
 risk. So enormous a premium must be attributed in part to the bar- 
 barous habits then prevalent among the nations with whom they 
 traded; for different nations were then much greater strangers to 
 each other, than they are at present, and commercial laws and cus- 
 toms much less respected; and in part to the imperfections of the 
 art of navigation. There was more danger in a voyage from the 
 Piraeus to Trapezus, though but three hundred leagues distant, than 
 there is no\v in one from L'Orient to China, which is a distance of 
 seven thousand. Thus, the improvements of geography and navi- 
 gation have contributed to lower the rate of interest, and ultimately 
 to reduce the cost price of products. Loans are sometimes contract- 
 ed not for a productive investment, but for mere barren consumption. 
 Transactions of this kind should always awaken the suspicion of the 
 lender, inasmuch as they engender no means of repayment of either 
 principal or interest. If charged upon a growing revenue, they are, 
 at all events, an anticipation of that revenue ; and if charged upon 
 any of the sources of revenue, they afford the means of dissipating 
 the particular source itself. If there be the security neither of reve- 
 nue nor of its source, they barely place the property of one person 
 at the wanton disposition of another. 
 
 Among the circumstances incident to the nature of the employ- 
 ment, which influence the rate of interest, the duration of the loan 
 must not be forgotten; ceteris paribus, interest is lower when the 
 lender can withdraw his funds at pleasure, or at least in a very short 
 period ; and that both on account of the positive advantage of having 
 capital readily at command, and because there is less dread of a Hsk, 
 
 * Voyage cTAnacharsis, torn. iv. p. 371. 
 
CHAP. VIII. ON DISTRIBUTION. ?47 
 
 which may probably be avoided by timely retreat. The facility of 
 immediate* negotiation presented by the transferable bills and notes 
 of modern governments, is one principal cause of the low rate of 
 interest, at which many oi these governments are enabled to bor- , 
 row. (a) This interest, in my opinion, hardly covers the risk of the 
 lender ; but he always reckons on the certainty of selling his securi- 
 ties before the moment of catastrophe, should any serious alarm be 
 entertained. The public securities that are not negotiable, bear a 
 much higher interest ; such, for instance, as the old personal annui- 
 ties in France, which the government generally sold at the rate of 10 
 per cent, a high average for young lives. Wherefore the Genevese 
 acted with excellent judgment, in settling their annuities on thirty 
 lives of well-known public characters. By this means, they made 
 their annuities negotiable, and so contrived to get the rate of interest 
 of securities not negotiable, upon securities that were negotiable. 
 
 About the vast influence of personal character and ability in the 
 borrower, in determining the amount of the premium of insurance to 
 the lender, there can be no doubt whatever : they are the basis of 
 what is called personal credit ; and it is hardly necessary to say, 
 that a person in good credit borrows at a cheaper rate, than another 
 who has none. 
 
 Next to approved integrity and probity, what most contributes to 
 the credit of an individual or of a government, is past punctuality in 
 performance of engagements ; this is, in fact, the very corner-stone 
 of credit, and one that seldom proves insecure. But why, it may be 
 asked, may not a man who has never yet made default in his pay- 
 ment, fail the very next moment 1 There is very little probability 
 that he will, especially if his punctuality be of long standing. For, 
 to have been ever punctual in his payments, he must either have 
 always been possessed of value in hand sufficient to meet demands 
 upon him ; that is to say, he must have been a man of property over 
 and above his debts, which is the best possible ground of trust; or 
 else he must have managed matters so well, and have speculated with 
 so much judgment and safety, as always to have had his returns 
 arrive before the calls became due; thus evincing a degree of ability 
 and prudence, which afforded an excellent guarantee for his future 
 punctuality. The converse of this is the reason, why a merchant, 
 that has once failed or hesitated in the performance of his engage- 
 ments, thenceforward loses his credit entirely. 
 
 Finally, the good government of the country, where the debtor 
 resides, reduces the risk of the creditor, and consequently, the pre- 
 mium of insurance he is obliged to demand to cover that risk. 
 Hence it is, that the rate of interest rises, whenever the laws and 
 their administration do not insure the performance of engagements. 
 
 (a) This is strongly illustrated by the unfunded and the funded debt of Great 
 Britain. The former, in the shape of exchequer and treasury bills, bears a rate 
 of interest considerably lower than the latter in the shape of stock; because the 
 bills are convertible readily at par; whereas, the usual rise and fall of the capita' 
 stock is much greater, than the interest upon it for short periods. T. 
 
3_i8 ON DISTRIBUTION BOOK II. 
 
 It is yet more aggravated, when they excite to the violation of them; 
 as when they authorise non-payment, or do not acknowledge the 
 validity of Ion a fide contracts. 
 
 The resort to personal restraint against insolvent debtors has been 
 generally considered as injurious to the borrower ; but is, on the con- 
 trary, much in his favour. Loans are made more willingly, and on 
 better terms, where the rights of the lender are best secured by 
 law. (a) Besides, the encouragement to accumulate capital is thereby 
 nlaro-ed ; whenever individuals mistrust the mode of investing their 
 savings, there is a strong inducement to every one to consume the 
 whole of his income, and this consideration will, perhaps, help to 
 explain a curious moral phenomenon; namely, that irresistible avidity 
 for excessive enjoyment, which is a common symptom in times of 
 political turbulence and confusion.* 
 
 However, while on the subject of the necessity of personal severity 
 towards debtors, I cannot recommend the practice of imprisonment; 
 to confine a debtor is to command him to discharge his debts, and at 
 the same time deprive him of the means of so doing. There seems 
 more reason in the Hindu institution, giving the creditor the option 
 of seizing the person of his insolvent debtor, and confining him at 
 the creditor's own home to compulsory labour, for the creditor's 
 benefit/)- But, whatever be the means, whereby the public authority 
 enforces the payment of debts, they must always be ineffective, if 
 law be partially or capriciously administered. The moment a debtor 
 is, or hopes to be, out of his creditor's reach, there is a risk to be run 
 b^; the creditor, which is of value, and must be indemnified. 
 
 After having thus detached from the rate of bare interest all that 
 is paid as premium of insurance to the lender against the risk of total 
 or partial loss of his capital, it remains to consider that part, w^hich 
 is purely and simply interest ; that is to say, rent paid for the utility 
 and the use of capital. 
 
 Now this portion of the gross sum called interest is larger in pro- 
 
 * See the description of the Plague at Florence, as given after Boccaccio by 
 Sismondi, in his admirable Histoire des Republiques d'ltalie. A similar effect 
 was observed at several of the most dreadful epochs of the French revolution. 
 
 f Raynal, Histoire Philosophique, torn. i. 
 
 (a) The personal restraint of the debtor has nowhere been carried to such 
 extreme length as in England. Not only was a debtor at one time liable to 
 imprisonment pendent lite, and before the debt was legally established, and that 
 for the smallest sum ; but the term of his imprisonment in execution after judg- 
 ment, was absolutely unlimited. The hardship, in both these particulars, was 
 partially remedied before the erection of our insolvent code ; and that code has 
 still further alleviated the condition of the debtor. But the whole system is 
 vitiated, and in a great measure, neutralised, by total neglect of all measures 
 for the prevention of insolvency, in limine. The grand expedient is, publicity 
 of property ; which, in the first place, gives the creditor the means of estimating 
 beforehand, ana with more accuracy, the grounds and fair extent of his debtor's 
 credit; and in the next, enables him, in case of default, to resort ro those means, 
 instead of endeavouring to discover or extort them by personal restraint. Thus 
 * i?, that one error of policy is sure to engender another. T 
 
CHAP. VIII. ON DISTRIBUTION. 349 
 
 portion as the supply of capital available for loans is less; and as th^/ < 
 demand of capital for that specific object is greater ; and again, thatH *- 
 demand is the greater in proportion to the more numerous and more . 
 lucrative employments of capital. Consequently, a rise in the raid 
 of interest does not infallibly or universally denote, that capital is 
 growing scarcer ; for possibly, it may be a sign, that its uses are 
 multiplied. Smith has remarked this consequence upon the close of 
 the very successful war on the part of England, which terminated 
 with the peace of 1763.* The rate of interest then advanced instead 
 of declining; the important acquisitions of England had opened a 
 new field for her commercial enterprise and speculation; capital was 
 not diminished in quantity, but the demand for it was increased ; and 
 the rise of interest, which ensued, though in most cases a sign of 
 impoverishment, was, in this, a consequence of the acquisition of new 
 sources of wealth. 
 
 France, in 1812, experienced the opposite effect of a cause directly 
 the reverse. A long and destructive war, which had annihilated 
 almost all external communication; exorbitant taxation; the ruinous 
 system of licenses ; the commercial enterprises of the government 
 ifself; frequent and arbitrary alterations in the duties on import; 
 confiscation, destruction, vexation; in fine, a system of administration 
 uniformly avaricious and hostile to private interest, had rendered all 
 enterprises of industry difficult, hazardous and ruinous in the ex- 
 treme. The aggregate capital of the nation was probably on the 
 decline; but the beneficial employment of it became still more rare 
 as well as dangerous ; so much so, that interest never fell so low in 
 France as at that period; and, what is in general the sign of extreme 
 prosperity, was then the effect of extreme distress. 
 
 These exceptions serve but to confirm the general and eternal lawA 
 that the more abundant is the disposable capital, in proportion to the| 
 multiplicity of its employments, the lower will the interest of bor- 
 rowed capital fall. With regard to the supply of disposable capital, 
 that must depend on the quantum of previous savings. On this 
 head, I must refer to what I have before said upon the subject of 
 the formation of capital.f 
 
 * Wealth of Nations, book i. c. 9. 
 
 f Supra, Book I. chap. 11. It has been remarked that the rate of interest is 
 usually somewhat lower in towns, than in country places. Wealth of Nations, 
 book i. c. 9. The reason is plain. Capital is for the most part in the hands of 
 the wealthy residents of the towns, or at least of persons who resort to them for 
 their business, and carry with them the commodity they deal in, i. e. capital, 
 which they do not like to employ at much distance from their own inspection. 
 Towns, and particularly great cities, are the grand markets for capital, perhaps 
 even more than for labour itself; accordingly, labour is there comparatively 
 dearer than capital. In the country, where there is little unemploved capital, 
 the contrary is observable. Thus, usury is more prevalent in country places; 
 it would be less so, if the business of lending" were more safe and in better 
 repute. () 
 
 (a) These remarks are just in the main ; but the advantage of town over COUP/ 
 try, in this particular, may be reduced to a very trifle, by the ease of internal 
 communication. In England the difference is scarcely perceptible. T. 
 30 
 
350 
 
 ON DISTRIBUTION. BOOK II. 
 
 If it be desired, that capital in search of employment, and industry 
 ,n search of capital, should both be satisfied in the fullest manner, 
 entire liberty of dealing must be allowed in all matters touching 
 loans at interest. Disposable capital, being thus left to itself, will 
 seldom remain long unemployed; and there is every reason to 
 believe, that as much industry will be called into activity, as the 
 actual state of society will admit. 
 
 But it is essential to pay a strict attention to the meaning of the 
 term, supply of disposable capital; for this alone can have any in- 
 fluence upon the rate of interest ; it is only so much capital, as the 
 owners have both the power and the will to dispose of, that can be 
 said to be in circulation. A capital already vested and engaged in 
 production or otherwise, is no longer in the market, and therefore 
 no longer forms a part of the total circulating capital ; its owner is 
 no longer a competitor of other o\vners in the business of lending, 
 unless the employment be one, from which capital may be easily 
 disengaged and transferred to other objects. Thus, capital lent to a 
 trader, and liable to be withdrawn from his hands at a short notice, 
 and, ft fortiori, capital employed in the discount of bills of exchange, 
 which is one way of lending among commercial men, is capital, 
 readily disposable and transferable to any other channel of employ- 
 ment, which the owner may judge convenient. 
 
 Capital employed by the owner on his own account, in a trade 
 that may be soon wound up, in that of a grocer for instance, stands 
 nearly in the same predicament. The articles he deals in find at all 
 times a ready market, and the capital thus employed may be realiz- 
 ed, repaid if lent, re-lent and re-employed in other trades, or applied 
 to any other use. It is always either in actual circulation, or at least 
 on the point of being so. Of all values, the one most immediately 
 disposable is that of money. But capital embarked in the construc- 
 tion of a mill, or other fabric, or even in a movable of small dimen- 
 sions, is fixed capital, which being no longer available for any other 
 purpose, is withdrawn from the mass of circulating capital, and can 
 no longer yield any other benefit than that of the product wherein it 
 has been vested. Nor should it be lost sight of, that even though 
 the mill or other fabric be sold, its value, as capital, is not by that 
 means restored to circulation ; it has merely passed from one pro- 
 prietor to another. On the other hand, the disposable value, where- 
 with the buyer has made the purchase, is not thrown out of circula- 
 tion, having merely passed from his into the seller's hands. The 
 sale neither increases nor diminishes the mass of floating capital ir 
 the market. Attention to this circumstance is essential to the form 
 ing a correct estimate of the causes, that determine the rate, as weh 
 of interest on capital, as likewise of profit accruing from capita: 
 employed, which we are about to consider presently. 
 
 It has been sometimes supposed, that capital is multiplied by the, 
 operation of credit. This error, though frequently recurring ir. 
 works professing to treat of political econorn /5 can on!/ a rise from 
 i total ignorance of the nature and function o*" cap:'**!. Capita* 
 
f 
 
 CHAP. VIII. ON DISTRIBUTION. 351 
 
 consists of positive value vested in material substance, and not of 
 immaterial products, which are utterly incapable of being accumu- 
 lated. And a material product evidently cannot be in more places 
 than one, or be employed by more persons than one, at the same \ 
 identical moment. The works, machinery, utensils, provisions, andj 1 
 stock in hand, composing the capital of a manufacturer, may possiblyy* 
 be wholly borrowed ; in which case, he will be acting upon a hired 
 capital, and not on one of his own ; yet, beyond all question that 
 capital can be made use of by no one else, so long as it remains 
 within his control and management : the .lender has parted with the 
 power of otherwise disposing of it for the time. A hundred others 
 might have equal security and credit to offer; but their applications 
 could not multiply the volume of disposable capital, and could have 
 no other effect than to prevent other capital from remaining idle and 
 out of employ.* 
 
 It is not to be expected, that I should here enter upon a compu- 
 tation of the motives of affection, consanguinity, generosity, or 
 gratitude, which may occasionally give rise to the loan of capital, 
 or influence the amount of interest demanded for it. Every reader 
 must take upon himself to appreciate the influence of moral causes 
 upon the laws of political economy, which alone we profess to 
 expound. 
 
 To limit capitalists to the lending at a certain fixed rate only, is 
 to set an arbitrary value on their commodity, to impose a maximum 
 of price upon it, and to exclude, from the mass of floating or circu- 
 lating capital, all that portion, whose proprietors cannot, or will 
 not, accept of the limited rate of interest. Laws of this description 
 are so mischievous, that it is well they are so little regarded as they 
 almost always are, the wants of borrowers combining with those of* 
 lenders, for the purpose of evading them; which is easily managed, 
 by stipulating for benefits to the lender, not indeed bearing the name 
 of interest, although really the same thing in the end. The only 
 consequence of such enactments is, to raise the rate of interest, by 
 adding to the risks, to which the lender is exposed, and against 
 which he must be indemnified. It is somewhat amusing to find that 
 those governments, which have fixed the rate of interest, have 
 
 * Vide supra, Book I. chap. 10, 11, on the mode of employing 1 , and on the 
 transformation and accumulation of capital. What is here said does not militate 
 against the positions laid down in Book I. chap. 22. on the representatives of 
 money. A Mil of exchange, with good names upon it, is only an expedient for 
 borrowing of a third person actual and positive value, in the interim between 
 the negotiation and the maturity of the bill. Bills and notes, payable on demand, 
 or at sight, whether issued by the government, or by private banking-establish- 
 ments, are a mere substitution of a cheap paper agent of circulation, in the place 
 of a costly and metallic agent. The monetary functions of the metal being exe- 
 cuted by the paper, the former is set free for other objects ; and, inasmuch as it 
 is exchangeable for other commodities or implements of industry, a positive 
 accession is made by the substitution to the natural capital ; but no further. The 
 degree of the accession is limited strictly to the amount of value required for 
 the business of circulation, and dispensed with by this expedient; which amount 
 is a mere trifle, in comparison with the total value of the national capital 
 
g -. 2 ON DISTRIBUTION. BOOK II. 
 
 almost invariably themselves set the example of breaking their own 
 laws bv borrowing at higher than legal interest in their own ease. 
 That' interest should be fixed by law is highly proper and neces- 
 sarv; but it should be fixed only in cases, where there is no previous 
 agreement about it ; as in the case of a legal recovery of a sum with 
 interest And, in such case, I think the interest fixed by law should 
 be estimated at the lowest rate that is usually paid by individuals; 
 because the lowest rate is that paid by the safest investments. Now, 
 it is quite consistent with justice, that the withholder of capital should 
 
 hazardous, and consequently without his having drawn from it at 
 least the lowest interest it would have afforded. 
 
 But this rate should not be denominated the legal interest, because 
 the rate of interest ought no more to be restricted, or determined by 
 law, than the rate of exchange, or the price of wine, linen, or any 
 other commodity. And this is the proper place to expose a very 
 prevalent error. 
 
 Capital, at the moment of lending, commonly assumes the form 
 of money ; whence it has been inferred, that abundance of money 
 is the same thing as abundance of capital ; and, consequently, that 
 abundance of money is what lowers the rate of interest. Hence the 
 erroneous expressions used by men of business, when they tell us, 
 that money is scarce, or that money is plentiful; which, it must be 
 confessed, are equally just and appropriate, as the very incorrect 
 term, interest of money. r he fact is, that abundance or scarcity of 
 money, or of its substitute, whatever it may be, no more affects the 
 rate of interest, than abundance or scarcity of cinnamon, of wheat, 
 or of silk. The article lent is not any commodity in particular, 01 
 even money, which is itself but a commodity, like all others; but it 
 is a value accumulated and destined to beneficial investment. 
 
 A man, who is about to lend, converts into money the aggregate 
 value he means to devote to that particular purpose; and the borrower 
 no sooner has it at command, than he exchanges it for something 
 else; the money that has effected this operation, forthwith served to 
 effect other similar or dissimilar operations; the payment of a tax 
 perhaps, or the subsidy of an army. The value lent has but for a 
 moment assumed the form of money, in the same manner, as we have 
 traced revenue received and expended, passing through the same 
 temporary form ; the identical pieces of money serving perhaps a 
 hundred times in the course of a year, to transfer equivalent portions 
 of income. So, likewise, the same sum of money, that has served 
 to transfer a value from the hands of one lender into those of a bor- 
 rower, may, after infinite intervening transfers, perform the like 
 office between a second borrower and lender, without stripping the 
 former borrower of any part of the value he has received In 
 reality, then, it is value which has been borrowed, and not any par- 
 licular sort of metal or of merchandise. All kinds of merchandise 
 
CHAP. VIII. ON DISTRIBUTION. 353 
 
 may be lent and borrowed, as well as money ; nor does the rate of 
 interest at all depend upon the quality of the object lent or borrowed 
 Nothing is more common in trade, than to lend and borrow other 
 objects than money. When a manufacturer buys the raw material 
 of his business at a certain credit, he, in fact, borrows the wool, or 
 cotton, as the case may be, making use of the value of those materials 
 in his concern ; and their quality has no influence on the interest, 
 with which he credits the seller.* The glut or scarcity of the com- 
 modity lent only affects its relative price to other commodities, and 
 has no influence whatever on the rate of interest upon its advance 
 or loan. Thus, when silver money lost three-fourths of its former 
 relative value, although four times as much of it was necessary to 
 pass a loan of the same extent of capital, the rate of interest remain- 
 ed unaltered. The quantity of specie or money in the market, might 
 increase tenfold, without multiplying the quantity of disposable, or 
 circulating capital.f 
 
 Wherefore, it is a great abuse of words, to talk of the interest of 
 money ; and probably this erroneous expression has led to the false 
 inference, that the abundance or scarcity of money regulates the rate 
 of interest.J Law, Montesquieu, nay, even the judicious Locke, in 
 a work expressly treating of the means of lowering the interest of 
 money, have all fallen into this mistake ; and it is no wonder that 
 others should have been misled by their authority. The theory of 
 
 * Many loans on interest are made without bearing that name, and without 
 implying a transfer of money. When a retail dealer supplies his shop by buying 
 of the manufacturer or wholesale dealer, he borrows at interest, and repays, 
 either at a certain term, or before it, retaining the discount, which is but the 
 return of the interest charged him in addition to the price of the goods. When 
 a provincial dealer makes a remittance to a banker at Paris, and afterwards 
 draws upon his banker, he lends to him, during the time that elapses between 
 the arrival of the remittance and the payment of the draft. The interest of this 
 advance is allowed in the interest account which the banker annexes to the 
 merchant's account current. In the Cours d'Economie Politique, compiled by 
 Storch, for the instruction of the young grand-dukes of Russia, and printed at 
 Petersburgh, torn. vi. p. 103, we are informed, that the English merchants, or 
 factors, settled in Russia, sell to their customers at a credit of twelve months, 
 which enables the Russian purchaser of current articles, to realize long before 
 the day of payment, and turn the proceeds to account in the interim ; thereby 
 operating with English capital, never intended to be so employed. It is to be 
 presumed, that the English indemnify themselves for this loss of interest, by the 
 additional price of their goods. But the average rate of profit upon capital in 
 Russia is so high, that even this round-about way of borrowing is sufficiently 
 profitable to the native dealers. 
 
 f This is no contradiction to the former position, that, the precious metals form 
 part of the capital of society. They form an item of capital, but not of disposable, 
 or lendable capital ; for they are already employed, and not in search of employ- 
 ment; employed in the business of circulating value from one hand to another. 
 If their supply exceed the demand for this object, they are sent to other parti?, 
 where their price continues higher; if their general abundance lower their price 
 everywhere, the sum of their value is not increased, but a laiger quantity of 
 them is given in exchange for the same value in other commodities. 
 
 \ If interest were always low in proportion to the greater supply of money, it 
 would be lower in Portugal, Brazil, and the West Indies, than in Germany, 
 Switzerland, &c., which is by no means the case. 
 
 30* 2U 
 
y54 ON DISTRIBUTION. BOOK II. 
 
 irtercst was wrapped in utter obscurity, until Hume and Smith-* 
 dispelled the vapour. Nor will it ever be clearly comprehended, 
 except by such as shall have acquired a correct notion of what has, 
 throughout this work, been denominated capital, and shall proceed 
 in the conviction, that the object lent or borrowed, is not a particular 
 commodity or object of merchandise, but a portion of value, of the 
 aggregate value of the capital available for that object; and that the 
 per centage paid for the use of this portion of capital, at all times 
 and places, depends on the relative supply and demand of capital to 
 he lent, and is wholly independent of the specific form or quality 
 of the commodity, wherein the loan is made, whether it be money, 
 or any other article whatever. 
 
 / 
 SECTION -II. 
 
 Of the Profits of Capital. 
 
 We have now sufficiently considered the nature and motive of the 
 
 interest paid by the borrower to the lender of capital, and, though 
 
 Jt appears pretty plainly, that this interest is compounded of the rent 
 
 Vof the capital, and of the premium of insurance against the risk of 
 
 its partial or total loss, we have also seen enough, to comprehend 
 
 the extreme difficulty of severing and distinguishing these two 
 
 ingredients. 
 
 Let us then proceed, in the next place, to investigate the causes of 
 the profit derivable from the employment of capital, whether by a 
 borrower or by the proprietor himself: to which end it will be 
 necessary, in the outset, to sever it from the profit of the industry, 
 that turns it to account; and here again we shall meet with the 
 greatest difficulty, in drawing the line of distinction; though it is 
 easy to perceive, that these two classes of profit, generally speaking, 
 are combined in the recompense or portion of the adventurer. Smith, 
 and most of the English writers on this science, have omitted to 
 notice this distinction; they comprise under the general head of the 
 profit of capital, or stock, as they term it, many items, which evi- 
 dently belong to the head of the profit of industry .f 
 
 * Essays of D. Hume, part ii. ess. 4. Wealth of Nations, book ii. c. 4. It 
 is well for the student in political economy, that Locke and Montesquieu have 
 not written more upon it; for the talent and ingenuity of a writer serve only to 
 perplex a subject he is not thoroughly acquainted with. To say the truth, a 
 man of lively wit can not satisfy his own mind without a degree of speciousnesa* 
 and plausibility, which is of all things the most dangerous to the generality of 
 readers, who are noi sufficiently grounded in principle to discover an error at 
 first sighi.. In those sciences, which consist in mere compilation and classifica- 
 iion, as in botany or natural history, one can scarcely read too much; but in 
 those deoendent upon the deduction of general laws from particular facts, the 
 liettgr course is to read little, and select that little with judgment. 
 
 r This omission is justified by Smith, on the following grounds. " Let us 
 suppose/ savs he, " that in some particular place, where the common annual 
 
CHAP. VIII. ON DISTRIBUTION. 355 
 
 Perhaps an approximation may be made to the accurate appre- 
 ciation of that part of the aggregate profit, which appertains to the 
 capita], and that, which appertains to the industry employing it, 
 respectively, by comparing the mean ratio of total profit with the 
 mean ratio of the difference of profit in the same line of business, 
 which seems a fair index of the difference of the skill and labour 
 engaged. We will suppose two houses, in the fur trade for example, 
 to work each upon a capital of 100,000 dollars, and to make on the 
 average, an annual profit, the one of 24,000 dollars, the other of 
 6000 dollars only; a difference of 18,000 dollars fairly referable to 
 the different degree of skill and labour, the mean of which is 9000 
 dollars; this may be considered as the gains of industry, which, de- 
 ducted from 15,000 dollars, the mean profit of the trade, will leave 
 6000 dollars for the profit of the capital embarked in it. 
 
 This example I could suggest as a means, rather of distinguishing 
 those items of profit thus mixed up together, than of estimating 
 their respective ratio with any tolerable certainty. But, without 
 any index to the precise line of demarkation between the profits of 
 capital and those of the industry employing it, we may take it for 
 granted, that the former will always be proportionate to the risk of 
 partial or total loss, and to the duration of the employment. In 
 practice, adventurers, having capital at their command, always weigh 
 beforehand the advantages and disadvantages of the different modes 
 of investment, as specified above,* and naturally prefer, ceteris pari- 
 bus, those presenting the smallest risk and the quickest return ; so 
 that there is less competition of capital for hazardous and long- 
 winded adventurers; indeed, none whatever is embarked in them, 
 unless they hold out a rate of profit so much above the average rate, ^ 
 as to tempt the capitalist to run the risk. Theory, therefore, leads v 
 to the presumption, which is confirmed by the test of experience, 
 that the profit of capital is high, in proportion to the hazard of the 
 adventure, and to the length of its duration.. 
 
 When a particular employment of capital, the trade with China, 
 
 profits of a manufacturing stock are 10 per cent, there are two different manu- 
 factures, in one of which the coarse materials annually wrought up cost only 
 7001., while the finer materials in the other cost 7000Z. If the labour in each 
 cost 300Z. per annum, the capital employed in the one will amount only to 1000Z.; 
 whereas that employed in the other will amount to 7300J. At the rate of 10 
 per cent., therefore, the undertaker of the one will expect a yearly profit of 10(M. 
 only, and that of the other 730/. ;" and he goes on to infer, " that the profit is in 
 proportion to the capital, and not to the labour and skill of inspection and direcr 
 tion." But the instance put is altogether inconclusive ; and it is equally easy tc 
 suppose the case of two manufactures, carried on in the same place, and in the 
 same line, each with an equal capital of 1009/. the one under the conduct of an 
 active, frugal, and intelligent manager, the other under that of an idle, ignorant, 
 and extravagant one ; the former yielding a profit of 1507. per annum, the latter 
 one of 50t. only. The difference in this case will arise, not from any difference 
 in the respective capitals employed, but from the difference in the skill and in- 
 dustry employing them ; which latter qualities will be more productive in tbi 
 one instance than in the other. 
 * Book II. chap. 7. sect 3. 
 
358 ON DISTRIBUTION. BOOK II. 
 
 for instance, does not afford a profit proportionate, not only to the 
 time of the detention, but likewise to the danger of loss, and the 
 inconvenience of a long, perhaps a two years' duration of one single 
 operation before the returns come to hand, a proportion of the capital 
 , is gradually withdrawn from that channel ; the competition slackens, 
 and the profits advance, until they rise high enough to attract fresh 
 capital.* 
 
 This will serve also to explain, why the profits, derivable from 
 f a new mode of employment, are larger than those of common and 
 ordinary employments, where the production and consumption have 
 been well understood for years. In the former case, competition is 
 deterred by the uncertainty of success ; in the latter, allured by the 
 security of the employment. 
 
 In short, in this matter, as in all others, where the interests of 
 mankind clash one with another, the ratio is determined by the re- 
 lative demand and supply for each mode of employment of capital 
 respectively. 
 
 It is a maxim with Smith and those of his school, that human 
 labour was the first price, the original purchase-money, paid for 
 all things. They have omitted to add, that for every object of pur- 
 chase, there is, moreover, paid, the agency and co-operation of the 
 capital employed in its production. Is not capital itself, they will 
 say, composed of accumulated products, of accumulated labour? 
 Granted : but the value of capital, like that of land, is distinguishable 
 from the value of its productive agency; the value of a field is quite 
 different from that of its annual rent. When a capital of 1000 dol- 
 lars is lent, or rather lent on hire, for a year, in consideration of 50 
 dollars more or less, its agency is transferred for that space of time, 
 and for that consideration; besides the 50 dollars, the lender receives 
 back the whole principal sum of 1000 dollars, which is applicable 
 to the same objects as before. Thus, although the capital be itself a 
 pre-existent product, the annual profit upon it is an entirely new one, 
 and has no reference to the industry, wherein the capital originated. 
 
 Wherefore when a product is ultimately completed by the aid of 
 capital, one portion of its value must go to recompense the agency 
 of the capital, as well as another to reward that of the industry, that 
 have concurred in its production. And the portion so applied is 
 wholly distinct from the value of the capital itself, which is returned 
 to the full amount, and emerges in a perfect state from its productive 
 employment. Nor does this profit upon capital represent any part 
 of the industry engaged in its original formation. 
 
 From all which it is impossible to avoid drawing this conclusion, 
 
 * To say nothing of the other motives, that attract industry towards any par- 
 ticular profession or repel it thence, which have been noticed in the preceding 
 chapter. These motives sometimes operate all in the same direction, and then 
 the proms of both industry and capital rise or fall together; when they act in 
 opposite directions, the difference on the profit of capital balances that on the 
 profit of industry ; or vice versa. 
 
CHAP. VIII. ON DISTRIBUTION. 357 
 
 that the profit of capital, like that of land and the othei ;iatural 
 sources, is the equivalent given for a productive service, which 
 though distinct from that of human industry, is nevertheless its 
 efficient allv in the production of wealth. 
 
 L 
 
 SECTION III. 
 
 6--+U*- 
 
 Of the Employments of Capital most beneficial to Society. 
 
 To the capitalist himself, the most advantageous employment oi 
 capital is that, which with equal risk yields the largest profit ; but 
 what is to him most beneficial, may perhaps not be so to the com- 
 munity at large; for capital has this peculiar faculty, that, besides 
 being productive of a revenue peculiar to itself, it is, moreover, a 
 means, whereby land and industry may generate a revenue likewise. 
 This is an exception to the general principle, that what is the most 
 productive to the individual, is so to the community at large. A 
 capital lent to a foreign country, may very probably produce to the 
 proprietors and the nation, the highest possible rate of interest; but 
 can afford no assistance towards extending the revenue of the 
 national territory, or for the national industry, as it would do, if 
 employed within the pale of the nation. 
 
 The portion of capital embarked in domestic agriculture is em- /-to ' 
 ployed best for the interests of a nation ; it enhances the productive^ 
 power of the land and of the labour of a country. It augments at 1 
 once the profits of industry and those of real property. Capital 
 employed under intelligent direction, may make barren rocks to 
 bear increase. The Cevennes, the Pyrenees, and the Pays de Vaud, 
 present on every side the view of mountains, once a scene of unva- 
 ried sterility, now covered with verdure and enriched by cultivation. 
 Parts of these rocks have been blasted with gunpowder, and the 
 -shivered fragments employed in the construction of terraces one 
 above another, supporting a thin stratum of earth carried thither by 
 human labour. In this manner is the barren surface of the rock 
 transformed into shelving platforms, richly furnished with verdure, 
 and teeming with produce and population. The capital originally 
 expended in these laborious improvements might, perhaps, have 
 produced larger .profits to the capitalist, if employed in external 
 commerce; but probably the total revenue of the district would 
 have been inferior in amount. 
 
 For a similar reason, capital cannot be more beneficially employ- 
 ed, than in strengthening and aiding the productive powers of nature. 
 Well contrived and useful machinery produces more than the in- 
 terest of its prime cost; and besides affording additional profit to the 
 proprietor, benefits the consumer and the community at large, to the 
 full extent of the saving effected by its means ; for every thing sarcd 
 is so much gain. 
 
 The productive employments, that rank next in point of nationa' 
 
358 
 
 ON DISTRIBUTION. BOOK II 
 
 (benefit, are those of manufacture and internal commerce; for the 
 profits of the industry they set in motion are earned at home; 
 whereas, capital embarked in foreign trade benefits the industry 
 and natural resources of all nations indiscriminately. 
 
 The employment of capital, that tends least to the national advan- 
 lage, is the carrying trade between one foreign country and another. 
 / When a nation is possessed of an immense accumulation of capi- 
 tal, it will do well to embark it in all these different channels of 
 industry; for they are all lucrative, and in nearly equal degree to 
 the capitalist, though in very different degrees to the nation at large. 
 What prejudice can arise to the lands of Holland, which are already 
 in a high state of cultivation and management, and want neither 
 clearing nor enclosing, or what injury be sustained by nations pos- 
 sessed of little territory, like the old states of Venice, Genoa, and 
 Hamburg, from the large investments of national capital in the car- 
 rying trade ? It flowed into that particular channel of employment, 
 merely because there was no other open to it. But that class of 
 trade, and generally all external commerce, is ill adapted to a nation 
 deficient in capital, and having not enough to keep its agriculture 
 and manufacture in activity ; and it would be absurd for its govern- 
 ment to give premature encouragement to those external branches 
 of industry; for such a measure would but check the employment 
 of capital in the manner best calculated to increase the national 
 revenue. I China, though it is the largest empire in the world, and 
 must possess the greatest aggregate revenue, since it maintains the 
 most numerous and dense population, abandons to foreigners almost 
 all its external commerce. Undoubtedly, in her present condition, 
 she would be a gainer by extending her external relations of com- 
 merce ; but she affords a very striking example of the prosperity 
 attainable without them. 
 
 It is very fortunate, that the natural course of things impels 
 capital rather into those channels, which are the most beneficial to 
 the community, than into those, which afford the largest ratio of 
 profit. The investments generally preferred are those that are 
 nearest home; whereof the first and foremost is the improvement 
 of the soil, which is justly considered the most safe and permanent ; 
 the next, manufacture arid internal commerce; and the last of all, 
 external commerce, the trade of transport, and the commerce with 
 distant nations. The owner of a capital, especially of a moderate 
 one, will embark it rather under his own superintendence, than in 
 distant and remote concerns. He is apt to think his risk too hazard- 
 ous, when he loses sight of his property for any considerable length 
 of time, when he consigns it to strangers, or can expect only tardy 
 returns, or is exposed to the chances of litigation with fraudulent 
 debtors, who may take advantage of their unsettled habits of life, 
 or of the laws of foreign countries, with which he is himself unac- 
 quainted Nothing, but the bait of exclusive privilege and monopoly- 
 profit, o the violent derangement of internal industry, caji induce 
 
CHAP. IX. ON DISTRIBUTION. 350 
 
 an European nation, not possessed of a large surplus capital, to 
 in the colonial or East India trade. (1) 
 
 CHAPTER IX. 
 
 OF THE REVENUE OF LAND. 
 
 SECTION I. 
 Of the Profit of Landed Property* 
 
 LAND has the faculty of transforming and adapting to the use of 
 mankind an infinity of substances, which, without its intervention, 
 
 *In the preceding chapter, I have given the interest, precedence of the profit, 
 of capital, because the former helps to render the latter more intelligible, f 
 have here adopted a contrary arrangement, because the consideration of the 
 profit of land elucidates the subject of rent. 
 
 (1) [The reasoning of this whole section appears to me to be unsound arid 
 inconclusive. There is no distinction in point of productiveness, between any 
 of the various employments of capital. There can, in short, be no line drawn 
 between the different productive channels, into which capital may be directed. 
 Whatever occupations tend to supply the wants and increase the comforts and 
 accommodations of life, are, in the strictest sense of the word, equally produc- 
 tive, and nearly in the same proportion augment the national wealth. The capi- 
 tal employed in the carrying-trade between one foreign country and another is. 
 as advantageous to the individual and nation to which it belongs, as the capital 
 employed at home. For, as has been already remaked in relation to the profit:- 
 of industry (vide note page 6) in the absence of all restraints, the profits of all 
 the different employments of capital, will be on an equality or nearly approaching 
 it, inasmuch as any material difference will cause its diversion to a more pro- 
 ductive channel, and thus restore the equilibrium. In a word, capital flows into 
 the carrying-trade only because it yields a greater profit than it otherwise would 
 do, did it not take that direction. 
 
 Moreover, there is no exception to the general principle, that what is mo^t 
 productive to the individual is also so to the community at large. Notwithstand- 
 ing the contrary assertion of our author, in the foregoing section, a capital lent 
 to, or employed in, a foreign country, if it yield to the proprietors and nation the 
 highest rate of interest, must necessarily afford the national revenue as much, 
 and extend the same assistance to the national industry, as if it were employed 
 within the pale of the nation. If, for example, a capital lent abroad, give em- 
 ployment to foreign industry and natural agents, it is because its productive 
 service, when things, I must again repeat, are left to take their natural course, 
 will yield a larger revenue to its owners. Were not this the case, this capital 
 would not seek employment abroad, but remain at home. The revenue produced 
 by capital employed abroad, if the proprietor does not himself at the same timf- 
 emigrate there, must be the means of calling into activity, and giving a greater 
 development to the productive faculties of the national industry and land, as tin* 
 revenue must be consumed, either productively or unproductively at home.] 
 
 AMERICAN EDITOR 
 
ON DISTRIBUTION. BOOK II. 
 
 as 
 
 would be to them of no service; it yields nutriment and vegetati 
 juices to the grain, the fruits, and vegetables, whereon we subsist; 
 well as to the forests, whereof we construct our houses, ships, and 
 furniture, and whence we derive fuel to keep us warm. Its agency 
 in the production of all these commodities may be called, the pro- 
 ductive service of land. And thence it is, that the profit of the pro- 
 prietor originates. 
 
 He derives a further benefit from the useful substances to be ex- 
 tracted from its entrails; the stone, metal, coal, peat, &c. &c. 
 
 Land, as we have above remarked, is not the only natural agent 
 possessing productive properties; but it is the only one, or almost 
 I he only one, which man has been able to appropriate, and turn to 
 his own peculiar and exclusive benefit. The water of rivers and of 
 the ocean has the power of giving motion to machinery, affords a 
 means of navigation, and supply of fish ; it is, therefore, undoubtedly 
 possessed of productive power. The wind turns our mill ; even the 
 heat of the sun co-operates with human industry; but happily no 
 man has yet been able to say, the wind and the sun's rays are mine, 
 and I will be paid for their productive services. I would not be 
 understood* to insinuate, that land should be no more the object of, 
 property, than the rays of the sun, or blast of the wind. There is 
 ;in essential difference between these sources of production ; the 
 power of the latter is inexhaustible; the benefit derived from them 
 by one man does not hinder another from deriving equal advantage. 
 The sea and the wind can at the same time convey my neighbour's 
 vessel and my own. With land it is otherwise. Capital and industry 
 will be expended upon it in vain, if all are equally privileged to 
 make use of it; and no one will be fool enough to make the out- 
 lay, unless assured of reaping the benefit. Nay, paradoxical as it 
 may seem at first sight, it is, nevertheless, perfectly true, that a 
 man, who is himself no share-holder of land, is equally interested 
 in its appropriation with the share-holder himself. The savage tribes 
 of New Zealand, and of the north-western coast of America, where 
 the land is unappropriated, have the greatest difficulty in procuring 
 a precarious subsistence upon fish and game, and are often reduced 
 1o devour worms, caterpillars, and the most nauseous vermin :* not 
 nnfrequently even to wage war on one another, from absolute want, 
 and to devour their prisoners as food ; whereas, in Europe, where 
 the appropriation is complete, the meanest individual, with bodily 
 health, and inclination to work, is sure of shelter, clothing, and sub- 
 sistence, at the least. 
 
 Jn preceding chapters, we have noticed the profit resulting from 
 industry and capital, embarked in agriculture or other branches of 
 industry. In the present, we are to inquire, wherein consists the 
 peculiar profit of land itself, independent of that accruing from the 
 industry and capital, devoted to its cultivation ; and to consider the 
 
 * Malthua, in his Essay on Population, book i. c. 405, has given a detail of 
 e of the revolting 1 extremes, to which savage tribes have been reduced by 
 want of a regular supply of food. 
 
CHAP. IX. ON DISTRIBUTION. 361 
 
 profit of land in the abstract, and whence it originates, without any 
 inquiry as to who may be the cultivator, whether the proprietor 
 himself, or a tenant under him. 
 
 It is the declared opinion of many writers,* that the value of 
 products is never more than the recompense of the human agency 
 or surplus, that can be set apart as the peculiar profit of land, and 
 constitute the rent paid for its use to the proprietor. The tenor of 
 their argument is this: the proprietor of land lying waste or fallow 
 having also a capital to dispose of, may, at his pleasure, expend it, 
 cither in cultivation, or in some other way. If he reckons that the 
 cultivation of his land will yield him as large a return as any other 
 investment, he will give it the preference; and, indeed, it is found 
 by experience, that this mode of investment is preferred, even 
 though somewhat less advantageous than others, as being 1 at all 
 events more safe. Well : and what do they infer from this ? Why, 
 that cultivation yields no return whatever, beyond the interest of 
 the capital engaged in it;f and if so, what is there left for the profit 
 
 *Deatutt de Tracy. Cnmmentaire sur V Esprit de Lois, c. 13. Rieardo(a) 
 Prin. of Pol. Ecoii. and Tax. c. 2. 
 
 f According to these writers, even the interest of capital is not given as the 
 recompense of its concurrence in the business of production. I have already 
 exposed the fallacy of this opinion, supra, chap. 8. sect. 2. 
 
 () This chapter of Ricardo is perhaps the least satisfactory and intelligible 
 of his whole work. It goes upon the principle detailed by Malthus, in his Essay 
 on Rent ; viz. that the ratio of rent is determined by the difference in the pro- 
 duct of land of different qualities, the worst land in cultivation yielding no rent 
 at all. Bat there is a great deal of land yielding rent without any cultivation; 
 and, in a country where the whole of the land is appropriated, none is ever cul- 
 tivated without paying some rent or other. The downs of Wiltshire yield a 
 rent, without any labour, or capital, being expended upon them; so likewise the 
 forests of Norway ; this rent is the natural product of the soil ; it is paid for the 
 perception of that natural product, between which, and the desire for it, 'an arti- 
 ficial difficulty is interposed by human appropriation. The whole rent is, there- 
 fore, referable, not to the quality of the land only, but to the quality jointly with 
 the appropriation ; and so it is in all cases. Wherever a difficulty is thus inter- 
 posed, rent will be paid upon all land brought into cultivation ; for why should 
 the proprietor part with the temporary possession for nothing, any more than the 
 capitalist with his capital ? And the ratio of rent is determined", not altogether 
 by the quality of the soil, but by the intensity 1. Of the desire, or demand 
 for its productive agency ; 2. Of the artificial difficulty interposed by nature and 
 human appropriation. The quality of the soil may vary the intensity of the 
 demand for it beyond all question ; for the quality is the productive agency : but 
 the supply of agricultural industry and capital in the market will also vary the 
 proportion of its product, which industry and capital will expect for themselves. 
 Why is rent highest, when a population is condensed on a limited terriiona. 
 surface] because then the utility of its productive qualities is more strongly felt 
 and desired, in consequence of their intense difficulty and attainment. And why 
 is rent still further raised by the prohibition of the import of products of external 
 agriculture? because the natural difficulty of obtaining the benefit of the pro- 
 ductive agency of foreign land is aggravated, by the artificial difficulty inter- 
 posed by legislative enactments. The degree of productive agency, of course, 
 affects the amount of the product; but rent originates in the union of that 
 agency, or utility, with difficulty of attainment, natural and artificial, and i*> 
 regulated in its ratio by their combined intensity. T. 
 31 2V 
 
ON DISTRIBUTION. BOOR II. 
 
 upon a partial and imperfect view of the matter, and upon a total 
 neglect of the influence of demand in the fixation of value. I will 
 now endeavour to give a more complete view of the subject. 
 
 The productive power of the soil has no value, unless where its 
 products are objects of demand. Travellers, who have explored the 
 interior of America, and other desert parts of the globe, make 
 repeated mention of tracts of the richest land, capable of every kind 
 of culture, yet wholly destitute of any useful or valuable products. 
 But no sooner is a colony established in the vicinity, or, by some 
 means or other, a market found where the products of the soil will, 
 in the way of exchange, pay the usual rate of interest upon the 
 requisite advances, than cultivation begins immediately. Up to this 
 .point, there is no difference between us. But if any circumstance 
 operate to aggravate the demand beyond ~fh~is point, the value of 
 agricultural products will exceed, and sometimes very greatly ex- 
 ceed, the ordinary rate of interest upon capital ; and this excess it is, 
 which constitutes the profit of land, and enables the actual cultivator, 
 when not himself the proprietor, to pay a rent to the proprietor, aftei 
 having first retained the full interest upon his own advances, and the 
 full recompense of his own industry. 
 
 Land is an agent gratuitously furnished to mankind at large, by 
 whom it is afterwards exclusively appropriated; but its appropria- 
 tion does not begin to be profitable to the individual, in whoso 
 favour it is made, until its products are an object of den^md, and 
 until their suj?j:>lyjceases to be co-extensive with the desire for them, 
 as it is with respect to some other natural objects, air, water, &c. 
 
 From those products of the soil only, thus raised in value by the 
 ' ! demand, can there accrue that profit to the proprietor which has 
 1 been called the profit of land ; and which is paid in all civilized coun- 
 tries, and especially where manufacture and commerce multiply the 
 objects of exchange. It may sometimes happen, that in a particular 
 district of such a country, the rent of land may be very trifling; 
 as in our own district of Sologne, where it is no more than 20 cents 
 an acre; but this is owing to the want of roads, and particularly of 
 water-carriage, which makes the charge of bringing its agricultural 
 produce to market, added to the charge of cultivation, absorb nearly 
 the whole value it will there sell for. In some countries, highly 
 civilized and productive in the extreme, land pays no more than 3 
 or 4 per cent, upon its price or purchase-money. Yet, this is no 
 proof of the poverty of the soil ; it proves only, that it sells dear. A 
 landed estate may yield 24 dollars the acre, and require very little 
 expense of cultivation; as if it be laid down in pasture, for instance; in 
 such case it must owe most of its value to its natural properties; yet, 
 /it have cost the proprietor 800 dollars the acre, it will yield a return 
 I ol' 3 per cent. only. (And herein consists the difference between the 
 l | -profit and the rent of land : profit is high or low, according to the 
 
CHAP. IX. ON DISTRIBUTION. 3G3 
 
 A A% 
 
 quantum of the product ;. rent, according to the quantum of the pur j 
 chase-money or price. An acre of land, yielding a profit of onof 
 dollar only, will bring as high a rent as an acre yielding a profit of 5(| 
 dollars, if 50 times as much has been paid for the one as for the other! 
 
 Whenever land is bought with capital, or capital with land, occa- 
 sion is given for a comparison of the returns of the one species of 
 property with the returns of the other. It is possible, that an estate, 
 Dought with a capital of 100,000 dollars, may produce but 3 or 4000 
 dollars per annum, whilst the same amount of capital would yield 5 
 or 6000 dollars. The lower jrate of interest, which the proprietor is 
 content to take on a purchase of land, may be attributed, in the first 
 place, to the superior stability of the investment. Capital can seldom 
 be made productive, without undergoing several changes both of 
 form and of place, the risk of which is always more or less alarming 
 to persons unaccustomed to the operations of industry ; whereas, on 
 the contrary, landed property produces without any change of either 
 quality or position. The satisfaction and pleasure attached to terri- 
 torial possession, the consideration, weight, and dignity it communi- 
 cates, and the titles and privileges with which it is in some countries 
 accompanied, contribute greatly to increase this natural preference. 
 
 It is true, that land is more exposed than other property to the 
 burden of public taxation, and to the arbitrary exactions of power, 
 precisely because it can neither be removed nor concealed. A float- 
 ing capital may take any shape whatever, and be removed at will. 
 It can escape tyranny and civil commotions more readily, than even 
 the person of its proprietor. It is a safer object of property ; for it 
 is often impossible to attach it, or to make it specifically responsible 
 for the debts of the proprietor. Moreover, it is much less exposed 
 to litigation than landed property. Yet, it is clear, that all these 
 advantages are more than counterpoised by the superior risk of 
 investment; and, that landed property is still preferred to floating 
 capital ; since land is dearer, in proportion to its annual returns. 
 
 Whatever may be the exchangeable price of land and capital one 
 to the other, it is proper to observe, that their interchange makes 
 no variation in the supply of productive agency of land and capital 
 respectively in circulation, and disposable for the purpose of produc- 
 tion ; consequently, that exchangeable price can nowise affect the 
 real and positive profit of land and of capital. When Richard sells 
 his estate to Thomas, the productive service of the land is at the dis- 
 posal of Thomas instead of Richard; and that of the capital, given 
 in exchange for it, is at the disposal of Richard instead of Thomas. 
 
 The only thing, which really varies the amount of productive 
 agency of land in circulation, is the actual amelioration of the soil,^ 
 by clearing and bringing new land into cultivation, or enlarging 
 the productive po\ver of old land, and thus increasing its product. 
 Savings and accumulations of capital are, in the shape of agricul- 
 tural improvements, transformed into landed property, and made to 
 participate in all the peculiar advantages and disadvantages attached 
 to it. The same may be said of houses, and generally of all Capita 
 
364 
 
 ON DISTRIBUTION. BOOK II. 
 
 > ; invested in a fixed and permanent object ; it thenceforth loses the 
 character of capital, and assumes that of landed property. 
 / Whence we may draw this invariable maxim ; that the productive 
 iagencv of land is possessed of value, which value, like value in gene- 
 
 ijrftl, increases in the direct ratio of the demand, and the inverse ratio 
 of the supply; and that, since land differs as much in quality, as in 
 /site and position, there is a peculiar demand and supply for each 
 peculiar quality. A demand for so much wine, more or less, what- 
 ever it arise from, creates a specific demand for as much productive 
 agency of the soil, as may be requisite for its growth;* and the extent 
 of surface, adapted to the culture of the grape, determines the supply 
 of that productive service. If the soil, capable of growing good 
 wine, be very limited in extent, and the demand for such wine very 
 brisk, the profit of the soil itself will be extravagantly high. 
 
 It is worthy of remark, that all land, that yields any profit at all, 
 however trifling the amount, even so little as 20 cents the acre, or 
 even less, may be kept in a state of cultivation : and there have been 
 many instances of its cultivation under such circumstances. Herein 
 it differs from capital and industry. A labourer, if he finds himself 
 settled in a place, where his labour does not yield him what he has 
 reason to expect, can migrate to another. So, likewise, capital quickly 
 flows from a channel, that affords a less, to one that affords a greater 
 'return. But land has not the same facilities: it is of necessity im- 
 moveable; consequently, out of its gross product, after the deduction 
 in the first instance of all advances of capital, with interest, as well 
 
 has of the profits of industry, without which there could be no product 
 whatever, there still remains to be deducted the expense of carrying 
 the product to the market, or place of exchange. When these seve- 
 ral deductions absorb the whole product of the land, the land itself 
 yields no profit at all, and the proprietor can never succeed in 
 
 ' getting a rent from it. Even if he cultivate it himself, he can only 
 gain a profit on his capital and industry, but will receive none what- 
 ever from the bare ownership of the land. In Scotland, there are 
 tracts of unproductive land thus cultivated by the proprietors, which 
 it would not answer for any one else to undertake. So, likewise, 
 in the back settlements of the United States, there are tracts of great 
 extent and fertility, whose revenue alone would not maintain the 
 proprietors ; yet they are, nevertheless, cultivated with success : but 
 it is by the proprietors themselves, who consume the product at the 
 place of growth, and are obliged to superadd to the profit of the land, 
 which is little or nothing, the further profit of capital and personal 
 industry, which afford a handsome competency. 
 
 It is .obvious, that land, though in a state of cultivation, yields no 
 profit, when no farmer will pay rent for it, which is a convincing 
 foroof that it gives no surplus, after allowing for the profit of the 
 (capital and industry requisite for its cultivation. 
 
 In the instance just mentioned, the effect is occasioned by the dis- 
 
 * As well as a demand for the capital and industry requisite for the cultivation. 
 
CHAP. IX. ON DISTRIBUTION. 365 
 
 tance of the market; the expense of transport swallows up the profit, 
 which might otherwise be made of the land. Other instances might 
 be adduced, in which badness of seasons, war, or taxation, have pro- 
 duced the same effect, and partially or totally absorbed the profit of 
 land, and thus thrown it out of cultivation.* 
 
 SECTION II. 
 
 Of Rent. 
 
 When a farmer takes a lease of land, he pays to the proprietor the 
 profit accruing from its productive agency, and reserves to himself, 
 besides the wages of his own industry the profit upon the capital he 
 embarks in the concern ; which capital consists in implements of 
 husbandry, carts, cattle, &LC. He is an adventurer in the business of 
 agricultural industry ; and, amongst the means he has to work with, 
 there is one that does not belong to him, and for which he pays rent, 
 i. e. the land. 
 
 The preceding section was occupied in explaining the source of 
 the profit of land. Its rent is generally fixed at the highest rate of 
 that profit, and for the following reason. 
 
 Agricultural adventure requires, on the average, a smaller capi- 
 tal,^) in proportion, than other classes of industry, reckoning the 
 land itself as no part of the capital of the adventurer. Wherefore, 
 there is a greater number of persons able, from their pecuniary cir- 
 cumstances, to embark in agricultural, than in any other speculations; 
 consequently, a greater competition of bidders for land upon lease- 
 On the other hand, the quantity of land fit for cultivation is limited 
 in all countries ; whereas the quantity of capital and the number 
 of cultivators have no assignable limitation. Landed proprietors, 
 therefore, at least in those countries which have been long peopled 
 and cultivated, are enabled to enforce a kind of monopoly against 
 the farmers. The demand for their commodity, land, may go on 
 continually increasing ; but the quantity of it can never be extended. 
 
 This circumstance is equally applicable to the nation at large, 
 and to each particular province or district. The number of acres 
 to be rented in each province is incapable of extension ; whilst the 
 
 * This catalogue of adverse circumstances, all bearing more strongly upon 
 '.he profit of land, than upon that of other sources of revenue, explains the fre- 
 quent and unavoidable remission of rent to the farmer, and proves the accuracy 
 of M. de Sevigne's judgment, when she writes from the country: "I wish my 
 aon could come here and convince himself of the fallacy of fancying oneself 
 possessed of wealth, when one is only possessed of land." Lettre 224. 
 
 (a) This is not universally true. In England, where agriculture has attained 
 . a high degree of perfection, arable farms require much larger capitals than for- 
 merly ; and a farmer is commonly a much richer man, than the majority of the 
 tradesmen in his neighbourhood. T. 
 31* 
 
300 
 
 ON DISTRIBUTION. BOOE II. 
 
 number of persons in a condition to rent them has no fixed and 
 absolute limit. 
 
 i Whenever this is the case, the bargain between the land-holder 
 and the tenant must always be greatly in favour of the former; and, 
 (whenever there is any portion of the soil, which yields to the latter 
 ILove than the interest of his capital and the wages of his industry, 
 fa higher bidder will soon offer himself. The liberality of a few pro- 
 prietors, the distance at which they happen to reside, the ignorance 
 of others, and even of the farmers themselves, and the imprudence 
 of a few more, may sometimes operate to depress the ratio of rent 
 below the maximum of profit; but these are accidental circum- 
 stances, which act for a season only, and can never prevent the 
 regular' and constant action of natural causes, which must in the 
 end prevail. 
 
 Besides this advantage accruing to the land-holder, derived from 
 the very nature of things, he has likewise in general the advantage 
 of possessing, or being able to accumulate greater wealth, and some- 
 times credit, patronage and influence, into the bargain : but the first 
 advantage is alone sufficient to insure him the sole benefit of any 
 circumstances, that may happen to enhance the profit of land. The 
 opening of a canal or road, the increase of population, wealth, and 
 affluence in the province, always operate to raise his rent. lie also 
 benefits by every improvement in the cultivation; for a man can 
 afford to pay dearer for the hire of an instrument, when he kn<ws 
 how to turn it to better account. 
 
 f When the proprietor himself expends a capital in the improvement 
 I ! of his land, in draining, irrigation, fences, buildings, houses, or other 
 j erections, the rent then includes, in addition to the profit of the land, 
 ; the interest likewise of the capital so expended.* 
 
 The farmer may sometimes undertake these expenses of ame- 
 lioration himself; but he can only calculate on receiving interest 
 on the outlay during the continuance of his lease: at the expira- 
 tion of which, the benefit must devolve to the land-holder, being 
 wholly incapable of removal : thenceforward the landlord derives 
 the whole profit, without having made any of the advances : for 
 he receives a proportionate increase of rent in consequence. The 
 farmer should, therefore, engage only in those improvements, whose 
 effects will last no longer than his lease ; unless the lease be long 
 enough, to allow the profit arising from his improvements to repay 
 the whole outlay, together with the interest. It is in this way, 
 that long leases operate to increase the product of the land; -\nd "it 
 is evident the effect will be the greatest, when the land is farmed 
 by the proprietor himself; for he is far less likely, than the farmer, 
 to lose the benefit of such advances; every judicious improvement 
 vields him a permanent profit, and the original outlay is amply 
 Jepaid, when the land is finally disposed of. The farmer's certainty 
 
 The capital, vested in improvements upon land, is sometimes of greater 
 ralue than the land itself. This is the case with dwelling-houses 
 
CHAP. IX. ON DISTRIBUTION. 3G7 
 
 of reaping the advantage till the end of his lease, is equally conducive 
 to the improvement of landed property with the length of leases. 
 On the contrary, such laws and customs, as authorize the cancelling 
 of leases in specified cases, as in case of sale hy the proprietor, are 
 highly prejudicial to agriculture; since the farmer will hardly ven- 
 ture to undertake any considerable improvement, if kept in continual 
 fear of seeing an intrusive successor appropriate the recompense of 
 his ingenuity, labour, and capital. In fact, every improvement he 
 should make would but increase the risk of that injustice ; for land 
 is far more saleable in good condition than otherwise. 
 
 Leases are nowhere more sacredly regarded than in England ; 
 and the privilege, enjoyed by leasees to the amount of 40s. (about 
 10 dollars) and upwards, of voting at Parliamentary elections, has. 
 in some measure, restored the equipoise of power and influence 
 between landlords and tenants, which seldom exists in practice. In no 
 other country do we see tenants so confident of undisturbed posses- 
 sion, as to build upon ground held on lease. Such tenants improve 
 the land, as if it were their own ; and their landlords are punctually 
 paid ; which is less frequently the case elsewhere. 
 
 The land is sometimes cultivated by persons possessed of no capi- 
 tal whatever: the proprietor furnishes himself the requisite capital, as 
 well as the Ian J. They are called in France, metayers, and com- 
 monly pay to the landlord half the gross product. This arrangement 
 is to be met with only in the infancy of agriculture, and is of all 
 others the least conducive to improvement ; for the party who bears 
 the expense of amelioration, whether landlord or tenant, makes the 
 other a gratuitous present of half the interest on his advances. This 
 kind of tendency was more common in the feudal times, than it is 
 at present. The lords were above tilling the land themselves, and 
 their vassals had not the means. The largest incomes were then 
 derived from the land, because the lords were large proprietors ; but 
 they bore no proportion to the extent of the land. Nor was this 
 owing to the defect of agricultural skill, so much as to the scarcity 
 of capital devoted to improvements. The lord felt little anxiety to~V 
 improve his property, and expended, in a way more liberal than 1 
 productive, an income that he might easily have tripled. He levied \ 
 war, gave feasts and tournaments, and maintained a numerous \ 
 retinue. If we look at the then degraded condition of commerce 
 and manufacture, superadded to the insecurity of the agricultural 
 interest, we need go no further for the explanation of the reason, 
 why the bulk of the community was in the extreme of indigence ; 
 and why, independently of every political cause, the nation itself 
 was weak and impotent. Five departments would now be able to 
 repel attacks, which overwhelmed all France at that period : but 
 happily for her, the other states of Europe were nowise in a bctte- 
 condition. 
 
368 
 
 ON DISTRIBUTION. BOOK II 
 
 CHAPTER X. 
 
 OP TFIE EFFECT OF REVENUE DERIVED BY ONE NATION FROM ANOTHER. 
 
 ONE nation cannot take from another the revenues of its industry. 
 A German tailor, establishing himself in France, there makes a 
 profit, in which Germany had no participation. But, if this tailor 
 contrive to amass a little capital, and after the lapse of several years 
 carry it back with him to his native country, he injures France to 
 the same extent as a French capitalist, who should emigrate with 
 the same amount of fortune.* In a political view, the injury to the 
 wealth of the nation is equal in both cases; but in a moral light, it is 
 otherwise; for I reckon that a native Frenchman in quitting his 
 country, robs it of an affectionate attachment, and a spirit of exclu- 
 sive nationality, which it can never look for in a stranger born. 
 
 A nation, receiving a stray child into its bosom again, acquires a 
 'real treasure; inasmuch as in him it receives an addition to its popu- 
 lation, an accession to the profits of national industry, and an acqui- 
 sition of capital. It at the same time recovers a lost citizen, and the 
 means for him to subsist upon. If the exile bring back his industry 
 only, at any rate the profits of industry are added to the national 
 stock. It is true, that a source of consumption is likewise super- 
 added ; but supposing it to counterbalance the advantage, there is no 
 diminution of revenue, while the moral and political strength of the 
 country is actually augmented, (a) 
 
 With regard to the capital lent by one nation to another, the effect 
 upon their respective wealth is precisely analogous to that, resulting 
 from every loan from one individual to another. If France borrow 
 capital from Holland, and devote it to a productive purpose, she will 
 gain the profit of industry and land accruing from the employment 
 of that capital ; and she will do so even though she pay interest ; 
 in like manner as a merchant or manufacturer borrows for the pur- 
 
 * If, however, this capital be the fruit of his personal frugality, he robs France 
 of no part of her wealth existing previous to his arrival. Had he continued 
 resident there, the aggregate of the capital of France would have been increased 
 to the full extent of hi& accumulation; but, in taking the whole away with him, 
 he takes no more than his own earnings, and no value but what is of his own 
 creation, in so doing, he commits no individual, and, therefore, no national 
 wrong. 
 
 (a) In the common course of things, such an addition is a national benefit, 
 Secause it is an accession to the secondary source of production, i. e. industry. 
 But defective human institutions may convert a benefit into a curse; as where a 
 |)oor-law system gives gratuitous subsistence to a part of the population, capable 
 of labour, but not incited by want. In such case, every additional human being 
 may be a burthen instead of a prize; for lie may be one more on the list of idle 
 oensioners. T 
 
CHAP. X. ON DISTRIBUTION. 369 
 
 poses of his concern, and gains a residue of profit, even aftei paying 
 the interest of the loan. 
 
 But, if one state borrow from another, not for productive pur- 
 poses, but for those of mere expenditure, the capital borrowed will 
 then yield no return, and the national revenue be saddled with the 
 interest to the foreign creditor. Such was the condition of France, 
 when she borrowed from the Genoese, the Dutch, and the Genevese, 
 for the support of her wars, or to feed the prodigality of a court. 
 Yet it was better to borrow from strangers than from natives, even 
 for the purpose of dissipation ; because, the amount so borrowed was 
 not withdrawn from the national productive capital of France. In 
 either case, the French people would have to pay the interest;* but 
 had they likewise lent the capital, they would have had to pay the 
 interest, and at the same time have lost the benefit, which their 
 industry and land might have derived from its employment and 
 agency. 
 
 With regard to such landed property, as may belong to foreigners 
 residing abroad, the revenue arising from it is an item of foreign, 
 and forms no part of the national revenue. But it is to be remem- 
 bered, that the foreigner cannot have purchased it without a remit- 
 tance of capital equal in value to the land; which capital is an equally 
 valuable acquisition, particularly if the nation be possessed of im- 
 proveable land in abundance, but of little capital to set industry in 
 motion. In making his purchase of land, the foreigner exchanges a 
 revenue of capital, which he leaves the nation to profit by, for a 
 revenue of land; which he thenceforth receives: thus bartering in- 
 terest of money for rent of land. If the national industry be active 
 and skilfully directed, more benefit may be derived from the interest, 
 than was before obtained from the rent ; the purchaser, however, 
 acquires a fixed and permanent property, in lieu of one more perish- 
 able, transferable, and destructible. Mismanagement may soon 
 annihilate the capital the nation has acquired ; but the land remains 
 a permanent possession of the purchaser, and he may sell it and get 
 back the value when he pleases. There is therefore nothing to be 
 apprehended from the purchase of land by foreigners, provided there 
 be wisdom enough, to employ in reproduction the value received in 
 exchange. 
 
 The particular form, in which one nation may draw revenue from 
 another, is of no importance whatever. It may be remitted in specie, 
 in bullion, or in any other kind of merchandise: indeed it is of the 
 greatest consequence to leave individuals to take it in the shape that 
 best suits their convenience ; for what suits them will infallibly be 
 the best for both nations; in like manner as in the conduct of inter- 
 national trade, the commodity, which individuals export or import 
 in preference, is that which best suits the mutual national interests. 
 
 The agents of the English East India Company drew from thai 
 
 * It will be shown in Book III. that the interest is equally lost, whethei 
 spent internally or externally, 
 
 2W 
 
370 ON DISTRIBUTION. BOOK II 
 
 country, either an annual revenue, or an accumulated fortune, which 
 they returned to England to enjoy and live upon : they took good 
 care not to withdraw these remittances in the shape of gold or 
 silver, because the precious metals were of more relative value in 
 Asia than in Europe; they remitted in the shape of India goods 
 and products, on which a fresh piofit was made on arrival in Eu- 
 rope: every million they remitted, swelled, perhaps, to so much as 
 1,200,000, by the time it reached the place of destination. Thus, 
 Europe gained to the amount of 1,200,000, while India lost only a 
 million. If these despoilers of India*() insisted on transmitting 
 this whole sum in specie, they must have robbed Hindostan, perhaps, 
 of 1,500,000, or upwards, for every 1,200,000 that England received. 
 The same sum may, perhaps, have been amassed originally in specie; 
 but it was always remitted in the shape of that commodity, which, 
 for the time being, answered best as an object of transport. As long 
 as exportation of any kind is allowed, and exportation has always 
 been regarded by statesmen with a favourable eye, it is easy to 
 receive in one country, the revenue and capital derived from another 
 Arid the remittance cannot be prevented by the government, without 
 the interdiction of all external commerce, which, after all, would 
 leave the resource of smuggling and contraband. In the eyes of 
 political economy, nothing is more absurd, than to see governments 
 prohibit the export of the national specie, as a means of checking 
 the emigration of wealth.f 
 
 * Raynal tells us, that, inasmuch as the East India Company derived a revenue 
 from Bengal, to be consumed in Europe, it must infallibly drain it of specie in 
 the end, since the company is the only merchant, and imports no specie itself. 
 But Raynal is mistaken in this. In the first place, private merchants do carry 
 the precious metals to India, because they are of more value there than in 
 Europe ; and that very reason also deters the servants of the company, who may 
 have made fortunes in Asia, from remitting them in specie. 
 
 And if it were to be suggested, that a fortune, remitted to Europe, is less sub- 
 stantial and more speedily dissipated, when it arrives in the shape of goods, than 
 wnen in that of specie, this again would be an error. The form, that property 
 happens to assume, does not affect its substantiality; when once transferred to 
 Europe, it may be converted into specie, or land, or what not. It is the amount 
 of values, and not the temporary form they appear under, which, in this colonial 
 connexion, as in that of international trade, is the essential circumstance. 
 
 fThe complete interception of all export of objects of value would not help 
 them towards the point of intent ; because free communication occasions a much 
 greater influx than efflux of wealth. Value, or wealth, is by nature fugitive 
 nnd independent. Incapable of all restraint, it is sure to vanish from the fetters 
 that are contrived to confine it, and to expand and flourish under the influence 
 of liberty. 
 
 (a) This is a harsh word, yet probably justified by the history of the original 
 acquisition. But the scene has now changed ; the servants of the sovereign 
 ..onipany no longer look to spoliation as a public or private resource, but are 
 content with the liberal remuneration of laborious duties, civil, military, and 
 financial. A slight examination of the connexion between Britain and her 
 Asiatic dependencies will show, how small a balance is remitted to the former 
 m any shape ; and it should be remembered that part, even of this, is but the 
 interest of loans raised in England, for the purposes of Indian administration, 
 though not always of a wise or paternal character. T. 
 
CHAP. XL ON DISTRIBUTION. 3?1 
 
 CHAPTER XI. 
 
 OP THE MODE IN WHICH THE QUANTITY OP THE PRODUCT AFFECTS 
 POPULATION. 
 
 SECTION L 
 
 Of Population, as connected with Political Economy. 
 
 HAVING, in Book I, investigated the production of the articles 
 necessary to the satisfaction of human wants, and in the present 
 Book, traced their distribution among the different members of the 
 community, let us now further extend our observations to the in- 
 fluence those products exercise upon the number of individuals, of 
 which the community is composed; that is to say, upon population. 
 
 In her treatment of all organic bodies, nature seems to neglect the 
 individual, and afford protection only to the species. Natural history 
 presents very curious examples of her extraordinary care to per- 
 petuate the species ; but the most powerful means she adopts for 
 that purpose, is the multiplication of germs in such vast profusion, 
 that notwithstanding the immense variety of accidents occurring to 
 prevent their early development, or destroy them in the progress to 
 maturity, there are always left more than sufficient to perpetuate 
 the species. Did not accident, destruction, or failure of the means 
 of development, check the multiplication of organic existence, there 
 is no animal or plant that might not cover the face of the globe in a 
 very few years. - 
 
 This faculty of infinite increase is common to man, with all other 
 organic bodies ; and although his superior intelligence continually ij 
 enlarges his own means of existence, he must sooner or later arrive 
 at the ultimum. 
 
 Animal existence depends upon the gratification of one sole and 
 immediate want, that of food and sustenance ; but man is enabled, by 
 the faculty of communication with his species, to barter one product 
 for another, and to regard the value, rather than the nature, of the 
 product. The producer and owner of a piece of furniture of twenty 
 dollars value, may consider himself as possessing as much human 
 food, as may be procurable for that price. And with respect to the 
 relative price of products, it is in all cases determined by the inten- 
 sity of the desire, the degree of utility in each product for the time 
 being. We may safely take it for granted, that mankind in genera! 
 will not barter an object of more, for one of less urgent necessity 
 In a season of agricultural scarcity, a larger quantity of furniture 
 will be given for a smaller quantity of human aliment ; but it is in- 
 variably true, that whenever barter takes place, the object given on 
 
372 ON DISTRIBUTION. BOOK fi. 
 
 one side is worth that given on the other, and that the one is pro- 
 curable for the other.* 
 
 Trade and barter, as we have seen above, adapt the products to 
 the general nature of the demand. The objects, whether of food 
 or raiment, or of habitation, for which the strongest desire is felt, 
 are of course the most in request ; and the wants of each family or 
 individual, are more or less fully satisfied, in proportion to the ability 
 to purchase these objects ; which ability depends .upon the produc- 
 tive means and exertion of each respectively; in plain terms, upon 
 the revenue of each respectively. Thus, in the end, if we sift this 
 matter to the bottom, we shall find, that families, and nations, which 
 are but aggregations of families, subsist wholly on their own pro- 
 ducts; and that the amount of product in each case necessarily 
 !imits the numbers of those who can subsist upon it. 
 
 Such animals as are incapable of providing for future exigencies, 
 after they are engendered, if they do not fall a prey to man, or some 
 of their fellow brutes, perish the moment they experience an im- 
 perative want, which they have not the means of gratifying. But 
 man has so many future wants to provide for, that he could not 
 answer the end of his creation, without a certain degree of provi- 
 dence and forethought ; and this provident turn can alone preserve 
 the human species from part of the evils it would necessarily endure, 
 if its numbers were to be perpetually reduced by the process of 
 destructive violence.f 
 
 Yet notwithstanding the forethought ascribed to man, and the 
 restraints imposed on him by reason, legislation, and social habits, 
 the increase of population is always evidently co-extensive, and even 
 something more than co-extensive, with the means of subsistence. 
 It is a melancholy but an undoubted fact, that, even in the most 
 
 * Although all products are necessary to the social existence of man, the ne- 
 cessity of food being of aH others most urgent and unceasing, and of most fre- 
 quent recurrence, objects of aliment are justly placed first in the catalogue of 
 the means of human existence. They are not all, however, the produce of the 
 national territorial surface ; but are procurable by commerce as well as by inter- 
 nal agriculture ; and many countries contain a greater number of inhabitants than 
 could subsist upon the produce of their land. Nay, the importation of another 
 commodity may be equivalent to an importation of an article of food. The export 
 of wines and brandies to the north of Europe is almost equivalent to an export 
 of bread ; for wine and brandy, in great measure, supply the place of beer and 
 spirits distilled from grain, and thus allow the grain, which would otherwise be 
 employed in the preparation of beer or spirits, to be reserved for that of bread. 
 
 {The practice of infanticide in China proves, that the local prejudices of cus- 
 tom and of religion there counteract the foresight which tends to check the in- 
 crease of population ; and one can not but deplore such prejudices ; for the human 
 misery resulting from the destruction is great, in proportion as its object is more 
 fully developed, and more capable of sensation. For this reason it would be still 
 more barbarous and irrational policy to multiply wars, and other means of human 
 destruction, in order to increase the enjoyments of the survivors ; because the 
 destructive scourge would affect human beings in a state more perfect, more sus- 
 ceptible of feeling and suffering, and arrived at a period of life when the mature 
 displav of his faculties renders man more valuable to himself and to others. 
 
CHAP. XI. ON DISTRIBUTION. 373 
 
 thriving countries, part of the population annually dies of mere want. 
 Not that all who perish from want absolutely die of hunger ; though 
 this calamity is of more frequent occurrence than is generally sup- 
 posed.* I mean only that they have not at command all the neces- 
 saries of life, and die for W 7 ant of some part of those articles of 
 necessity. A sick or disabled person may, perhaps, require nothing 
 more than a little rest, or medical advice, together with, perhaps, 
 some simple remedy, to set him up again ; but the requisite rest, or 
 advice, or remedy, is denied, or not afforded. A child may require 
 'the attentions of the mother, but the mother may perhaps be taken 
 away to labour, by the imperious calls of necessity ; and the child 
 perish through accident, neglect, or disease. It is a fact well esta- 
 blished by the researches of all who have turned their attention to 
 statistics/that out of an equal number of children of wealthy and of 
 indigent parents, at least twice as many of the latter die in infancy 
 as of the former. In short, scanty or unwholesome diet, the insuffi- 
 cient change of linen, the want of warm and dry clothing, or of 
 fuel, ruin the health, undermine the constitution, and sooner or later 
 bring multitudes of human beings to an untimely end ; and all, that 
 perish in consequence of want beyond their means to supply, may 
 be said to die of want. 
 
 Thus, to man, particularly in a forward state of civilization, a 
 variety of products, some of them in the class of what have been 
 denominated immaterial products, are necessaries of existence; these 
 are multiplied in a degree proportionate to the desire for them, 
 respectively, because its intensity causes a proportionate elevation 
 
 *The Hospice de Bicetre, near Paris, contains, on the average, five or six 
 thousand poor. In the scarcity of the year 1795, the governors could not afford 
 them food, either so good or so abundant as usual ; and I am assured by the house- 
 steward of the establishment, that at that period almost all the inmates died. 
 
 It would appear from the returns given in a tract entitled " Observations on 
 the Condition of the Labouring Classes" by J. Barton, that the average of 
 deaths, in seven distinct manufacturing- districts of England, has been propor- 
 tionate to the dearness, or, in other words, to the scarcity of subsistence. I 
 subjoin an extract from his statements. 
 
 Average price of Wheat 
 
 Years. per qr. Deaths, 
 
 s. d. 
 
 1801 118 3 55,965 
 
 1804 60 1 44,794 
 
 1807 73 3 48,108 
 
 1810 106 2 54,864 
 
 From tne same returns it appears, that the scarcity occasioned less mortality 
 in the agricultural districts. The reason is manifest: the labourer is there more 
 commonly paid in kind, and the high sale-price of the product enabled the 
 farmer to give a high purchase-price for labour, (a) 
 
 (a) The latter reason is not very satisfactory ; for the total receipts of *ne 
 corn-growers are probably not larger in years of scarcity, than in those cf 
 abundance. T. 
 32 
 
374 ON DISTRIBUTION. BOOK II. 
 
 of their price : and it may be laid down as a general maxim, that 
 the population of a state is always proportionate to the sum of its 
 production in every kind.* This is a truth acknowledged by most 
 writers on political economy, however various and discordant their 
 opinions on most other points/)- (1) 
 
 It appears to me, however, that one very natural consequence, 
 deducible from this maxim, has escaped their observation ; which is, 
 that nothing can permanently increase population, except the encou- 
 ragement and advance of production ; and that nothing can occa- 
 sion its permanent diminution, but such circumstances as attack 
 production in its sources. 
 
 The Romans were forever making regulations to repair the loss 
 of population, occasioned by their state of perpetual external warfare. 
 Their censors preached up matrimony ; their laws offered premiums 
 
 * Not but that accidental causes may sometimes qualify these general rules. 
 A country, where property is very unequally distributed, and where a few indi- 
 viduals consume produce enough for the maintenance of numbers, will doubtless 
 subsist a smaller population, than a country of equal production, where wealth 
 is more equally diffused. The very opulent are notoriously averse to the burthen 
 of a family ; and the very indigent are unable to rear one. 
 
 f Vide Stewart, On Political Economy, book i. c. 4. Quesnay Encyclopedic, 
 art. Grains. Montesquieu, Esprit des Lois, liv. 18. c. 10. and liv. 23. c. 10. 
 Buffbn, ed. de Bernard, torn. iv. p. 266. Forbonnais, Principe s et Observa- 
 tions, p. 39, 45. Hume, Essays, part 2. Ess. 2. CEuvres de Poivre, p. 145, 
 146. Condillac, Le Commerce et le Gouvernement, part 1. chap. 24, 25. Verri, 
 Rejlexions sur VEconomie Politique, c. 210. Mirabeau, Ami des Hommes, torn, 
 i. p. 40. Raynal, Histoire de V Etablissement, liv. 21. s. 23. Chastellux, de la 
 Felicite Publique, torn. ii. p. 205. Necker, Administration des Finances de 
 France, c. 9. and Notes sur VEloge de Colbert. Condorcet, Notes sur Voltaire, 
 ed. de Kepi. torn. xlv. p. 60. Smith, Wealth of Nations, book i. c. 8, 11. Gar- 
 nier, Abrege Elementaire, part 1. c. 3. and Preface de sa Traduction de Smith. 
 Canard, Principes d" Economic Politique, p. 133. Godwin, On Political Jus- 
 tice, book viii. c. 3. Claviere, De la France et des Etats Unis, ed. 2. p. 60, 
 315. Brown-Duignan, Essay on the Principles of National Economy, p. 97. 
 Lond. 1776. Beccaria, Elementi di Economia Publica, par. prim. c. 2, 3. 
 Gorani, Recherches sur la Science du Gouvernement, torn. ii. c. 7. Sismondi, 
 Nouv. Prin. d'Econ. Pol. liv. vii. c. 1. et seq. Vide also, more especially, Mai- 
 thus, Essay on Population, a work of considerable research ; the sound and 
 powerful arguments of which would put this matter beyond dispute, if it indeed 
 had been doubted. 
 
 (1) The simple laws of population, or their general principles, which are few 
 and plain, are examined, discussed, and established with great ability by Pro- 
 fessor Senior, of Oxford, as well in the two lectures on Population we have 
 already referred to, as in his subsequent correspondence with Mr. Malthus, to 
 which these lectures gave rise, and which Mr. Senior has subjoined to them, in 
 an appendix. Full justice is done, by Mr. Senior, to the originality, and depth 
 of Mr. Malthus's views on Population, as well as to their great importance, at 
 the time he first gave them to the public ; the inaccuracy, nevertheless, in his 
 statement of the general proposition, namely, the tendency of every people to 
 increase in their numbers, more rapidly than in their wealth, is clearly pointed 
 >ut, and the errors which flow from it satisfactorily exhibited. "If a single 
 country,'' says Mr. Senior, "can be found in which there is now less poverty 
 than is universal in a savage state, it must be true, that under the circumstances 
 in which that country has been placed, the means of subsistence have a greatei 
 tendency to increase than the population." AMERICAN EDITOR. 
 
CHAP. XI. ON DISTRIBUTION. 375 
 
 and honours to plurality of children ; but these measures were fruit- 
 less. There is no difficulty in getting children ; the difficulty lies in 
 maintaining them. They should have enlarged their internal pro- 
 duction, instead of spreading devastation amongst their neighbours. 
 All their boasted regulations did not prevent the effectual depopula- 
 tion of Italy and Greece, even long before the inroads of the bar- 
 barous northern hordes.* 
 
 The edict of Louis XVI. in favour of marriage, awarding pensions 
 to those parents who should have ten, and larger ones to those who 
 should have twelve chidren, was attended with no better success. 
 The premiums that monarch held out in a thousand ways to indo- 
 lence and uselessness, were much more adverse, than such poor 
 encouragements could be conducive, to the increase of population. 
 
 It is the fashion to assert, that the discovery of the new world has 
 tended to depopulate old Spain; whereas her depopulation has re- 
 sulted from the vicious institutions of her government, and the small 
 amount of her internal product, in proportion to her territorial extentf 
 The most effectual encouragement to population is, the activity of 
 industry, and the consequent multiplication of the national products. 
 It abounds in all industrious districts, and, when a virgin soil happens 
 to co-operate with the exertions of a community, whence idleness is 
 altogether discarded, its rapid increase is truly astonishing. In the 
 United States of America, population has been doubling in the course 
 of twenty years. 
 
 For the same reasons, although temporary calamities may sweep 
 off multitudes, yet, if they leave untainted the source of reproduc- 
 tion, they are sure to prove more afflicting to humanity, than fatal to 
 population. It soon trenches again upon the limit, assigned by the 
 aggregate of annual production. Messance has given some very 
 curious calculations, whereby it appears, that after the ravages occa- 
 sioned by the famous plague of Marseilles in 1720, marriages through- 
 out Provence were more fruitful than before. The Abbe d'Expilly 
 comes to the same conclusion. The same effect was observable in 
 Prussia, after the plague of 1710. Although it had swept off a third 
 of the population, the tables of Sussmilch J show the number of 
 births, which, before the plague, amounted annually to about 26,000. 
 to have advanced in the year following, 1711, to no less than 32,000, 
 It might have been supposed, that the number of marriages, after so 
 terrible a mortality, would have been at least considerably reduced, 
 on the contrary, it actually doubled ; a strong indication of the ten- 
 dency of population to keep always on a level \vith the national 
 resources. 
 
 The loss of population is not the greatest calamity resulting from 
 
 * Vide Livii Hist. lib. vi. Plutarchi Moralia, xxx. De dcfectu oraciilorurr. 
 Strabonis, lib. vii. 
 
 f Ustariz has remarked, that the most populous provinces of Spain are 
 from which there has been the greatest emigration to America. 
 
 | Quoted by Malthus, in his Essay on PopuL vol. iL 
 
376 ON DISTRIBUTION. BOOK ii 
 
 such temporary visitations ; the first and greatest is, the misery they 
 occasion to the human race. Great multitudes can not be swept from 
 the land of the living by pestilence, famine or war, without the 
 endurance of a vast deal of suffering and agony, by numbers of sen- 
 tient beings; besides the pain, distress, and misery of the survivors; 
 the destitution of widows, orphans, brothers, sisters, and parents. It 
 is a subject of additional regret, if among the rest, there happen to 
 fall one or two of those superior arid enlightened men, whose single 
 talents and virtues have more effect upon the happiness and wealth 
 of nations, than the grovelling industry of a million of ordinary mortals. 
 
 Moreover, a great loss of human beings, arrived at maturity, is 
 certainly a loss of so much acquired wealth or capital ; for every 
 grown person is an accumulated capital, representing all the ad- 
 vances expended during a course of many years, in training and 
 making him what he is. A bantling a day old by no means replaces 
 a man of twenty; and the well-known expression of the Prince de 
 Coride, on the victorious field of Senef, was equally absurd and 
 unfeeling.* 
 
 The destructive scourges of the human species, therefore, if not 
 injurious to population, are at least an outrage on humanity; on 
 which account alone, their authors are highly criminal/)- 
 
 But though such temporary calamities are more afflicting to hu- 
 manity than hurtful to the population of nations, far other is the 
 effect of a vicious government, acting upon a bad system of political 
 economy. This latter attacks the very principle of population, by 
 drying up the sources of production; and since the numbers of 
 mankind, as before seen, always approach nearly to the utmost 
 
 ' *"Une nuit de Paris reparera tout cela." It requires the care and expendi- 
 ture of twenty successive years to replace the full-grown man, that a cannon- 
 liall has destroyed in a moment. The destruction of the human race by war is far 
 more extensive than is commonly imagined. The ravage of a cultivated district, 
 the plunder of dwelling-houses, the demolition of establishments of industry, the 
 consumption of capital, &c. &c. deprive numbers of the means of livelihood, and 
 cause many more to perish, than are left on the field of battle. 
 
 fUpon this principle, no capital improvement of the medicinal or chirurgical 
 art, like that of vaccination for instance, can permanently influence national 
 population ; yet its influence upon the lot of humanity may be very considerable ; 
 for it may operate powerfully to preserve beings already far advanced in age, in 
 strength, and in knowledge : whom to replace, would cost fresh births and fresh 
 advances : in other words, abundance of sacrifices, privations, and sufferings 
 l>oth to the parents and the children. When population must be kept up by addi- 
 tional births, there is always more of the suffering incident to the entrance and 
 the exit of human existence; for they are both of more frequent occurrence. 
 Population may be kept up with half the number of births and deaths, if the 
 average term of life be advanced from forty to fifty years. There will, indeed, 
 OF a greater waste of the germs of existence; but the condition of mankind must 
 be measured by the quantum of human suffering, whereof mere germs are not 
 susceptible. .The waste of them is so immense, in the ordinary course of nature, 
 that the small addition can be of no consequence. Were the vegetable creation 
 rndovved with sensation, the best thing that could happen to it would be, that 
 'he seeds of all the vegetables, now rooted up and destroyed, should be decom- 
 iosed before the vegetable faculties were awakened. 
 
>lu-\ 
 iedl 
 se; ) 
 
 CHAP. XI. ON DISTRIBUTION. 377 
 
 limits the annual revenue of the nation will admit of, if the govern- 
 ment reduce that revenue by the pressure of intolerable taxation, 
 forcing the subject to sacrifice part of his capital, and consequently 
 diminishing the aggregate means of subsistence and reproduction 
 possessed by the community, such a government not only imposes 
 a preventive check on further procreation, but may be fairly said 
 to commit downright murder; for nothing so effectually thins the 
 effective ranks of mankind, as privation of the means of subsistence. 
 
 The evil effects of monastic establishments upon population,, have 
 been severely and justly inveighed against ; but the mode, in which 
 they operate, has been misunderstood; it is the idleness, not the- 
 celibacy, of the monastic orders, that ought to be censured. They 
 put their lands into cultivation, it is true, but where is the merit of 
 that? Would the lands remain untilled, if the monastic system 
 were abolished? So far from that evil resulting from the abolition, 
 wherever these establishments have been converted into manufac- 
 tories, of which the French revolution has offered many examples, 
 equal agricultural produce has continued to be raised, and the pro- 
 duce of the manufacturing industry has been all clear gain; while 
 ihe increased total product, thus created, has been followed by an 
 increase of population also. 
 
 From these premises, may likewise be drawn this further conclu- 
 sion ; that the inhabitants of a country are not more scantily supplied 
 with the necessaries of life, because their number is on the increase 
 nor more plentifully, because it is on the decline. Their relative 
 condition depends on the relative quantity of products they have at 
 their disposal; and it is easy to conceive these products to be con- , 
 siderable, though the population be dense; and scanty, though the 
 population be thinly spread. Famine was of more frequent occur- 
 rence in Europe during the middle ages, than it has been of late 
 years, although Europe is evidently more thickly peopled at present. 
 The product of England, during the reign of queen Elizabeth, was 
 not nearly so abundant as it is now, although her population was 
 then less by half; and the population of Spain, reduced to but eight 
 millions, enjoys not nearly so much affluence, as when it amounted 
 to twenty-four.* 
 
 Some writersf have considered a dense population as an index of 
 national prosperity ; and, doubtless, it is a certain sign of enlarged 
 national production. But general prosperity implies the general dif- 
 fusion and abundance of all the necessaries, and some of the super- 
 fluities of life ampngst all classes of the population. Some parts of 
 India and of China are oppressed with population, and with misery 
 also; but their condition would be nowise improved by thinning its 
 
 * If population depends on the amount of product, the number of births is a 
 very imperfect criterion, by which to measure it. When industry and produce 
 are increasing, births are multiplied disproportionately to the existing- population, 
 so as to swell the estimate; on the contrary, in the declining' state of national 
 wealth, the actual population exceeds the average ratio to the births. 
 
 f Wallace, Condorcfit, Godwin. 
 
 32* 2X 
 
378 ON DISTRIBUTION. BOOK II. 
 
 numbers, at least it it were brought about by a diminution of the 
 aggregate product. Instead of reducing the numbers of the popula- 
 tion, it were far more desirable to augment the gross product; which 
 may always be effected by superior individual activity, industry, 
 and frugality, and the better administration, that is to say, the less 
 frequent interference of public authority. 
 
 But it will naturally be asked, if the population of a country re- 
 gularly keeps pace with its means of subsistence, what will become 
 of it in years of scarcity and famine ? 
 
 Hear what Stewart* says on the subject : " There is a very great 
 deception as to the difference between crops ; a good year for one 
 soil is bad for another." " It is far from being true," he continues, 
 "that the same number of people consume always the same quan- 
 tity of food. In years of plenty, every one is well fed ; food is not 
 so frugally managed; a quantify of animals are fatted for use; and 
 people drink more largely, because all is cheap. A year of scarcity 
 comes ; the people are ill fed ; and when the lower classes come to 
 divide with their children, the portions are brought to be very 
 small;" instead of saving, they consume their previous hoard; and 
 after all, it is unhappily too true, that part of that class must suffer 
 and perish. 
 
 This calamity is most common in countries overflowing with 
 population, like Hindostan, or China, where there is little external 
 or maritime commerce, and where the poorer classes have always 
 been strictly limited to the mere necessaries of life. There, the 
 produce of ordinary years is barely sufficient to allow this miserable 
 pittance; consequently, the slightest failure of the crop leaves mul- 
 titudes wholly destitute of common necessaries, to rot and perish 
 by wholesale. All accounts agree in representing that famines are, 
 for this reason, very frequent and destructive in China and many 
 parts of Hindostan. 
 
 Commerce in general, and maritime commerce in particular 
 facilitates the interchange of products, even with the most remote 
 countries, and thus renders it practicable to import articles of sub- 
 sistence, in return for several other kinds of produce; but too great a 
 dependence on this resource, leaves the nation at the mercy of every 
 natural or political occurrence, which may happen to intercept or 
 derange the intercourse with foreign countries. The intercourse 
 must then be preserved at all events, no matter whether by force or 
 fraud, competition must be got rid of by every means,* however 
 unjustifiable; a separate province, or weak ally, perhaps, is obliged 
 to purchase the national products, under restrictions equally galling, 
 MS the exaction of actual tribute; and a commercial monopoly en- 
 forced, even at the hazard of a war; all which evils make the "state 
 of the nation extremely precarious indeed. 
 
 The produce of England, in articles of human subsistence, had 
 undoubtedly increased largely towards the end of the 18th century; 
 
 * Sir Tames, of Coltness, book i. c. 17. 
 
CHAP. XI. ON DISTRIBUTION. 379 
 
 but its produce in articles of apparel and household furniture had 
 probably increased still more rapidly. The consequence has been, 
 that immensity of production, which enables her to multiply her 
 population beyond what the produce of her soil can support,* and 
 to bear up under the pressure of public burthens, to which there is 
 no parallel nor even approximation. But England has suffered' 
 severely, whenever foreign markets have been shut against her 
 produce ; and she has sometimes been obliged to resort to violent 
 means to preserve her external intercourse. She would act wisely, 
 perhaps, in discontinuing those encouragements, that impel fresh 
 capital into the channels of manufacture and external commerce, 
 and directing it rather towards that of agricultural industry. It is 
 probable, that in that case, several districts, which have not yet 
 received the utmost cultivation of which they are susceptible, par- 
 ticularly many parts of Scotland and Ireland, would raise agricul- 
 tural produce enough to purchase most part, if not the whole, of the 
 surplus product of her manufactures and commerce beyond her 
 present consumption.! Great Britain would thereby create for her- 
 self a domestic consumption, which is always the surest and the 
 nost advantageous. Her neighbours, no longer offended by the 
 necessarily jealous and exclusive nature of her policy, would proba- 
 bly lay aside their hostile feelings, and become willing customers. 
 But, after all, if her manufactured should still be disproportioned to 
 her agricultural produce, what is there to prevent her from adopting 
 a system of judicious colonization, and thus creating for herself fresh 
 markets for the produce of her domestic industry in every part of 
 the globe, \vhence she might derive, in return, a supply of food foi 
 her superfluous population ?J 
 
 In this particular, the position of France appears to be precisely 
 opposite to that of Great Britain. It would seem, that her agricul- 
 tural product is equal to the maintenance of a much larger manu- 
 facturing and commercial population. The face of the country pre- 
 
 * In a pamphlet entitled, Considerations on British Agriculture, published in 
 1814, by W. Jacob, a member of the Royal Society, and a well-informed writer 
 upon agricultural topics, we are told, (p. 34,) that England ceased to be an ex- 
 porter, and became an importer, of wheat, about the year 1800. 
 
 f The writer last cited enters into long details to show, that the soil of the 
 British isles could be made to produce at least a third more than their present 
 product, ibid. p. 115. et seq. 
 
 I By judicious colonization, I mean colonization formed on the principles of 
 complete expatriation, of self-government without control of the mother-country, 
 and of freedom of external relations ; but with the enjoyment of protection only 
 by the mother-country, while it should continue necessary. Why should no. 
 political bodies imitate in this particular the relation of parent and child 1 When 
 arrived at the age of maturity, the personal independence of the child is both 
 just and natural; the relation it engenders is, moreover, the most lasting and 
 most beneficial to both parties. Great part of Africa might be peopled with 
 European colonies formed on these principles. The world has yet room enough, 
 and the cultivated land on the face of the globe is far inferior in extent to the 
 fertile land remaining untilled. The earl of Selkirk has thrown much light an 
 this matter, in his tract on Emigration and the State of the 
 
380 
 
 ON DISTRIBUTION. BOOK II, 
 
 >ents the picture of high and general cultivation ; but the villages 
 and country towns are, for the most part, surprisingly small, poor, 
 ill-built, and ill-paved, the few shops scantily supplied, and the public 
 houses neither neat nor comfortable. It is plain, the agricultural 
 product must either be less than the appearance would indicate, or 
 it must be consumed in a thriftless and unprofitable manner; proba- 
 bly both these causes are in operation. 
 
 "In the first place, the production is far less than it might be; and 
 k that is chiefly owing to three causes : 1. The want of capital, parti- 
 cularly in enclosures, live stock, and amelioration:* 2. The indolence 
 of the cultivators, and the too general neglect of weeding, trimming 
 the hedges, clearing the trees of moss, destroying insects, &c. &c. 
 3. The neglect of a proper alternation of crops, and of the most 
 approved methods of cultivation. 
 
 In the second place, the consumption is unthrifty and unprofitable; 
 for a great part of it is mere waste, and yields no human gratifica- 
 tion whatever. To speak of one article alone, that is, of firing, 
 which is an object of great value in districts, where coal and wood 
 are scarce; the waste of it is enormous in the huts of the peasantry 
 lighted as they often are by the door-way only, and admitting the 
 rain down the chimney while the fire is burning. Unwholesome 
 beverage or food, and the indulgence of the alehouse, are like injuri- 
 ous modes of consumption. 
 
 In fine, towns and villages would be more thickly spread, and 
 would besides present an appearance of greater affluence, were the 
 generality of the inhabitants more active and industrious, and actu- 
 ated by the laudable emulation, tinctured perhaps with some little 
 vanity, rather of possessing every object of real utility, and exhib- 
 iting in their domestic arrangements the utmost order and neatness, 
 than of living in indolence upon the rent of a trifling patrimony, 
 or the scanty salary of some useless public employ. The small 
 proprietor, with an income of 3 or 400 dollars per annum, just suffi- 
 cient to vegetate upon, might double or triple it perhaps by adding 
 the revenue derivable from personal industry; and even those en- 
 gaged in useful occupations do not push them to the full extent of 
 their activity and intelligence. Moreover, the spirit of inquiry and 
 improvement has probably been disheartened by the example of 
 frequent ill success; although the failure has commonly been occa 
 sioned by the want of judgment, perseverance, and frugality. 
 ***~ National population is uniformly proportionate to the quantum 
 jof national production; but it may vary locally within the limits ot 
 each state, according to the favourable or unfavourable operation 
 of local circumstances. A particular district will be rich, because 
 its soil is fertile, its inhabitants industrious, and possessed ot capi- 
 
 * The want of capital prevents the employment of machinery for expediting 
 the operations, like the thrashing machine in common use in England. This 
 makes a larger supply of human agency requisite in agriculture ; and the more 
 mouths there are to be fed, the smaller will be the surplus produce, which alone 
 ifr disposable. 
 
CHAP. XI. ON DISTRIBUTION. 381 
 
 tal accumulated by their frugality ; in like manner as a family will 
 surpass its neighbours in wealth, because of its superior intelli- 
 gence and activity. The boundaries and political constitutions of 
 states affect population only, inasmuch as they affect the national 
 production. The influence of religion and national habits upon 
 population is precisely analogous. All travellers agree, that pro- 
 testant are both richer and more populous than catholic countries ; 
 and the reason is, because the habits of the former are more con- 
 ducive to production. 
 
 SECTION II. 
 
 Of the influence of the Quality of a national product upon the local dis- 
 tribution of the Population. 
 
 For the earth to be cultivated, it is necessary that population 
 should be spread over its surface; for industry and commerce to 
 flourish, it is desirable to collect together in those spots, where the 
 arts may be exercised with the most advantage; that is to say, 
 where there can be the greatest subdivision of labour. The dyer 
 naturally establishes himself near the clothier; the druggist near 
 the dyer ; the agent, or owner, of a vessel employed in the transport 
 of drugs will approximate in locality to the druggist; and so of 
 other producers in general. 
 
 At the same time, all such as live without labour on the interest 
 of capital, or the rent of landed property, are attracted to the 
 towns, where they find brought to a focus, every luxury to feed 
 their appetites, as well as a choice of society, and a variety of 
 pleasure and amusement. The charms of a town life attract foreign 
 visiters, and all such as live by their labour, but are free to ex- 
 ercise it wherever they like. Thus, towns become the abode of 
 literary men and artizans, and likewise the seats of government, 
 of courts of justice, and most other public establishments; and their 
 population is enlarged by the addition of all the persons attached 
 to such establishments, and all who are accidentally brought thither 
 by business. 
 
 Not but what there is always a number of country residents, 
 that are employed in manufacturing industry, exclusive of such as 
 make it their abode in preference. Local convenience, running 
 water, the contiguity of a forest or a mine, will draw a good deal 
 of machinery, and a number of labourers, in manufacture, out of 
 the precincts of towns. There are, likewise, some kinds of work- 
 which must be performed in the neighbourhood of the consumers , 
 that of the tailor, the shoemaker, or the farrier; but these are 
 trifling compared with the manufacturing industry of all kinds exe- 
 cuted in towns. 
 
 Writers on political economy have calculated, that a thriving 
 country fs capable of supporting in its towns, a population equa- 
 
ON DISTRIBUTION. BOOK II. 
 
 to that of the country. Some examples lead to an opinion, that it 
 could support a still greater proportion, were its industry directed 
 with greater skill and its agriculture conducted with more intelligence 
 and less waste, even supposing its soil to be of very moderate fer- 
 tility.* Thus much at least is certain, that, when the towns raise a 
 product for foreign consumption, they are then enabled to draw from 
 abroad provisions in return, and may sustain a population much 
 larger in proportion to that of the country. Of this we have instances 
 in "the numerous petty states, whose territory alone is barely suffi- 
 cient to afford subsistence to one of the suburbs of their capital. 
 
 Arrain, the cultivation of pasture land, requiring much less human 
 labour than that of arable, it follows, that, in grazing countries, a 
 greater proportion of the inhabitants can apply themselves to the 
 arts of industry ; whicb are therefore more attended to in pasture 
 than in corn countries. Witness Flanders, Holland, and Normandy 
 that was. (b) 
 
 * There is good reason to believe, that the total population of England is more 
 than the double of that employed in her internal agriculture. From the returns 
 laid before parliament, 1811, it appears there were in Great Britain, inclusive of 
 Wales and Scotland, 895,998 families employed in agriculture ; and that the 
 total number of families amounted to 2,544,215, which would give but a third 
 of the population to the purposes of agriculture. 
 
 According to Arthur Young, the country population of France, within her old 
 limits, was . 20,521,538 
 
 And that of the cities and towns 5,709,270 
 
 Making a total of 26,230,808 
 
 Supposing him to be correct, France, within her old boundary, could main- 
 tain, on this principle, a population of 41 millions, supposing her merely to 
 double her agricultural population ; and of 60 millions, supposing her industry 
 were equally active with that of Great Britain, (a) 
 
 It is the general remark of travellers, that the traffic of the great roads of 
 France is much less, than might be expected, in a country possessing so many 
 natural advantages. This may be attributed chiefly to the small number and 
 size of her towns ; for it is the communication from town to town that peoples 
 the great road ; that of the rural population being principally from one part of 
 the village or farm to another. 
 
 (fl) Our author has here fallen into a palpaple error. The ratio of the agri- 
 cultural, to the total population of Great Britain, has not been varied as above 
 stated, solely, or even chiefly by the multiplication of the commercial and manu- 
 facturing classes; but by the transfer of the human labour spared in agriculture 
 to the two other branches of industry. Agriculture might occupy one third only 
 of the population of France, and yet the total population be decreased and not 
 multiplied. T. 
 
 (6) This position is too general. A pastoral nation, devoting the whole of its 
 territory to pasture, could spare a very small proportion of its population for 
 commerce and manufacture ; witness Tartary and the Pampas of South America, 
 Where a dense manufacturing and commercial population makes it advantageous 
 tx> the land-holder to devote his land to pasture, and look to foreigners for the 
 upply of corn, as in Holland, a small proportion of the population may, indeed 
 be required for domestic, but a large proportion will be required for the anima 
 f ion of foreign agriculture. T. 
 
CHAP. XL ON DISTRIBUTION. 383 
 
 From the period of the irruption of the barbarians into the Roman 
 empire, down to the 17th century, that is to say, to a date almost 
 within living memory, the towns made but little figure in the larger 
 states of Europe. That portion of the population, which was 
 thought to live upon the cultivators of the land, was not then, as 
 now, composed principally of merchants and manufacturers, but con- 
 sisted of a nobility, surrounded by numerous retainers, of churchmen 
 and other idlers, the tenants of the chateau, the abbey, or the con- 
 vent, with their several dependencies ; very few of them living within 
 the towns. The products of manufacture and commerce were very] 
 limited indeed ; the manufacturers were the poor cottagers, and the 
 merchants mere pedlars ; a few rude implements of husbandry, andi 
 some very clumsy utensils and articles of furniture, answered all 
 the purposes of cultivation and ordinary life. The fairs, held three 
 or four times in the year, furnished commodities of a superior 
 quality, which we should now look upon with contempt ; and what^ 
 rare household articles, stuffs, or jewels, of price, werVffom time 
 to time imported from the commercial cities of Italy, or from the 
 Greeks of Constantinople, were regarded as objects of uncommon , 
 luxury and magnificence, far too costly for any but the richest 
 princes and nobles. 
 
 In this state of things, the towns of course made but a poor figure. 
 Whatever magnificence they may possess in our time is of very 
 modern date. In all the towns of France together, it would be 
 impossible to point out a single handsome range of buildings, or fine 
 street, of two hundred years' antiquity. There is nothing of an- 
 terior date, with the exception of a few Gothic churches, but clumsy 
 tenements huddled together in dirty and crooked streets, utterly 
 impassable to the swarm of carriages, cattle, and foot-passengers, 
 that indicates the present population and opulence. 
 
 No country can yield the utmost agricultural produce it is equa,. 
 to, until every part of its surface be studded with towns and cities. 
 Few manufactures could arrive at perfection, without the conve- 
 niences they afford ; and, without manufactures, what is there to give 
 in exchange for agricultural products? A district whose agricultural 
 products can find no market, feeds not half the number of inhabit- 
 ants it is capable of supporting ; and the condition, even of those 
 it does support, is rude enough, and destitute both of comfort and 
 refinement ; they are in the lowest stage of civilization. But, if an 
 industrious colony comes to establish itself in the district, and gra- 
 dually forms a town, whose inhabitants increase till they equal the 
 numbers of the original cultivators, the town will find subsistence 
 on the agricultural product of the district, and the cultivators be 
 enriched by the product of the industry of the town. 
 
 Moreover, towns offer indirect channels for the export of the 
 agricultural values of the district to a distant market. The raw 
 products of agriculture are not easy of transport, because the 
 expense soon swallows up the total price of the commodity trans- 
 ported. Manufactured produce has greatly the advantage in this 
 
384 ON DISTRIBUTION. BOOK II. 
 
 respect; for industry will frequently attach very considerable value 
 to a substance of little bulk and weight. By the means of manufac 
 lure, the raw products of national agriculture are converted int/j 
 manufactured goods of much more condensed value, which will 
 defray the charge of a more distant transport, and bring a retun? 
 of produce adapted to the wants of the exporting country. 
 
 There are many of the provinces of France, that are miserable 
 enough at present, yet want nothing but towns to bring them into 
 high cultivation. Their situation would, indeed, be hopeless, were 
 we to adopt the system of that class of economists, which recom- 
 mends the purchase of manufactures from foreign countries, with 
 the raw produce of domestic agriculture. (1) 
 
 However, if towns owe their origin and increase to the concen 
 tration of a variety of manufactures, great and small, manufactures, 
 again, are to be set in activity by nothing but productive capital; and 
 
 " productive capital is only to be accumulated by frugality of con- 
 sumption. Wherefore, it is not enough to trace the plan of a town, 
 .and give it a name; before it can have real existence, it must be gra- 
 
 ^dually supplied with industrious hands, mechanical skill, implements 
 of trade, raw materials and the necessary subsistence of those engaged 
 
 (1) [The slow progress of agriculture in these provinces of France is not 
 attributable to the want of towns in the midst of them ; towns and cjties are a 
 consequence, not the cause of the general prosperity of a country. Nor would 
 the adoption of a different policy from that which recommends the purchase of 
 manufactures from foreign countries with the raw produce of domestic agricul- 
 ture, improve the situation of these districts. A system of policy which should 
 attempt by restraints or encouragements, to divert a portion of the capital and 
 industry employed in agriculture or commerce from those channels towards the 
 erection of a town, or the establishment of a manufactory, with a view to pro- 
 mote the better cultivation of the soil, would be subversive of this end. 
 
 To what causes then must the misery, said by our author to prevail in those 
 provinces, be ascribed, or what has retarded their agricultural improvement? 
 The prosperity of agriculture, as well as that of every other branch of industry, 
 depends upon the unrestrained operation of individual interest ; not only furnish- 
 ing motives to exertion, but knowledge to direct that exertion. All that is 
 necessary to enable a state to reach the highest pitch of opulence, is not to dis- 
 turb the action of this important principle. The obstacles, it will accordingly 
 be found, which have opposed the progress of improvement in the countries 
 alluded to, may be traced to the interference by the public authorities with the 
 salutary operation of this powerful motive of action, or, in other words, to their 
 bad laws and political institutions. Sometimes imposing restraints on the culti- 
 vator, and exposing him to numberless oppressions, either by prescribing the 
 mode in which the soil shall be cultivated, or the products it shall yield. And, 
 when not thus directly interfering with the business of production, prohibiting 
 .he exportation of the raw produce of the soil, and thereby depriving it of the 
 best market. At other times harassing the husbandman with taxation, the 
 shameful inequalities of which, whilst they relieve the higher orders, permit 
 the burden to fall, almost exclusively, on his shoulders, or depriving him of the 
 freedom of trafle from province to province within his own country! but, abovn 
 all, by perpetuating the inheritance of landed property in particular bodies or 
 families, without the power of alienation. These are a few of the corrupt and 
 liarbarous laws which have retarded the agriculture, not of these particular 
 provinces of France only, but of many of the fairest portions of Europe.] 
 
 AMERICAN EDITOR. 
 
. XI. ON DISTRIBUTION. 385 
 
 in industry, until the completion and sale of their products. Other- 
 wise, instead of founding a city, a mere scaffolding is run up, which 
 must soon fall to the ground, because it rests upon no solid founda- 
 tion. This was the case with regard to Ecatherinoslaw, in the 
 Crimea ; and was, indeed, foreseen by the emperor Joseph II., who 
 assisted at the ceremony of its foundation, and laid the second stone 
 in due form: *' The empress of Russia and myself," said he to his 
 suite, "have completed a great work in a single day: she has laid 
 the first stone of a city, and I have laid the finishing one." 
 
 Nor will capital alone suffice to set in motion the mass of industry 
 and the productive energy necessary to the formation and aggrari 
 dizement of a city, unless it present also the advantages of locality 
 and of beneficent public institutions. The local position of Washing- 
 ton, it should seem, is adverse to its progress in size and opulence: 
 for it has been outstripped by most of the other cities of the Union ;(1) 
 whereas, Palmyra, in ancient times, grew both wealthy and popu- 
 jous, though in the midst of a sandy desert, solely because it had 
 become the entrepot of commerce between Europe and eastern Asia. 
 The same advantage gave importance and splendour to Alexandria, 
 and, at a still more remote period, to Egyptian Thebes. The mere 
 will of a despot could never have made it a city of a hundred gates, 
 and of the magnitude and populousness recorded by Herodotus. Its 
 grandeur must have been owing to its vicinity to the Red Sea and 
 the channel of the Nile, and to its central position between India and 
 Europe, (a) 
 
 If a city cannot be raised, neither does it seem, that its further 
 aggrandizement can be arrested by the mere fiat of the monarch. 
 Paris continued to increase, in defiance of abundance of regulations 
 issued by the government of the day to limit its extension. The 
 only effectual barrier is that opposed by natural causes, which it 
 would be very difficult to define with precision, for it consists rather 
 of an aggregate of little inconveniences, than of any grand or posi- 
 
 () There is some stretch of imagination in this. Probably the Egyptian 
 Thebes was itself the centre of manufacture and commerce in its day, and not 
 its entrepot ; indeed, there is no reason to suppose a very active intercourse be- 
 tween India and Europe to have existed at so early a period ; and, if it had, 
 Thebes would hardly have been the entrepot. But central India furnishes itself 
 instances of cities containing as large a population. Nineveh and Babylon 
 seem to have been quite as populous; each was probably the central point of an 
 enormous domestic industry. T. 
 
 (1) [The local position of Washington, perhaps, is not as advantageous as 
 that of some of the other cities of the Union; it certainly, however, has not been 
 adverse to its progress in population and wealth. In the year 1800, when 
 Washington became the seat of the general government, its whole population 
 amounted to 53,210 ; according to the census, it contained in 1810, 8,208 inhabit- 
 ants, in 1820, 13,247 inhabitants, and in 1830, 18,828 inhabitants. In the year 
 1820 the whole number of buildings was 2,208, of which 925 were of brick. 
 By the assessment valuation of the year 1830, the whole number of buildings 
 was 3,125. It cannot, therefore, be said to have been outstripped by most of 
 the other cities in the progress of improvement.] AMERICAN EDITOO. 
 
 33 2 Y 
 
380 ON DISTRIBUTION. BOOK II. 
 
 live obstruction. In overgrown cities, the municipal administration 
 is never well attended to; a vast deal of valuable time is lost in going 
 from one quarter to another: the crossing and jostling is immense in 
 the central parts: and the narrow streets and passages, having been 
 calculated for a much smaller population, are unequal to the vast 
 increase of horses, carriages, passengers, and traffic of all sorts. 
 This evil is felt most seriously at Paris, and accidents are growing 
 more frequent every day ; yet new streets are now building on the 
 same defective plan, with a certain prospect of a like inconvenience 
 in n very few years hence. 
 
BOOK III 
 
 OF THE CONSUMPTION OF WEALTH 
 
 CHAPTER L 
 
 OF THE DIFFERENT KINDS OF CONSUMPTION. 
 
 IN the course of my work, I have frequently been obliged to an- 
 ticipate the explanation of terms and notions which in the natural 
 order should have been postponed to a later period of the investiga- 
 tion. Thus I was obliged in the first book to explain the sense, in 
 which I used the term, consumption, because production cannot be 
 effected without consumption. 
 
 My reader will have seen from the explanation there given, that, 
 in like manner as by production is meant the creation, not of sub- 
 stance, but of utility, so by consumption is meant the destruction of 
 utility, and not of substance, or matter. When once the utility of a 
 thing is destroyed, there is an end of the source and basis *of its 
 value ; an extinction of that, which made it an object of desire and 
 of demand. It thenceforward ceases to possess value, and is no 
 longer an item of wealth. 
 
 Thus, the terms, to consume, to destroy the utility, to annihilate 
 the value of any thing, are as strictly synonymous as the opposite 
 terms to produce, to communicate utility, to create value, and convey 
 to the mind precisely the same idea. Consumption, then, being the 
 destruction of value, is commensurate, not with the bulk, the weight, 
 or the number of the products consumed, but with their value. Large 
 consumption is the destruction of large value, whatever form that 
 value may happen to have assumed. 
 
 Every product is liable to be consumed ; because the value, which 
 can be added to, can likewise be subtracted from, any object. If it 
 has been added by human exertion or industry, it may be subtracted 
 by human use, or a variety of accidents. But it cannot be more 
 than once consumed ; value once destroyed cannot be destroyed a 
 second time. Consumption is sometimes rapid, sometimes gradual. 
 A house, a ship, an implement of iron, are equally consumable as a 
 loaf, a joint of meat, or a coat. Consumption again may be but 
 
388 ON CONSUMPTION. BOOK III. 
 
 partial. A horse, an article of furniture, or a house when re-sold 
 by the possessor, has been but partially consumed ; there is still a 
 residue of value, for which an equivalent is received in exchange 
 on the re-sale. Sometimes consumption is involuntary, and either 
 accidental, as when a house is burnt, or a vessel shipwrecked, or 
 contrary to the consumer's intention, as when a cargo is thrown 
 overboard, or stores set on fire to prevent their falling into enemies' 
 hands. 
 
 Value may be consumed, either long after 'its production, or at 
 the very moment, and in the very act of production, as in the case 
 of the pleasure afforded by a concert, or theatrical exhibition. Time 
 and labour may be consumed ; for labour, applicable to an useful 
 purpose, is an object of value, and when once consumed, can never 
 be consumed again. 
 
 Whatever cannot possibly lose its value is not liable to consump- 
 tion. A landed estate cannot be consumed; but its annual productive 
 agency may; for when once that agency has been exerted, it cannot 
 be exerted again. The improvements of an estate may be consumed, 
 although their value may possibly exceed that of the estate itself; 
 for these improvements are the effect of human exertion and indus- 
 try ; but the land itself is inconsumable.* 
 
 So likewise it is with any industrious faculty. One may consume 
 a labourer's day's work, but not his faculty of working; which, 
 however, is liable to destruction by the death of the person pos- 
 sessing it. 
 
 All products are consumed sooner or later; indeed they, are pro- 
 duced solely for the purpose of consumption, and, whenever the con- 
 sumption of a product is delayed after it has reached the point of 
 absolute maturity, it is value inert and neutralized for the time. For 
 as all value may be employed re-prod uctively, and made to yield a 
 profit to the possessor, the withholding a product from consumption 
 is a loss of the possible profit, in other words, of the interest its 
 value would have yielded, if usefully employed.-)- 
 
 * Some materials are capable of receiving and discharging the same kind of 
 value many times over; as linen, which will undergo repeated washing. The 
 cleanliness given it by the laundress, is a value wholly consumed on each occa- 
 sion, along with a part of that of the linen itself. 
 
 f The values not consumed sooner or later in a useful way are of little mo- 
 ment ; such are provisions spoiled by keeping, products lost" accidentally, and 
 those whose use has become obsolete, or which have never been used at all, 
 owing to the failure of the demand for them, wherein value originates. Values 
 Duried, or concealed, are commonly withdrawn but for a time from consumption ; 
 when found, it is always the interest of the finder to turn them to account, 
 \vhich he cannot do without submitting them to consumption. In this case, 
 the only loss is that of the profit derivable from them during the period of their 
 disappearance, and may be reckoned equivalent to the interest for that time. 
 
 The same observation applies^ to the minute savings, successively laid by 
 until the moment of investment, the aggregate of which is, doubtless, conside- 
 rable. The loss, resulting from this inertness of capital, may be partially reme- 
 died by moderating the duties on transfer, by extending to the utmost the facility 
 'jf circulation, and by the establishment of banks of deposite, in which capita 
 
CHAP. I. ON CONSUMPTION. 3S9 
 
 But, products being universally destined for consumption, and that, 
 too in the quickest way, how, it may be asked, can there be ever an 
 accumulation of capital, that is to say, of values produced? 
 
 I answer that value may be accumulated, without being neces- " 
 sarily vested all the while in the same identical product, provided 
 only it be perpetuated in some product or other. Now, values em- 
 ployed as capital are perpetuated by reproduction; the various 
 products of which capital consists, are consumed like all other pro- 
 ducts : but their value is no sooner destroyed by consumption, than 
 it re-appears in another, or a similar substance. A manufactory can 
 not be kept up, without a consumption of victuals and clothes for 
 the workmen, as well as of the raw material of manufacture; but, 
 while value in those forms is undergoing consumption, new value is 
 communicated to the object of manufacture. The items that com- / 
 posed the capital so expended, are consumed and gone; but the / 
 capital, the accumulated value, still exists and re-appears under fy 
 new form, applicable to a second course of consumption. Wherea/, 
 if consumed unproductively, it never re-appears at all. 1 
 
 The annual consumption of an individual, is, the aggregate of all 
 the values consumed by that individual within the year. The 
 annual consumption of a nation is, the aggregate of values consumed 
 within the year by all the individuals and communities, whereof the 
 nation consists. 
 
 In the estimate of individual or national consumption, must be 
 included every kind of consumption, whatever be its motive or con- 
 sequence, whether productive of new value or not ; in like manner, 
 as the estimate of the annual production of a nation comprises the 
 total value of its products raised within the year. Thus, a soap 
 manufactory is said to consume such or such a quantity or value of 
 alkali in a year, although this value be re-produced from the manu- 
 factory in the shape of soap ; on the other hand, it is said to produce 
 annually such and such a quantity or value of soap, although (he 
 production may have cost the destruction of a great variety of 
 values, which, if deducted, would vastly reduce the apparent pro- 
 duct. By annual production, or consumption, national or individual, 
 is therefore meant, the gross and not the net amount.* 
 
 Whence it naturally follows, that all the commodities, which a na- 
 tion imports, must be reckoned as a part of its annual product, and all 
 its exports as part of its annual consumption. The trade of France 
 consumes the total value of the silk it exports to the United States; 
 and produces, on the other hand, the total value of cotton received 
 in return. And, in like manner, the manufacture of France con- 
 may be safely vested, and whence it may readily be withdrawn. In times of 
 political confusion, and under an arbitrary government, many will prefer to keep 
 their capital inactive, concealed, and unproductive, either of profit or gratification, 
 r?.ther than run the risk of its display. This latter evil is never felt under a 
 good government. 
 
 * For the distinction between the gross and the net product, vide supi a, Boo* 
 II. chap. 5. 
 33* 
 
39G 
 
 ON CONSUMPTION. BOOK III. 
 
 sumes the value of alkali employed by the soap-boiler, and produces 
 the value of soap derived from the concern. 
 
 The total annual consumption of a nation, or an individual, is a very 
 different thing from the aggregate of capital. A capital may be 
 wholly or partially consumed several times a year. When a shoe- 
 maker buys leather, and cuts and works it up into shoes, there is 
 so much capital consumed and reproduced. Every time he repeats 
 the operation, there is so much more capital consumed. Suppose 
 the leather purchased to amount to 40 dollars, and the operation 
 to be repeated 12 times in the year, there will have been an annual 
 consumption of 480 dollars upon a capital of 40 dollars. On the 
 other hand, there may be portions of his capital, implements of 
 trade, for instance, which it may take several years to consume. Of 
 this part of his capital he may consume annually but 1-4 or 1-10 
 perhaps. 
 
 In each country the wants of the consumer determine the quality 
 of the product. The product most wanted is most in demand ; and 
 that which is most in demand yields, the largest profit to industry, 
 capital, and land, which are therefore employed in raising this 
 particular product in preference ; and, vice versa, when a product 
 becomes less in demand, there is a less profit to be got by its produc- 
 tion; it is, therefore, no longer produced. All the stock on hand 
 falls in price ; the low price encourages the consumption, which soon 
 absorbs the stock on hand. 
 
 The total national consumption may be divided into the heads of 
 public consumption, and private consumption ; the former is effected 
 by the public, or in its service ; the latter by individuals or families. 
 Either class may be productive or unproductive. 
 
 In every community each member is a consumer; for no one can 
 subsist, without the satisfaction of some necessary wants, however 
 confined and limited ; on the other hand, all, who do not live on 
 mere charity, or gratuitous bounty, contribute somehow to produc- 
 tion, by their industry, their capital, or their land; wherefore, the 
 consumers may be said to be themselves the producers; and the 
 great bulk of consumption takes place amongst the middling and 
 poorer classes, whose numbers more than counterbalance the small- 
 ness of the share allotted to each.* 
 
 * It is probable, tbat, in all countries, anywise advanced in industry, the reve- 
 nues of industry exceed those of capital and land united, and, consequently, that 
 the consumption of those deriving income solely from industry, and wholly de- 
 pendent for subsistence upon their personal faculties, exceeds that of Doth capi- 
 talists and landlords together. It is not uncommon to meet with a manufactory, 
 that, with a capital, say of 120,000 dollars, will pay daily in wages to its people, 
 60 dollars, which, with the deduction of Sundays and holidays, makes 18,000 
 dollars per annum ; if to this be added, 4000 dollars more for the net profits of 
 personal superintendence and management, it will give a total of 22,000 dollars 
 per annum, for the revenue of industry alone. The same capital, vested in land 
 at hu 20 years' purchase would yield a revenue of 6000 dollars only. 
 
 Tne cultivation by metayers, the very lowest description of farmers, gives to 
 them, and their subordinate labourers* industry, a revenue equal to that of the 
 'and jointly with the caoital, which is advanced by the proprietor. 
 
CHAP. II. ON CONSUMPTION. 391 
 
 Opulent, civilised, and industrious nations, are greater consumers 
 than poor ones, because tney are infinitely greater producers. They 
 annually, and in some cases, several times in the course of the yeai, 
 re-consume their productive capital, which is thus continually reno- 
 vated ; and consume unproductively, the greater part of their reve- 
 nues, whether derived from industry, from capital, or from land. 
 
 It is not uncommon to find authors proposing, as the model for 
 imitation, those nations whose wants are few ; whereas, it is far 
 preferable to have numerous wants, along with the power to gratify 
 them. This is the way at once to multiply the human species, arid 
 to give to each a more enlarged existence. 
 
 Stewart* extols the Lacedaemonian policy, which consisted in 
 practising the art of self-denial in the extreme, without aiming at 
 progressive advancement in the art of production. But herein the 
 Spartans were rivalled by the rudest tribes of savages, which are 
 commonly neither numerous nor amply provided. Upon this prin- 
 ciple, it would be the very acme of perfection to produce nothing 
 and to have no wants; that is to say, to annihilate human existence. 
 
 CHAPTER II. 
 
 OF THE EFFECT OF CONSUMPTION IN GENERAL 
 
 THE immediate effect of consumption of every kind is, the loss of 
 value, consequently, of wealth, to the owner of the article consumed. 
 This is the invariable and inevitable consequence, and should never 
 be lost sight of in reasoning on this matter. A product consumed 
 is a value lost to all the world and to all eternity; but the further 
 consequence, that may follow, will depend upon the circumstances 
 and nature of the consumption. 
 
 If the consumption be unproductive, there usually results the 
 gratification of some want, but no reproduction of value whatever; 
 if productive, there results the satisfaction of no \vant. but a creation 
 of new value, equal, inferior, or superior in amount to that consumed, 
 and profitable or unprofitable to the adventurer accordingly/)* 
 
 * Book II. chap. 14. 
 
 fThis may be illustrated by the burning of fuel in a grate or furnace. The 
 fuel burnt, serves either to give warmth, or to cook victuals, boil dyeing ingre- 
 dients, and the like, and thereby to increase their value. There is no utility in 
 the mere gratuitous act of burning, except inasmuch as it tends to satisfy somf 
 human want, that of warmth for instance ; in which case, the consumption is 
 unproductive ; or inasmuch as it confers upon a substance submitted to its action, 
 a value, that may replace the value of the fuel consumed ; in which case the 
 consumption is productive. 
 
 If the fuel, burnt for the sake of warmth, produce either no warmth at all, ot 
 very little ; or that burnt to give value to a substance, give it no value, or a less 
 value than the value consumed in fuel, the consumption will be til-judged a no 
 improvident. 
 
392 
 
 ON CONSUMPTION. BOOK III. 
 
 Thus, consumption may be regarded as an act of barter, wherein 
 the owner of the value consumed gives up that value on the one 
 hand, and receives in return, either the satisfaction of a personal 
 want, or a fresh value, equivalent to the value consumed. 
 
 It may be proper here to remark, that consumption, productive of 
 nothing beyond a present gratification, requires no skill or talent in 
 the consumer. It requires neither labour nor ingenuity to eat a 
 good dinner, or dress in fine clothes.* On the contrary, productive 
 consumption, besides yielding no immediate or present gratification, 
 requires an exertion of combined labour and skill, or, of what has 
 all along been denominated, industry. 
 
 When the owner of a product ready for consumption has himself 
 no industrious faculty, and wishes, but knows not how to consume 
 it productively, he lends it to some one more industrious than him- 
 self, who commences by destroying it, but in such a way, as to 
 reproduce another, and* thereby enable himself to make a full resti- 
 tution to the lender, after retaining the profit of his own skill and 
 labour. The value returned consists of different objects from that 
 lent, it is true; indeed, the condition of a loan is in substance this; 
 to replace the value lent, of whatever amount, say 2000 dollars, at a 
 time specified, by other value, equivalent to the same amount of silver 
 coin of the like weight and quality at the time of repayment. An 
 object, lent on condition of specific restitution, cannot be available 
 for reproduction ; because, by the terms of the loan, it is not to be 
 consumed. 
 
 Sometimes a producer is the consumer of his own product ; as 
 when the farmer eats his own poultry or vegetables ; or the clothier 
 wears his own cloth. But, the objects of human consumption being 
 far more varied and numerous, than the objects of each person's pro- 
 duction respectively, most operations of consumption are preceded 
 by a process of barter. He first turns into money, or receives in 
 that shape, the values composing his individual revenue; and then 
 changes again that money for the articles he purposes to consume. 
 Wherefore, in common parlance, to spend and to consume have 
 become nearly synonymous. Yet, by the mere act of buying, the 
 value expended is not lost: for the article purchased has likewise a 
 value, which may be parted with again for what it cost, if it has not 
 been bought over-dear. The loss of value does not happen till the 
 actual consumption, after which the value is destroyed ; it then 
 ceases to exist, and is not the object of a second consumption. For 
 this reason it is, that in domestic life, the bad management of the 
 wife soon runs through a moderate fortune; for she in general regu- 
 lates the daily consumption of the family, which is the chief source 
 of expense, and one that is always recurring. 
 
 * There is unquestionably a sort of talent requisite in the expenditure of a 
 large income with credit to the proprietor, so as to gratify personal taste, with- 
 out awakening the self-love of others ; to oblige without the sense of humilia- 
 tion; to labour for the public good, without alarming individual interests. But 
 this kind of talent is referable rather to the head of practical, whilst its influence 
 upon the rest of mankind falls within the province of theoretical, morality. 
 
CUAP. III. ON CONSUMPTION. 393 
 
 This will serve to expose the error of the notion, that where there 
 is no loss of money, there can be no loss of wealth. It is the com- 
 monest thing in the world to hear it roundly asserted, that the 
 money spent is not lost, but remains in the country; and, therefore, 
 that the country cannot be impoverished by its internal expenditure. 
 It is true, the value of the money remains as before ; but the object. 
 or the hundred objects, perhaps, that have been successively bought 
 with the same money, have been consumed, and their value de- 
 stroyed. 
 
 Wherefore, it is superfluous, I had almost said ridiculous, to con- 
 fine at home the national money, for the purpose of preserving 
 national wealth. Money by no means prevents the consumption of 
 value, and the consequent diminution of wealth ; on the contrary, it 
 facilitates the arrival of consumable objects at their ultimate destina- 
 tion ; which is a most beneficial act, when the end is well chosen, 
 and the result satisfactory. Nor would it be correct even to main- 
 tain, that the export of specie is at all events a loss, although its 
 presence in the country may be no hindrance to consumption or to 
 the diminution of wealth. For unless it be made without any view 
 to a return, which is rarely the case, it is in fact the same thing as 
 productive consumption ; being merely a sacrifice of one value, for 
 the purpose of obtaining another. Where no return whatever is in 
 view, there indeed is so much loss of national capital ; but the loss 
 would be quite as great, were goods, and not money, so exported. 
 
 CHAPTER IH. 
 
 OF THE EFFECT OF PRODUCTIVE CONSUMPTION. 
 
 THE nature of productive consumption has been explained above, 
 in Book I. The value absorbed by it is what has been called Capi- 
 tal. The trader, manufacturer, and cultivator, purchase the raw 
 material* and productive agency, which they consume in the prepa- 
 ration of new products; and the immediate effect is precisely the 
 same as that of unproductive consumption, namely, to create a 
 demand for the objects of their consumption, which operates upon 
 their price, and upon their production; and to cause a destruction 
 of value But the ultimate effect is different; there is no satisfac- 
 tion of a human want, and no resulting gratification, except that 
 accruing to the adventurer from the possession of the fresh product 
 
 * The raw materials of manufacture and commerce are, the products bought 
 with a view to the communication to them of further value. Calicoes are raw 
 material to the calico-printer, and printed calicoes to the dealer who buys them 
 r or re-sale or export. In commerce, every act of purchase is an act of con- 
 sumption ; and every act of re-sale, an act of production. 
 
 2Z 
 
39-1 
 
 ON CONSUMPTION. BOOK Hi 
 
 the value which replaces that of the products consumed, and com- 
 monly affords him a profit into the bargain. 
 
 To this position, that productive consumption does not imme- 
 diatelv satisfy any human want, a cursory observer may possibly 
 object, that the wages of labour, though a productive outlay, go to 
 satisfy the wants of the labourer, in food, raiment, and amusement 
 perhaps. But, in this operation, there is a double consumption; I. 
 Of the capital consumed productively in the purchase of productive 
 agency, wherefrom results no human gratification : 2. Of the daily or 
 weekly revenue of the labourer, i. e. of his productive agency, the 
 recompense for which is consumed unproductively by himself and 
 his family, in like manner as the rent of the manufactory, which 
 forms the revenue of the landlord, is by him consumed uaprod ac- 
 tively. And this does not imply the consumption of the same value 
 twice over, first productively, and afterwards unproductively; for 
 the values consumed are two distinct values resting on bases alto- 
 gether different. The first, the productive agency of the labourer, is 
 the effect of his muscular power and skill, which is itself a positive 
 product, bearing value like any other. The second is a portion of 
 capital, given by the adventurer in exchange for that productive 
 agency. After the act of exchange is once completed, the consump 
 tion of the value given on either side is contemporaneous, but with a 
 different object in view; the one being intended to create a new pro- 
 duct, the other to satisfy the wants of the productive agent and his 
 family. Thus, the object, expended and consumed by the adven- 
 turer, is the equivalent he receives for his capital ; and that, consumed 
 unproductively by the labourer, is the equivalent for his revenue. 
 The interchange of these t\vo values by no means makes them one 
 and the same. 
 
 So likewise, the intellectual industry of superintendence is repro- 
 ductively consumed in the concern ; and the profits, accruing to the 
 adventurei as its recompense, are consumed unproductively by him- 
 self and his family. 
 
 In short, this double consumption is precisely analogous to that 
 of the raw material used in the concern. The clothier presents 
 himself to the wool-dealer, with 1000 crowns in his hand; there 
 are, at this moment, two values in existence, on the one side, that 
 of the 1000 crowns, which is the result of previous production, and 
 now forms a part of the capital of the clothier ; on the other, the 
 wool constituting a part of the annual product of a grazing farm. 
 These products are interchanged, and each is separately consumed; 
 the capital converted into wool, in a way to produce cloth ; the pro- 
 duct of the farm, converted into crown-pieces, in the satisfaction of 
 the wants of the farmer, or his landlord. 
 
 Since every thing consumed is so much lost, the gain of repro- 
 ductive consumption is equal, whether proceeding from reduced con- 
 sumption, or from enlarged production. In China, ihey make a great 
 saving, in the consumption of seed-corn, by following the drilling 
 ;n lieu or the broad-cast, method. The effect of this saving is jre 
 
CHAP. III. ON CONSUMPTION. 395 
 
 cisely the same, a$ if the land were, in China, proportionately moro 
 productive than in Europe.* 
 
 In manufacture, when the raw material used is of no value what- 
 ever, it is not to be reckoned as forming any part of the requisite 
 consumption of the concern; thus, the stone used by the lime-burner, 
 and the sand employed by the glass-blower, are no part of their 
 respective consumption, whenever they have cost them nothing. 
 
 A saving of productive agency, whether of industry, of land, or 
 of capital,: is equally real and effectual, as a saving of raw material ; 
 and it is practicable in two ways ; either by making the same pro- 
 ductive means yield more agency; or by obtaining the same result 
 from a smaller quantity of productive means. 
 
 Such savings generally operate in a very short time to the bene- 
 fit of the community at large ; they reduce the charges of produc- 
 tion ; and in proportion as the economical process becomes better 
 understood, and more generally practised, the competition of pro- 
 ducers brings the price of the product gradually to a level with the 
 charges of production. But for this very reason, all, who do not 
 learn to economise like their neighbours, must necessarily lose, while 
 others are gaining. Manufacturers have been ruined by hundreds, 
 because they would go to work in a grand style with too costly and 
 complex .an apparatus, provided of course at an excessive expense 
 of capital. 
 
 Fortunately, in the great majority of cases, self-interest is most 
 sensibly and immediately affected by a loss of this kind ; and in the 
 concerns of business, like pain in the human frame, gives timely 
 warning of injuries, that require care and reparation. If the rash 
 or ignorant adventurer in production were not the first to suffer the 
 punishment of his own errors or misconduct, we should find it far 
 more common than it is to dash into improvident speculation ; which 
 is quite as fatal to public prosperity, as profusion and extravagance. 
 A merchant, that spends 10,000 dollars in the acquisition of 6000 
 dollars, stands, in respect to his private concerns and to the general 
 wealth of the community, upon exactly the same footing, as a man 
 of fashion, who spends 4000 dollars in horses, mistresses, gluttony, 
 or ostentation ; except, perhaps, that the latter has more pleasure 
 and personal gratification for his money.f 
 
 * One of the suite of Lord Macartney estimated the saving of grain in China, 
 by this method alone, to be equal to the supply of the whole population of Great 
 Britain. 
 
 f There is almost insuperable difficulty in estimating 1 with precision the con- 
 sumption and production of value; and individuals have no other means of 
 knowing, whether their fortune be increased or diminished, except by keeping- 
 regular accounts of their receipt and expenditure ; indeed, all prudent persons 
 are careful to do so, and it is a duty imposed by law in the case of traders. An 
 adventurer could otherwise scarcely know whether his concern were gainful or 
 losing, and might be involving himself and his creditors in ruin. Besides keep- 
 ing regular accounts, a prudent manager will make previous estimates of the 
 value that will be absorbed in the concern, and of its probable proceeds; the use 
 of which, like that of a plan or design in building, is to give an approximation, 
 though it can afford no certainty. 
 
396 
 
 ON CONSUMPTION. BOOK IH. 
 
 What has been said on this subject in Book I, of this work, makes 
 it needless to enlarge here on the head of productive consumption. 
 I shall, therefore, henceforward direct my reader's attention to 
 the subject of unproductive consumption, its motives, and conse- 
 quences; premising, that in what 1 am about to say, the word con- 
 sumption, used alone, will import unproductive consumption, as it 
 does in common conversation. 
 
 CHAPTER IV. 
 
 OF THE EFFECT OF UNPRODUCTIVE CONSUMPTION IN GENERAL. 
 
 HAVING just considered the nature and effect of consumption in 
 general, as well as the general effect of productive consumption in 
 particular, it remains only to consider, in this and the following 
 chapters, such consumption as is effected with no other end or object 
 in view, than the mere satisfaction of a want, or the enjoyment of 
 some pleasurable sensation. 
 
 Whoever has thoroughly comprehended the nature of consump 
 tion and production, as displayed in the preceding pages, will have 
 arrived at the conviction, that no consumption of the class denomi- 
 nated unproductive, has any ulterior effect, beyond the satisfaction 
 of a want by the destruction of existing value. It is a mere ex- 
 change of a portion of existing wealth on the one side, for human 
 gratification on the other, and nothing more. Beyond this, what 
 can be expected? reproduction? how can the same identical utility 
 De afforded a second time? Wine can not be both drunk and dis- 
 tilled into brandy too. Neither can the object consumed serve to 
 establish a fresh demand, and thus indirectly to stimulate future pro- 
 ductive exertion; for it has already been explained that the only 
 effectual demand is created by the possession of wherewithal to 
 purchase, of something to give in exchange; and what can that 
 be, except a product, which, before the act of exchange and con- 
 sumption, must have been an item, either of revenue or of capital ? 
 The existence and intensity of the demand must invariablv depend 
 upon the amount of revenue and of capital : the bare existence of 
 revenue and of capital is all that is necessary for the stimulus of 
 production, which nothing else can stimulate/ The choice of one 
 object of consumption necessarily precludes that of another; what 
 is consumed in the shape of silks cannot be consumed in the shape 
 of linens or woollens; nor can what has once been devoted to 
 pleasure or amusement, be made productive also of more positive 01 
 substantial utility 
 
 Wherefore the sole object of inquiry, with regard to unpro 
 ductive consumption, is, the degree of gratification resulting from the 
 net of consump ion itself: and this inquiry will, in the remainder of 
 
CHAP. IV. ON CONSUMPTION. 397 
 
 this chapter, be pursued in respect of unproductive consumption in 
 general, after which we shall give in the following chapters, .a sepa- 
 rate consideration to that of individuals, and that of the public, or 
 community at large. The sole point is, to weigh the loss, occasioned 
 to the consumer by his consumption, against the satisfaction it 
 affords him. The degree of correctness, with which the balance of 
 loss and gain is struck, will determine whether the consumption be 
 judicious or otherwise ; which is a point that next to the actual pro- 
 duction of wealth, has the most powerful influence upon the well or 
 ill-being of families and of nations. 
 
 In this point of view, the most judicious kinds of consumption 
 seem to be : 
 
 1. Such as conduce to the satisfaction of positive wants; by which 
 term I mean those, upon the satisfaction of which depends the exist- 
 ence, the health, and the contentment of the generality of mankind ; 
 being the very reverse of such as are generated by refined sensuah- 
 ty, pride, and caprice. Thus, the national consumption will, on the 
 whole, be judicious, if it absorb the articles rather of convenience 
 than of display : the more linen and the less lace ; the more plain and 
 wholesome dishes, and the fewer dainties ; the more warm clothing, 
 and the less embroidery, the better. In a nation whose consump- 
 tion is so directed, the public establishments will be remarkable rather 
 for utility than splendour, its hospitals will be less magnificent than 
 salutary and extensive ; its roads well furnished with inns, rather 
 than unnecessarily wide and spacious, and its towns well paved, 
 though with few palaces to attract the gaze of strangers. 
 
 The luxury of ostentation affords a much less substantial and solid 
 gratification, than the luxury of comfort, if I may be allowed the 
 expression. Besides, the latter is less costly, that is to say, involves 
 the necessity of a smaller consumption ; whereas the former is 
 insatiable ; it spreads from one to another, from the mere proneness 
 to imitation ; and the extent to which it may reach, is as absolutely 
 unlimited, (a) " Pride," says Franklin, " is a beggar quite as clam- 
 orous as want, but infinitely more insatiable." 
 
 Taking society in the aggregate, it will be found that, one with 
 another, the gratification of real wants is more important to the 
 community, than the gratification of artificial ones. The wants of 
 the rich man occasion the production and consumption of an exqui- 
 site perfume, perhaps those of the poor man, the production and 
 consumption of a good warm winter cloak; supposing the value to 
 
 () It is strange, that so acute a writer should not have perceived, that the 
 mischief of pure individual vanity can never be very formidable, because the 
 pleasure it affords loses in intensity, in proportion to its diffusion. Indeed as 
 far as individual consumption is concerned, attacks upon luxury are mere idle 
 declamations; for the productive energies of mankind will always be directed 
 towards an object, with a force and in a degree porportionate to the intensity of 
 the want for it. It is the extravagance of public luxury alone that can ever be 
 formidable; this, as well as public consumption of every kind, it is always the 
 interest of the community at large to contract, and that of public functionaries t 
 expand, to tht utmost. T. 
 34 
 
398 ON CONSUMPTION. Booa III. 
 
 be equal, the diminution of the general wealth is the same in both 
 cases ;.but the resulting gratification will, in the one case, be trifling, 
 transient, and scarcely perceptible ; in the other, solid, ample, and of 
 long duration.* 
 
 2. Such as are the most gradual, and absorb products of the best 
 quality. A nation or an individual, will do wisely to direct con- 
 sumption chiefly to those articles, that are the longest time in wear- 
 ing out, and the most frequently in use. Good houses and furniture 
 are, therefore, objects of judicious preference ; for there are few pro- 
 ducts that take longer time to consume than a house, or that are of 
 more frequent utility ; in fact, the best part of one's life is passed in 
 it. Frequent changes of fashion are unwise; for fashion takes upon 
 itself to throw things away long before they have lost their utility, 
 and sometimes before they have lost even the freshness of novelty, 
 thus multiplying consumption exceedingly, and rejecting as good for 
 nothing what is perhaps still useful, convenient, or even elegant. So 
 that a Vapid succession of fashions impoverishes a state, as well by 
 the consumption it occasions, as by that which it arrests. 
 
 There is an advantage in consuming articles of superior quality, 
 although somewhat dearer, and for this reason : in every kind of 
 manufacture, there are some charges that are always the same, 
 whether the product be of good or bad quality. Coarse linen will 
 have cost, in weaving, packing, storing, retailing, and carriage, 
 before it comes to the ultimate consumer, quite as much trouble and 
 labour, as linen of the finest quality, therefore in purchasing an infe- 
 rior quality, the only saving is the cost of the raw material : the 
 labour and trouble must always be paid in full, and at the same rate ; 
 yet the product of that labour and trouble are much quicker con- 
 sumed, when the linen is of inferior, than when it is of superior 
 quality. 
 
 This reasoning is applicable indifferently to every class of pro- 
 duct ; for in every one there are some kinds of productive agency, 
 that are paid equally without reference to quality ; and that agency 
 is more profitably bestowed in the raising of products of good than 
 of bad quality ; therefore, it is generally more advantageous for a 
 nation to consume the former. But this can not be done, unless the 
 nation can discern between good and bad, and have acquired taste 
 for the former; wherein again appears the necessity of knowledgef 
 to the furtherance of national prosperity ; and unless, besides, the 
 bulk of the population be so far removed above penury, as not to 
 I)e obliged to buy whatever is the cheapest in the first instance, al 
 though it be in the long-run the dearest to the consumer. 
 
 It is evident, that the interference of public authority in regu- 
 
 "The lending at interest what might have been spent in frivolity is of this 
 latter class; for interest can not be paid, unless the loan be productively em- 
 ployed ; in which case it will go in part to the maintenance of the labouring 
 
 f By knowledge, I would always be understood to mean, acquaintance with 
 .he true state of things, or generally with truth in every branch. 
 
CIIAP. IV. ON CONSUMPTION. 399 
 
 lating the details of the manufacture, supposing it to succeed in 
 making the manufacturer produce goods of the best quality, which 
 is very problematical, must be quite ineffectual in promoting their 
 consumption ; for it can give the consumer, neither the taste of what 
 is of the better quality, nor the ability to purchase. The difficulty 
 lies, not in finding a producer, but in rinding a consumer. It will be 
 no hard matter to supply good and elegant commodities, if there be 
 consumers both willing and able to purchase them. But such a 
 demand can exist only in nations enjoying comparative affluence; it 
 is affluence, that both furnishes the means of buying articles of good 
 quality, and gives a taste for them. Now the interference of author- 
 ity is not the road to affluence, which results from activity of pro- 
 duction, seconded by the spirit of frugality ; from habits of industry 
 pervading every channel of occupation, and of frugality tending to 
 accumulation of capital. In a country, where these qualities are 
 prevalent, and in no other, can individuals be at all nice or fasti- 
 dious in what they consume. On the contrary, profusion and em- 
 barrassment are inseparable companions ; there is no choice when 
 necessity drives. 
 
 The pleasures of the table, of play, of pyrotechnic exhibitions, 
 and the like, are to be reckoned amongst those of shortest duration. 
 I have seen villages, that, although in want of good water, yet do 
 not hesitate to spend in a wake or festival, that lasts but one day, as 
 much money as would suffice to construct a conduit for the supply 
 of that necessary of life, and a fountain or public cistern on the vil- 
 lage green; the inhabitants preferring to get once drunk in honour 
 of the squire or saint, and to go day after day with the greatest in- 
 convenience, and bring muddy water from half a league distance. 
 The filth arid discomfort prevalent in rustic habitations are attributa- 
 ble, partly to poverty, and partly to injudicious consumption. 
 
 In most countries, if a part of what is squandered in frivolous 
 and hazardous amusements, whether in town or country, were spent 
 in the embellishment and convenience of the habitations, in suitable 
 clothing, in neat and useful furniture, or in the instruction of the 
 population, the whole community would soon assume an appearance 
 of improvement, civilization, and affluence, infinitely more attractive 
 to strangers, as well as more gratifying to the people themselves. 
 
 3. The collective consumption of numbers. There are some kinds 
 of agency, that need not be multiplied in proportion to the increased 
 consumption. One cook can dress dinner for ten as easily as for 
 one ; the same grate will roast a dozen joints as well as one ; and 
 this is the reason, why there is so much economy in the mess-table 
 of a college, a monastery, a regiment, or a large manufactory, in 
 the supply of great numbers from a common kettle or kitchen, and 
 in the dispensaries of cheap soups. 
 
 4. And lastly, on grounds entirely different, those kinds of con 
 sumption are judicious, which are consistent with moral rectitude ; 
 and, on the contrary, those, which infringe its laws, generally end 
 in public, as well as private calamity. But it would be too wide a 
 
400 ON CONSUMPTION. BOOK III. 
 
 digression from my subject to attempt the illustration of this posi- 
 
 It is observable, that great inequality of private fortune is hostile 
 to those kinds of consumption, that must be regarded as most judi- 
 cious. In proportion as that inequality is more marked, the artifi- 
 cial wants of the population are more numerous, the real ones more 
 scantily supplied, and the rapid consumption more common and de- 
 structive. The patrician spendthrifts and imperial gluttons of an- 
 cient Rome thought they never could squander enough. Besides, 
 immoral kinds of consumption are infinitely more general, where the 
 extremes of wealth and poverty are found blended together. In 
 such a state of society, there are few, who can indulge in the re- 
 finement of luxury, but a vast number, who look on their enjoy- 
 ments with envy, and are ever impatient to imitate them. To. get 
 into the privileged class is the grand object, be the means ever so 
 questionable; and those who are little scrupulous in the acquire- 
 ment, are seldom more so in the employment of wealth. () 
 
 The government has, in all countries, a vast influence, in deter- 
 mining the character of the national consumption; not only because 
 it absolutely directs the consumption of the slate itself, but because a 
 great proportion of the consumption of individuals is gained by its 
 will and example. If the government indulge a taste for splendour 
 and ostentation, splendour and ostentation will be the order of the 
 day, with the whole host of imitators ; and even those of better 
 judgment and discretion must, in some measure, yield to the tor 
 rent. For, how seldom are they independent of that consideration 
 and good opinion, which, under such circumstances, are to be 
 earned, not by personal qualities, but by a course of extravagance 
 they can not approve 1 
 
 First and foremost in the list of injudicious kinds of consumption 
 stand those which yield disgust and displeasure, in lieu of the grati- 
 fication anticipated. Under this class may be ranged, excess and 
 intemperance in private individuals; and, in the state, wars under- 
 taken with the motive of pure vengeance, like that of Louis XIV. 
 in revenge for the attacks of a Dutch newspaper, or with that of 
 empty glory, which leads commonly to disgrace and odium. Yet 
 such wars are even less to be deplored for the waste of national 
 wealth and resources, than for the irremediable loss of personal 
 virtue and talent sacrificed in the struggle ; a loss which involves 
 
 (a) In a wholesome state of society, when public institutions are not needless- 
 ly multiplied, and all tend to the common purpose of public good, this very im- 
 patience and anxiety is conducive to the welfare, and not to the injury, of so- 
 ciety. Indeed, great inequality of fortune seems to be a necessary accompani- 
 ment to ^jocia/ wealth and great national productive power. It is the prospect 
 of great prizes only, that can stimulate to the extreme of intellectual and cor- 
 poreal industry ; and there is no instance on record of a nation far advanced in 
 industry, in which great inequality of fortune has not existed. One bishopric of 
 Durham will tempt more clerical adventurers, than five hundred moderate bene- 
 fices ' and the example of a single Arkwright or Peel will stimulate manufac- 
 turing science arid activity more than a whole Manchester of moderate cotton 
 spinning concerns. T. 
 
CH4P. V. ON CONSUMPTION. 401 
 
 families in distress enough, when exacted by the public good, and 
 by iht, pressure of inexorable necessity ; but must be doubly shock- 
 ing and afflicting, when it originates in the caprice, the wickedness, 
 tne tbily, or the ungovernable passions of national rulers. 
 
 CHAPTER V. 
 
 OP INDIVIDUAL CONSUMPTION-ITS MOTIVES AND ITS EFFECTS. 
 
 THE consumption of individuals, as contrasted with that of the 
 ^ublic or community at large, is such as is made with the object of 
 satisfying the wants of families and individuals. These wants 
 chiefly consist in those of food, raiment, lodging, and amusement. 
 They are supplied with the necessary articles of consumption in 
 each department, out of the respective revenue of each family or 
 individual, whether derived from personal industry, from capital, or 
 from land. The wealth of a family advances, declines, or remains 
 stationary, according as its consumption equals, exceeds, or falls 
 short of its revenue. The aggregate of the consumption of all the 
 individuals, added to that of the government for public purposes, 
 forms the grand total of national consumption. 
 
 A family, or indeed a community, or nation, may certainly con- 
 sume the whole of its revenue, without being thereby impoverished; 
 but it by no means follows, that it either must, or would act wisely, 
 in so doing. Common prudence would counsel to provide against 
 casualties. Who can say with certainty, that his income will not 
 fall off, or that his fortune is exempt from the injustice, the fraud, or 
 the violence of mankind ? Lands may be confiscated ; ships may be 
 wrecked; litigation may involve him in its expenses and uncertain- 
 ties. The richest merchant is liable to be ruined by one unlucky 
 speculation, or by the failure of others. Were he to spend his 
 whole income, his capital might, and in all probability would, be 
 continually on the decline. 
 
 But, supposing it to remain stationary, should one be content with 
 keeping it so? A fortune, however large, will seem little enough, 
 when it comes to be divided amongst a number of children. And, 
 even if there be no occasion to divide it, what harm is there in en- 
 larging it ; so it be done by honourable means ? what else is it, but 
 the desire of each individual to better his situation, that suggests 
 the frugality that accumulates capital, and thereby assists the pro 
 caress of industry, and leads to national opulence and civilisation 7 
 Had not previous generations been actuated by this stimulus, ,,ne 
 present one would now be in the savage state ; and it is impossible 
 to say, how much farther it may yet be possible to carry civilization. 
 U has never been proved to my satisfaction, that nine-tenths of the 
 34 * 3 A 
 
402 ON CONSUMPTION. BOOK HI 
 
 population must inevitably remain in that degree of misery and 
 semi-barbarism, which they are found in at present in most coun- 
 tries of Europe. 
 
 The observance of the rules of private economy keeps the con- 
 sumption of a family within reasonable bounds : that is to say, the 
 bounds prescribed in each instance by a judicious comparison of the 
 value sacrificed in consumption, with the satisfaction it affords. 
 None but the individual himself, can fairly and correctly estimate 
 the loss and gain, resulting to himself or family from each particu- 
 lar act of consumption ; for the balance will depend upon the for- 
 tune, the rank, and the wants of himself and family ; and, in some 
 degree, perhaps, upon personal taste and feelings. To restrain con- 
 sumption within too narrow limits, would involve the privation of 
 gratification that fortune has placed within reach ; and, on the other 
 hand, a too profuse consumption might trench upon resources, that 
 it might be but common prudence to husband.* 
 
 Individual consumption has constant reference to the character 
 and passions of the consumer. It is influenced alternately by the 
 noblest and the vilest propensities of our nature; at one time it is 
 stimulated by sensuality ; at another by vanity, by generosity, by 
 revenge, or even by covetousness. It is checked by prudence or 
 foresight, by groundless apprehension, by distrust, or by selfishness. 
 As these various qualities happen in turn to predominate, they direct 
 mankind in the use they make of their wealth. In this, as in every 
 other action of life, the line of true wisdom is the most difficult to 
 observe. Human infirmity is perpetually deviating to the one side 
 or the other, and seldom steers altogether clear of excess.f 
 
 In respect to consumption, prodigality and avarice are the two 
 faults to be avoided : both of them neutralize the benefits that wealth 
 is calculated to confer on its possessor ; prodigality by exhausting, 
 avarice by not using, the means of enjoyment. Prodigality is, 
 indeed, the more amiable of the two, because it is allied to many 
 amiable and social qualities. It is regarded with more indulgence, 
 because it imparts its pleasures to others; yet it is of the two the 
 more mischievous to society ; for it squanders and makes away with 
 the capital that should be the support of industry ; it destroys indus- 
 
 * On this ground sumptuary laws are superfluous and unjust. The indulgence 
 proscribed is either within the means of the individual or not : in the former 
 case, it is an act of oppression to prohibit a gratification involving no injury to 
 others, equally unjustifiable aa prohibition in any other particular ; in the latter, 
 it is at all events nugatory to do so ; for there is no occasion for legal interfer- 
 ence, where pecuniary circumstances alone are an effectual bar. Every irregu- 
 larity of this kind works its own punishment. It has been said, that it is th 
 duty of the government to check those habits, which have a tendency to lead 
 people into expenses exceeding their means ; but it will be found, that such 
 habits can only be introduced by the example and encouragement of the public 
 Authorities themselves. In all other circumstances, neither custom nor fashion 
 will ever lead the different classes of society into any expenses, but what are 
 suitable to their respective means. 
 
 f The weaker sex is, from the very circumstance of inferiority IP strengtn oi 
 mind, exposed to greater excess both of avarice and prodigality. 
 
CHAP. V. ON CONSUMPTION. 403 
 
 try, the grand agent of production, by the destruction of the other 
 agent, capital. If, by expense and consumption, are meant those 
 kinds only which minister to our pleasures and luxuries, it is a great 
 mistake to say that money is good for nothing but to be spent, and 
 that products are only raised to be consumed. Money may be em- 
 ployed in the work of re-production ; when so employed, it must be 
 productive of great benefit ; and, every time that a fixed capital rs 
 squandered, a corresponding quantity of industry must be extinguisn- 
 ed, in some quarter or other. The spendthrift, in running througn 
 his fortune, is at the same time exhausting, pro tanto, the source of 
 the profits upon industry. 
 
 The miser, who, in the dread of losing his money, hesitates to turn 
 it to account, does, indeed, nothing to promote the progress of indus- 
 try; but at least he can not be said to reduce the means of produc- 
 tion. His hoard is scraped together by the abridgment of his per- 
 sonal gratifications, not at the expense of the public, according to 
 the vulgar notion ; it has been withdrawn from no productive occu- 
 pation, and will at any rate re-appear at his death, and be available 
 for the purpose of extending the operations of industry, if it be not 
 squandered by his heirs, or so effectually concealed, as to evade all 
 search or recovery. 
 
 It is absurd in spendthrifts to boast of their prodigality, which is 
 quite as unworthy the nobleness of our nature, as the sordid mean- 
 ness of the opposite character. There is no merit in consuming all 
 one can lay hands upon, and desisting only when one can get no 
 more to consume; every animal can do as much; nay, there are 
 some animals that set a better example of provident management. 
 It is more becoming the character of a being gifted with reason and 
 foresight, never to consume, in any instance, without some reasona- 
 ble object in view. At least, this is the course that economy would 
 prescribe. 
 
 In short, economy is nothing more than the direction of human 
 consumption with judgment and discretion, the knowledge of our 
 means, and the best mode of employing them. There is no fixed 
 rule of economy; it must be guided by a reference to the fortune 
 condition, and wants of the consumer. An expense, that may be 
 authorized by the strictest economy in a person of moderate fortune, 
 would, perhaps, be pitiful in a rich man, and absolute extravagance 
 in a poor one. In a state of sickness, a man must allow himself in- 
 dulgences, that he would not think of in health. An act of benefi- 
 cence, that trenches on the personal enjoyments of the benefactor, 
 is deserving of the highest praise ; but it would be highly blamable, 
 if done at the expense of his children's subsistence. 
 
 Economy is equally distant from avarice and profusion. Avarice 
 hoards, not for the purpose of consuming or re-producing, but for 
 the mere sake of hoarding ; it is a kind of instinct, or mechanical 
 impulse, much to the discredit of those in whom it is detected: 
 whereas, true economy is the offspring of prudence and sound rea 
 son : and does not sacrifice necessaries to superfluities, like the miser 
 
404 ON CONSUMPTION. BOOK L,'I. 
 
 when he denies himself present comforts, in the view of luxury, e\ er 
 prospective and never to be enjoyed. The most sumptuous enter 
 tainment may be conducted with economy, without diminishing, but 
 rather adding to its splendour, which the slightest appearance of 
 avarice would tarnish and deface. The economical man balances 
 his means against his present or future wants, and those of his family 
 and friends, not forgetting the calls of humanity. The miser regards 
 neither family nor friends ; scarcely attends to his own personal 
 wants, and is an utter stranger to those of mankind at large. Econ- 
 omy never consumes without an object ; avarice never willingly 
 consumes at all ; the one is a sober and rational study, the only one 
 that supplies the means of fulfilling our duties, and being at the sau:e 
 time just and generous; the other, a vile propensity to sacrifice 
 every thing to the sordid consideration of self. 
 
 Economy has not unreasonably been ranked among the virtues of 
 mankind ; for, like the other virtues, it implies self-command and 
 control ; and is productive of the happiest consequences ; the good 
 education of children, physical and moral ; the careful attendance 
 of old age; the calmness of mind, so necessary to the good conduct 
 of middle life ; and that independence of circumstances which alone 
 can secure against mercenary motives, are all referable to this 
 quality. Without it there can be no liberality, none at least of a 
 permanent and wholesome kind ; for, when it degenerates into prodi- 
 gality, it is an indiscriminate largess, alike to deserving and unde- 
 serving ; stinting those who have claims in favour of those who have 
 none. It is common to see the spendthrift reduced to beg a favour 
 from people that he has loaded with his bounty ; for what he gives 
 now, one expects a return will some day be called for ; whereas, 
 the gifts of the economical man are purely gratuitous ; for he never 
 gives except from his superfluities. The latter is rich with a mode- 
 rate fortune ; but the miser and the prodigal are poor, though in 
 possession of the largest resources. 
 
 Economy is inconsistent with disorder, which stumbles blindfold 
 over wealth, sometimes missing what it most desires, although close 
 within its reach, and sometimes seizing and devouring what it is 
 most interested in preserving; ever impelled by the occurrences of 
 the moment, which it either can not foresee, or can not emancipate 
 itself from ; and always unconscious of its own position, and utterly 
 incapable of choosing the proper course for the future. A house- 
 hold, conducted without order, is preyed upon by all the world : 
 neither the fidelity of the servants, nor even the parsimony of the 
 master, can save it from ultimate ruin. For it is exposed to the 
 perpetual iccurrence of a variety of little outgoings, on every occa- 
 sion, however trivial.* 
 
 * I remember being once in the country a witness of the numberless minute 
 losses that neglectful housekeeping entails. For want of a trumpery latch, the 
 gate of the poultry-yard was forever open: there being no means of closing it 
 paternally, it was on the swing every time a person went out; and many of the 
 
CHAJ>. V. ON CONSUMPTION. 403 
 
 Among the motives that operate to determine the consumption 
 of individjals, the most prominent is luxury, that frequent theme 
 of declamation, which, however, I should probably not have dwelt 
 upon, could I expect that every body would take the trouble of ap- 
 plying the principles I have been labouring to establish ; and were 
 it not always useful to substitute reason for declamation. 
 
 Luxury has been defined to be, the use of superfluities.* For my 
 own part, I am at a loss to draw the line between superfluities and 
 necessaries ; the shades of difference are as indistinct and completely 
 blended as the colours of the rainbow. 
 
 Taste, education, temperament, bodily health, make the degrees 
 of utility and necessity infinitely variable, and render it impossible 
 to employ in an absolute sense, terms, which always of necessity 
 convey an idea of relation and comparison. 
 
 The line of demarcation between necessaries and superfluities shifts 
 with the fluctuating condition of society. Strictly speaking, man- 
 kind might exist upon roots and herbs, with a sheepskin for clothing, 
 and a wigwam for lodging; yet, in the present state of European 
 society, we cannot look upon bread or butcher's meat, woollen- 
 clothes or houses of masonry, as luxuries. For the same reason, 
 the line varies also according to the varying circumstances of indi- 
 vidual fortune ; what is a necessary in a large town, or in a particu- 
 lar line of life, may, in another line of life, or in the country, be a 
 mere superfluity. Wherefore, it is impossible exactly to define the 
 boundary between the one and the other. Smith has fixed it a little / 
 in advance of Stewart; including in the rank of necessaries, besides/ 
 natural wants, such as the established rules of decency and propriety | 
 have made necessary in the lower classes of society. But Smith; 
 was wrong in attempting to fix at all what must, in the nature off 
 things, be ever varying. 
 
 Luxury may be said, in a general way, to be, the use or consump- 
 
 poultry were lost in consequence. One day a fine young porker made his es- 
 cape into the woods, and the whole family, gardener, cook, milk-maid, &c., pre- 
 sently turned oat in quest of the fugitive. The gardener was the first to dis- 
 cover the object of pursuit, and in leaping a ditch to cut off his further escape, 
 got a sprain that confined him to his bed for the next fortnight: the cook found 
 the linen burnt that she had left hung up before the fire to dry; and the milk- 
 maid, having forgotten in her haste to tie up the cattle properly in the cow-house, 
 one of the loose cows had broken the leg of a colt that happened to be kept in 
 the same shed. The linen burnt and the gardener's work lost, were worth full 
 twenty crowns; and the colt about as much more: so that here was a loss in a 
 few minutes of forty crowns, purely for want of a latch that might have cost a 
 few sous at the utmost; and this in a household where the strictest economy was 
 necessary, to say nothing of the suffering of the poor man, or the anxiety and 
 other troublesome incidents. The misfortune was to be sure not very serious, 
 nor the loss very heavy ; yet when it is considered, that similar neglect was the 
 occasion of repeated disasters of the same kind, and ultimately of the ruin of n 
 worthy family, it was deserving of some little attention. 
 
 * Stewart, Essay on Pol. Econ. book ii. c. 20. The same writer has in an 
 other passage observed, that every thing not absolutely necessary to lire exist- 
 ence is a superfluity. 
 
406 ON CONSUMPTION. BOOK III. 
 
 tion of dear articles; for the term dear is one of relation, and there- 
 lore may be properly enough applied in the definition of another 
 term, whose sense is 'likewise relative. Luxury* with us in France 
 conveys the idea rather of ostentation than of sensuality; applied to 
 dress, *it denotes rather the superior beauty and impression upon the 
 beholder, than superior convenience and comfort to the wearer; ap- 
 plied to the table, it means rather the splendour of a sumptuous ban- 
 quet, than the exquisite farce of the solitary epicure. The grand aim 
 of luxury in this sense is to attract admiration by the rarity, the cost- 
 liness, and the magnificence of the objects displayed, recommended 
 probably neither by utility, noi convenience, nor pleasurable quali- 
 ties, but merely by their dazzling exterior and effect upon the opinions 
 of mankind at large. Luxury conveys the idea of ostentation ; but 
 ostentation has itself a far more extensive meaning, and comprehends 
 every quality assumed for the purpose of display. A man may be 
 ostentatiously virtuous, but is never luxuriously so ; for luxury im 
 plies expense. Thus, luxury of wit or genius is a metaphorical 
 expression, implying a profuse display or expenditure, if it may be 
 so called, of those qualities of the intellect, which it is the character- 
 istic of good taste to deal out with a sparing hand. 
 
 Although, with us in France, what we term luxury is chiefly 
 directed to ostentatious indulgence, the excess and refinement of sen- 
 suality are equally unjustifiable, and of precisely similar effect : that 
 is to say, of a frivolous and inconsiderable enjoyment or satisfaction, 
 obtained by a large consumption, calculated to satisfy more urgent 
 and extensive wants. But I should not stigmatise as luxury that 
 degree of variety or abundance, which a prudent and well-informed 
 person in a civilised community would like to see upon his table 
 upon domestic and common occasions, or aim at in his dress and 
 abode, when under no compulsion to keep up an appearance. I should 
 call this degree of indulgence judicious and suitable to his condition, 
 but not an instance of luxury. 
 
 Having thus defined the term luxury, we may go on to investigate 
 its effect upon the well-ordering or economy of nations. 
 
 Under the head of unproductive consumption is comprised the 
 satisfaction of many actual and urgent wants, which is a purpose of 
 sufficient consequence to outweigh the mischief, that must ensue 
 from the destruction of values. But what is there to compensate 
 that mischief, where such consumption has not for its object the satis- 
 faction of such wants ? where money is spent for the mere sake of 
 spending, and the value destroyed without any object beyond its 
 destruction? 
 
 It is supposed to be beneficial, at all events, to the producers of 
 the articles consumed. But it is to be considered, that the same 
 expenditure must take place, though not, perhaps, upon objects quite 
 
 * The English term luxury has a much more sensual meaning than the French 
 !uxe, and seems to comprise both luxe and luscure, the luxus, or luxuria, and 
 luxuries of the Latin writers. 
 
CHAP. V. ON CONSUMPTION. 407 
 
 so frivolous; for the money withheld from luxurious indulgences 
 s not absolutely thrown into the sea ; it is sure to be spent either 
 upon more judicious gratifications or upon reproduction. In one 
 way or other, all the revenue, not absolutely sunk or buried, is con- 
 sumed by the receiver of it, or by some one in his stead ; and in all 
 cases whatever, the encouragement held out by consumption to the 
 producer is co-extensive with the total amount of revenue to be ex- 
 pended. Whence it follows : 
 
 1. That the encouragement which ostentatious extravagance 
 affords to one class of production is necessarily withdrawn from 
 another. 
 
 2. That the encouragement resulting from this kind of consump- 
 tion cannot increase, except in the event of an increase in the reve- 
 nue of the consumers : which revenue, as we can not but know by 
 this time, is not to be increased by luxurious, but solely by repro- 
 ductive consumption. 
 
 How great, then, must be the mistake of those, \vho, on observing 
 the obvious fact, that the production always equals the consumption, 
 as it must necessarily do, since a thing can not be consumed before 
 it is produced, have confounded the cause with the effect, and laid it 
 down as a maxim, that consumption originates production ; there- 
 fore that frugality is directly adverse to public prosperity, and that 
 the most useful citizen is the one who spends the most. 
 
 The partisans of the two opposite systems above adverted to, the 
 economists, and the advocates of exclusive commerce, or the balance 
 of trade, have made this maxim a fundamental article of their creed. 
 The merchants and manufacturers, who seldom look beyond the 
 actual sale of their products, or inquire into the causes which may 
 operate to extend their sale, have warmly supported a position, ap- 
 parently so consistent with their interests ; the poets, who are ever 
 apt to be seduced by appearances, and do not consider themselves 
 bound to be wiser than politicians and men of business, have been 
 Joud in the praise of luxury;* and the rich have not been backward 
 
 * Though it is not every subject that allows equal scope to poetical genius, it 
 does not seem, that error affords a finer field than truth. The lines of Voltaire 
 on the system of the world, and on the discoveries of Newton regarding the 
 properties of light, are strictly conformable to the rules of science, and nowise 
 inferior in beauty to those of Lucretius on the fanciful dogmas of the Epicurean 
 school. But if Voltaire had been better acquainted with the principles of poli- 
 tical economy, he would never have given utterance to such sentiments as thf 
 following : 
 
 Sachez surtout que le luxe enrichit 
 
 Un grand etat, s'il en perd un petit. 
 
 Cette splendeur, cette pompe mondaine, 
 
 D'un regne heureux est la marque certain. 
 
 Le riche est ne pour beaucoup depenser .... 
 
 The progress of science compels those who covet literary fame, to make 
 themselves acquainted with general principles at the least ; without a close ad- 
 herence to truth and nature, there is little chance of permanent reputation, even 
 ill the poetical department. 
 
408 
 
 ON CONSUMPTION. BOOK 111 
 
 in adopting principles, that exalt their ostentation into a virtue, ann 
 their self-gratification into benevolence.* 
 
 means of prodi , 
 
 take pride in idle expense, but will ever be held in no less contempt 
 by the wise, on account of its pernicious effects, than it has been all 
 along, for the motives by which it is actuated. 
 
 These conclusions of theory have been confirmed by experience. 
 Misery is the inseparable companion of luxury. The man of wealth 
 and ostentation squanders upon costly trinkets, sumptuous repasts, 
 magnificent mansions, dogs, horses, and mistresses, a portion of 
 value, which, vested in productive occupation, would enable a mul- 
 titude of willing labourers, whom his extravagance now consigns to 
 idleness and misery, to provide themselves with warm clothing 
 nourishing food, and household conveniences. The gold buckles 
 of the rich man leave the poor one without shoes to his feet ; and 
 the labourer will want a shirt to his back, while his rich neighbour 
 glitters in velvet and embroidery. 
 
 It is vain to resist the nature of things. Magnificence may do 
 what it will to keep poverty out of sight, yet it will cross it at every 
 urn, still haunting, as if to reproach it for its excesses. This con- 
 v rast was to be met with at Versailles, at Rome, at Madrid, and in 
 every seat of royal residence. In a recent instance, it occurred in 
 France in an afflicting degree, after a long series of extravagant and 
 ostentatious administration ; yet the principle is so undeniable, that 
 one would not suppose it had required so terrible an illustraticn.f 
 
 * La Republique a lien affaire 
 De Gens, qui ne depensent rien ; 
 Je ne sais d'hnmme necessaire, 
 Que celui dont le luxe epand beaucoup de bien. 
 
 La Fontaine, Avantage de la Science. 
 
 " Were the rich not to spend their money freely," says Montesquieu, " the 
 poor would starve." Esprit des Lois, liv. vii. c. 4. 
 
 f There are other circumstances that contribute to veil the residence of the 
 court in an atmosphere of human misery. It is there, that personal service is 
 consumed by wholesale; and that is of all things the most rapidly consumed, 
 being, indeed, consumed as fast as produced. Under this denomination, is to be 
 comprised, the agency of the soldiery, of menial servants, of public function- 
 aries, whether useful or not, of clerks, lawyers, judges, civilians, ecclesiastic.*, 
 actors, musicians, drolls, and numerous other hangers-on, who all crowd towards 
 the focus of power and occupation, civil, judicial, military, or religious. It is 
 there also, that material products seem to be more wantonly consumed. The 
 choicest viands, the most beautiful and costly stuffs, the rarest works of art and 
 fashion, all seem emulous to reach this general sink, whence little or nothing 
 ever emerges. 
 
 Yet, if the accumulated values, that are drained from every quarter of th 
 national territory to feed the consumption of the seat of royalty, were distributed 
 with any regard to equity, they would probably suffice to maintain all classes in 
 fromfort and plenty. Though such drains must always be calamitous, because 
 (hey absoib value, and yield no return, at any rate the local population might be 
 ivetty well off; but it is notorious that wealth is nowhere less equally diffused. 
 
CIIAF. V. ON CONSUMPTION. 409 
 
 Those who are little in the habit of looking through the appear- 
 ance to the reality of things, are apt to be seduced by the glitter and 
 the bustle of ostentatious luxury. They take the display of con- 
 sumption as conclusive evidence of national prosperity. If they 
 could open their eyes, they would see, that a nation verging to- 
 wards decline will for some time continue to preserve a show of 
 opulence; like the establishment of a spendthrift on the high road 
 to ruin. But this false glare can not last long; the effort dries up 
 the sources of reproduction, and, therefore, must infallibly be fol- 
 lowed bv a state of apathy and exhaustion of the political frame, 
 which is only to be remedied by slow degrees, and by the adoption 
 of a regimen the very reverse of that, by which it has thus been 
 reduced. 
 
 It is distressing to see the fatal habits and customs of the nation 
 one is attached to by birth, fortune, and social affection, extending 
 their influence over the wisest individuals, and those best able to 
 appreciate this danger and foresee its disastrous consequences. The 
 number of persons, who have sufficient spirit and independence of 
 fortune to act up to their principles, and set themselves forward as 
 an example, is extremely small. Most men yield to the torrent, ana 
 rush on ruin with their eyes open, in search of happiness; although 
 it requires a very small share of philosophy to see the madness of 
 this course, and to perceive, that, when once the common wants of 
 nature are satisfied, happiness is to be found, not in the frivolous 
 enjoyments of luxurious vanity, but in the moderate exercise of our 
 physical and moral faculties. 
 
 Wherefore, those, who abuse great power, or talent, by exerting 
 it in diffusing a taste for luxury, are the worst enemies of social hap- 
 piness. If there is one habit, that deserves more encouragement 
 than another, in monarchies as well as republics, in great as well as 
 small, it is this of economy. Yet, after all, no encouragement is 
 wanted ; it is quite enough to withdraw favour and honour from 
 habits of profusion; to afford inviolable security to all savings and 
 acquirements; to give perfect freedom to their investment and occu* 
 pation in every branch of industry, that is not absolutely criminal. 
 
 It is alleged, that, to excite mankind to spend or consume, is to 
 excite them to produce, inasmuch as they can only spend what they 
 may acquire. This fallacy is grounded on the assumption, that 
 production is equally within the ability of mankind as consumption; 
 that it is as easy to augment as to expend one's revenue. But, sup 
 posing it were so, nay further, that the desire to spend, begets a 
 
 The prince, the favourite, a mistress, or a bloated peculator, takes the lion's 
 share, leaving to the subordinate drones the pittance assigned to them by the 
 generosity or caprice of their superiors. 
 
 The residence of an overgrown proprietor upon his estate then only tends to 
 diffuse abundance and cheerfulness around him, when his expenditure is directed 
 to objects of utility, rather than of pomp; in which case he is really an adven 
 turer in agriculture, and an accumulator of capital in the shape of improvement* 
 and ameliorations. 
 
 35 3B 
 
 1 
 
410 ON CONSUMPTION. BOOK III. 
 
 likino- for labour, although experience by no means warrants such a 
 conclusion, yet there can be no enlargement of production, without 
 an augmentation of capital, which is one of the necessary elements 
 of production; but it is clear, that capital can only be accumulated 
 by frugality; and how can that be expected from those, whose only 
 stimulus to production is the desire of enjoyment. 
 
 Moreover, when the desire of acquirement is stimulated by the 
 love of display, how can the slow and limited progress of real pro- 
 duction keep pace with the ardour of that motive? Will it not find a 
 shorter road to its object, in the rapid and disreputable profits of 
 jobbing and intrigue, classes of industry most fatal to national wel- 
 fare, because they produce nothing themselves, but only aim at 
 appropriating a share of the produce of other people? It is this 
 motive, that sets in motion the despicable art and cunning of the 
 knave, leads the pettifogger to speculate on the obscurity of the 
 laws, and the man of authority to sell to folly and wickedness that 
 patronage which it is his duty to dispense gratuitously to merit and 
 to right. Pliny mentions having seen Paulina at a supper, dressed in 
 a network of pearls and emeralds, that cost 40 millions of sestertii, (1) 
 as she was ready to prove by her jeweller's bills. It was bought 
 with the fruit of her ancestor's speculations. " Thus," says the 
 Roman writer, " it was to dress out his grand-daughter in jewels at 
 an entertainment, that Lollius forgot himself so far, as to lay waste 
 whole provinces, to become the object of detestation to the Asiatics 
 he governed, to forfeit the favour of Caesar, and end his life by 
 poison." 
 
 This is the kind of industry generated by love of display. 
 
 If it be pretended, that a system, which encourages profusion, 
 operates only upon the wealthy, and thus tends to a beneficial end, 
 inasmuch as it reduces the evil of the inequality of fortune, there 
 can be little difficulty in showing, that profusion in the higher, begets 
 a similar spirit in the middling and lower classes of society, which 
 last must, of course, the soonest arrive at the limits of their income ; 
 so that, in fact, the universal profusion has the effect of increasing, 
 instead of reducing, that inequality. Besides, the profusion of the 
 wealthier class is always preceded, or followed, by that of the govern- 
 ment, which must be fed and supplied by taxation, that is always 
 sure to fall more heavily upon small incomes than on large ones.* 
 
 *In favour of luxury, the followi ig paradoxical argument has been advanced; 
 for what is too ridiculous to be hazarded in such a cause ? " That since luxury 
 consumes superfluities only, the objects it destroys are of little real utility, and 
 therefore the loss to society can be but small." There is this ready answer : the 
 value of the objects consumed by luxury must have been reduced by the compe- 
 tition of producers to a level with the charges of production, wherein are com- 
 prised the profits of the producers. Objects of luxury are equally the product 
 of land, capital, and industry, which might have been employed in raising objects 
 of real utility, had the demand taken that direction ; for production invariably 
 accommodates itself to the taste of the consumers. 
 
 (I) [About 140,000 dollars. Some English ladies wear jewels of greatei 
 
V. OJN CONSUMPTION. 411 
 
 The apologists of luxury have sometimes gone so far as to cry up 
 the advantages of misery and indigence ; on the ground, that, \vithout 
 the stimulus of want, the lower classes of mankind could never be 
 impelled to labour, so that neither the upper classes, nor society at 
 large, could have the benefit of their exertions. 
 
 Happily, this position is as false in principle as it would be cruel 
 in practice. Were nakedness a sufficient motive of exertion, the 
 savage would be the most diligent and laborious, for he is the nearest 
 to nakedness, of his species. Yet his indolence is equally notorious 
 and incurable. Savages will often fret themselves to death, if com- 
 pelled to work. It is observable throughout Europe, that the laziest 
 nations are those nearest approaching to the savage state; a mechanic 
 in good circumstances, at London or Paris, would execute twice as 
 much work in a given time, as the rude mechanic of a poor district. 
 Wants multiply as fast as they are satisfied ; a man who has a jacket 
 is for having a coat ; and, when he has his coat, he must have a great- 
 coat too. The artisan, that is lodged in an apartment by himself, 
 extends his views to a second ; if he has two shirts, he soon wants a 
 dozen, for the comforts of more frequent change of linen ; whereas, 
 if he has none at all, he never feels the want of it. No man feels 
 any disinclination to make a further acquisition, in consequence of 
 having made one already. 
 
 The comforts of the lower classes are, therefore, by no means in- 
 compatible with the existence of society, as too many have main- 
 tained. The shoemaker will make quite as good shoes in a warm 
 room, with a good coat to his backhand wholesome food for himself 
 and his family, as when perishing with cold in an open stall ; he is 
 not less skilful or inclined to work, because he has the reasonable 
 conveniences of life. Linen is washed as well in England, where 
 washing is carried on comfortably within doors, as where it is exe- 
 cuted in the nearest stream in the neighbourhood. 
 
 It is time for the rich to abandon the puerile apprehension of losing 
 the objects of their sensuality, if the poor man's comforts be pro- 
 moted. On the contrary, reason and experience concur in teaching, 
 that the greatest variety, abundance, and refinement of enjoyment 
 are to be found in those countries, where wealth abounds most, and 
 is the most widely diffused. 
 
 value ; but some read the passage in Pliny Quadringenties, instead of Quad' 
 ragies Sestertium, This would make the jewels of Paulina worth 1,400,000 
 dollars; the more probable sum.] AMERICAN EDITOR. 
 
,J12 ON CONSUMPTION. BOOF ID 
 
 CHAPTER VI. 
 
 ON PUBLIC CONSUMPTION 
 
 SECTION I. 
 Of the Nature and general Effect of Public Consumption. * 
 
 BESIDES the wants of individuals and of families which it is the 
 object of private consumption to satisfy, the collection of many indi- 
 viduals into a community gives rise to a new class of wants, the 
 wants of the society in its aggregate capacity, the satisfaction of 
 which is the object of public consumption. The public buys and 
 consumes the personal service of the minister, that directs its affairs, 
 the soldier, that protects it from external violence, the civil or crimi- 
 nal judge, that protects the rights and interests of each member 
 against the aggression of the rest. All these different vocations have 
 their use, although they may often be unnecessarily multiplied or 
 overpaid; but that arises from a defective political organization* 
 which it does not fall within the scope of this work to investigate. 
 
 We shall see presently whence it is, that the public derives all the 
 values, wherewith it purchases the services of its agents, as well as 
 the articles its wants require. All we have to consider in this chap- 
 ter is, the mode in which its consumption is effected, and the conse- 
 quences resulting from it. 
 
 If I have made myself understood in the commencement of this 
 third book, my readers will have no difficulty in comprehending, that 
 public consumption, or that which takes place for the general utility 
 of the whole community, is precisely analogous to that consumption, 
 which goes to satisfy the wants of individuals or families. In either 
 case, there is a destruction of values, and a loss of wealth ; although, 
 perhaps, not a shilling of specie goes out of the country. 
 
 By way of insuring conviction of the truth of this position, let us 
 trace from first to last the passage of a product towards ultimate 
 consumption on the public account. 
 
 The government exacts from a tax-payer the payment of a given 
 tax in the shape of money. To meet this demand, the tax-payer 
 exchanges part of the products at his disposal for coin, which he 
 pays to the tax-gatherer:* a second set of government^ agents is 
 
 * Although the capitalist and landholder receive their interest and rent origi- 
 nally in the shape of money, and have, therefore, no occasion to go through any 
 previous act of exchange, to obtain wherewithal to pay the tax, yet suclfa pre- 
 vious exchange must have been effected by the adventurer, who turns the land 
 or capital to account. The effect is precisely the same, as if the rent or interest 
 had been paid in kind ; that is, in the immediate products of the land or capital ; 
 and the landholder or capitalist had paid the tax either by the direct transfer of 
 
CHAP. VI. ON CONSUMPTION. 413 
 
 'busied in buying with that coin, cloth and other necessaries f<>r 
 the soldiery. Up to this point, there is no value lost or consumed : 
 there has only been a gratuitous transfer of value, and a subsequent 
 act of barter : but the value contributed by the subject still exists in 
 the shape of stores and supplies in the military depot. In the end, 
 however, this value is consumed ; and then the portion of wealth, 
 which passes from the hands of the tax-payer into those of the tax- 
 gatherer, is destroyed and annihilated. 
 
 Yet it is not the sum of money that is destroyed : that has only, 
 passed from one hand to another, either without any return, as when 
 it passed from the tax-payer to the tax-gatherer ; or in exchange for 
 an equivalent, as when it passed from the government agent to the; 
 contractor for clothing and supplies. The value of the money sur- 
 vives the whole operation, and goes through three, four, or a dozen 
 hands, without any sensible alteration ; it is the value of the clothing 
 and necessaries that disappears, with precisely the same effect, as if 
 the tax-payer had, with the same money, purchased clothing and 
 necessaries for his own private consumption. The sole difference 
 is, that the individual irt the one case, and the state in the other 
 enjoys the satisfaction resulting from that consumption. 
 
 The same reasoning may be easily applied to all other kinds of 
 public consumption. When the money of the tax-payer goes to 
 pay the salary of a public officer, that officer sells his time, his tal- 
 ents, and his exertions, to the public, all of which are consumed for 
 public purposes. On the other hand, that officer consumes, instead 
 of the tax-payer, the value he receives in lieu of his services ; in 
 the same manner as any clerk or person in the private employ of 
 the tax-payer would do. 
 
 There has been long a prevalent notion, that the values, paid by 
 the community for the public service, return to it again in some 
 shape or other ; in the vulgar phrase, that what government and its 
 agents receive, is refunded again by their expenditure. This is a 
 gross fallacy; but one that has been productive of infinite mis 
 chief, inasmuch as it has been the pretext for a great deal of shame- 
 less waste and dilapidation. The value paid to government by the 
 tax-payer is given without equivalent or return: it is expended by 
 the government in the purchase of personal service, of objects of 
 consumption ; in one word, of products of equivalent value, which 
 are actually transferred. Purchase or exchange is a very different 
 thing from restitution.* 
 
 part of those products, or by first selling 1 them, and afterwards paying over the 
 proceeds. On this subject, vide supra, Book II. chap. 5, for the mode in which 
 revenue is distributed amongst the community. 
 
 * Dr. Hamilton, in his valuable tract upon The National Debt of Great Bri- 
 tain, illustrates the absurdity of the position here attacked, by comparing it tc 
 the " forcible entry of a robber into a merchant's house, who should take away 
 his money, and tell him he did him no injury, for the money, or part of it, would 
 be employed in purchasing the commodities he dealt in, upon which he would 
 receive a profit." The encouragement afforded by the public expenditure is on* 
 wisely analogous. 
 35* 
 
(L- 
 
 ON CONSUMPTION. BOOK III. 
 
 Turn it which way you will, this operation, though often very 
 complex in the execution, must always be reducible by analysis to 
 this plain statement. A product consumed must always be a pro- 
 duct lost, be the consumer who he may ; lost without return, when- 
 over no value or advantage is received in return; but, to the tax- 
 payer, the advantage derived from the services of the public func 
 tionary, or from the consumption effected in the prosecution of 
 public objects, is a positive return. 
 
 If, then, public and private expenditure affect social wealth in 
 the same manner, the principles of economy, by which it should be 
 regulated, must be the same in both cases. There are not two kinds 
 of economy, any more than two kinds of honesty, or of morality. Jf 
 a government or an individual consume in such a way, as to give 
 birth to a product larger than that consumed, a successful effort of 
 productive industry will be made. If no product result from the 
 act of consumption, there is a loss of value, whether to the state or 
 to the individual ; yet, probably, that loss of value may have been 
 productive of all the good anticipated. Military stores and sup- 
 plies, and the time and labour of civil and military functionaries, 
 engaged in the effectual defence of the state, are well bestowed, 
 though consumed and annihilated ; it is the same with them, as with 
 the commodities and personal service, that have been consumed in 
 a private establishment. The sole benefit resulting in the latter case 
 is, the satisfaction of a want; if the want had no existence, the 
 expense or consumption is a positive mischief, incurred without an 
 object. So likewise of the public consumption ; consumption for 
 the mere purpose of consumption, systematic profusion, the creation 
 of an office for the sole purpose of giving a salary, the destruction 
 of an article for the mere pleasure of paying for it, are acts of 
 extravagance either in a government or an individual, in a small 
 state or a large one, a republic or a monarchy. Nay, there is more 
 criminality in public, than in private extravagance and profusion ; 
 inasmuch as the individual squanders only what belongs to him ; 
 but the government has nothing of its own to squander, being, in 
 fact, a mere trustee of the public treasure.* 
 
 What, then, are we to think of the principles laid down by those 
 writers, who have laboured to draw an essential distinction between 
 public and private wealth; to show, that economy is the way to 
 increase private fortune, but, on the contrary, that public wealth 
 increases with the increase of public consumption : inferring thence 
 this false and dangerous conclusion, that the rules of conduct in the 
 management of private fortune and of public treasure, are not only 
 different, but in direct opposition ? 
 
 If such principles were to be found only in books, and had never 
 iiept into practice, one might suffer them without care or regret to 
 
 * It is mere usurpation in a government, to pretend to a right over the property 
 of individuals, or to act as if possessing such a right; and usurpation can never 
 constitute right; although it may confer possession. Were it otherwise, a thief, 
 who had once, by force or fraud, obtained possession of another man's property, 
 could never be called upon to make restitution, when overpowered and taken 
 r, for he might set up the plea of legitimate ownership. 
 
CHAP VI. ON CONSUMPTION. 415 
 
 swell the monstrous heap of printed absurdity ; but it must excite 
 our compassion and indignation to hear them professed by men of 
 eminent rank, talents, and intelligence ; and still more to see them 
 reduced into practice by the agents of public authority, who can 
 enforce error and absurdity at the point of the bayonet.. or mouth of 
 the cannon.* 
 
 ""Martennrde Maintenon mentions in a letter to the Cardinal de 
 Noailles, that, when she one day urged Louis XIV. to be more 
 liberal in charitable donations, he replied, that royalty dispenses 
 charity by its profuse expenditure; a truly alarming dogma, and one 
 that shows the ruin of France to have been reduced to principle/!" 
 False principles are more fatal than even intentional misconduct; 
 because they are followed up with erroneous notions of self-interest, 
 and are long persevered in without remorse or reserve. If Louis 
 XIV. had believed his extravagant ostentation to have been a mere 
 gratification of his personal vanity, and his conquests the satisfaction 
 of personal ambition alone, his good sense and proper feeling would 
 probably, in a short time, have made it a matter of conscience to 
 desist, or at any rate, he would have stopped short for his own sake ; 
 but he was firmly persuaded, that his prodigality was for the public 
 good as well as his own ; so that nothing could stop him, but mis- 
 fortune and humiliation-! 
 
 *The reader will readily perceive, that this and many other passages, were 
 written under the pressure of a military despotism, which had assumed the ab- 
 solute disposal of the national resources, and suffered no one to express a doubt 
 of the justice and policy of its acts. 
 
 t Fenelon> Vauban, and a very few more, of the most distinguished talent, had 
 a confused idea of the ruinous tendency of this system; but they failed in im- 
 pressing 1 the rest of the world with the same conviction ; for want of just notions 
 on the subject of the production and consumption of wealth. Thus Vauban, in 
 his Dixme royale, says, ' the present misery of France is attributable, not to the 
 rigour of the climate, the character of the inhabitants, or the barrenness of the 
 soil : for the climate is most favourable, the people active, diligent, dexterous, and 
 numerous : but to the frequency and long continuance of war, and the ignorance 
 and neglect of economy.' Fenelon had expressed the same sentiments in seve- 
 ral admirable passages of his Telemaque, but they passed for mere declamation, 
 as well they might; for he was not qualified to prove their truth and accuracy. \ 
 
 | When Voltaire tells us, speaking of the superb edifices of Louis XIV., that 
 they were by no means burthensome to the nation, but served to circulate money 
 in the community, he gives a decisive proof of the utter ignorance of the most 
 celebrated French writers of his day upon these matters. He looked no further 
 than the money employed on the occasion ; and, when the view is limited to that, 
 alone, the extreme of prodigality exhibits no appearance of loss ; for money is, in 
 fact, an item, neither of revenue, nor of annual consumption. But a little closer 
 attention will convince us of the fallacy of this position, which would lead us to 
 the absurd inference, that no consumption whatever has occurred within the 
 year, whenever the amount of specie at the end of it is found to be nowise di- 
 minished. The vigilance of the historian should have traced the 167 millions of 
 dollars expended on the chateau of Versailles alone, from the original produc- 
 tion by the laborious efforts of the productive classes of the nation, to the first 
 exchange into money, wherewith to pay the taxes, through the second exchange 
 into building materials, painting, gilding, &c. to the ultimate consumption in 
 that shape, for the personal gratification of the vanity of the monarch. The 
 money acted as a mere means of facilitating the transfers cf value in the course 
 
16 
 
 ON CONSUMPTION. BOOK III. 
 
 So little were the true principles of political economy understood, 
 even by men of the greatest science, so late as the 18th century, 
 that Frederick II. of Prussia, with all his anxiety in search of truth, 
 nis sagacity, and his merit, writes thus to D'Alembert, in justifica- 
 tion of his wars: "My numerous armies promote the circulation of 
 
 money, and disburse" impartially amongst the provinces the taxes 
 paid by the people to the state." Again I repeat, this is not the fact ; 
 the taxes paid to the government by the subject are not refunded 
 
 * 
 
 y its expenditure. Whether paid in money or in kind, they are 
 converted into provisions and supplies, and in that shape consumed 
 and destroyed by persons, that never can replace the value, because 
 they produce no value whatever.* It was well for Prussia that 
 Frederick II. did not square his conduct to his principles. The good 
 he did to his people, by the economy of his internal administration, 
 more than compensated for the mischief of his wars. 
 
 Since the consumption of nations or the governments which re- 
 present them, occasions a loss of value*, and consequently, of wealth, 
 it is only so far justifiable, as there results from it some national 
 advantage, equivalent to the sacrifice of value. The whole skill of 
 government, therefore, consists in the continual and judicious com- 
 parison of the sacrifice about to be incurred, with the expected 
 benefit to the community; for I have no hesitation in pronouncing 
 every instance, where the benefit is not equivalent to the loss, to be 
 an instance of folly, or of criminality, in the government. 
 
 It is yet more monstrous, then, to see how frequently govern- 
 ments, not content with squandering the substance of the people} 
 
 of the transaction ; and the winding up of the account will show, a destruction of 
 value to the amount of 167 millions of dollars, balanced by the production of a 
 palace, in need of constant repair, and of the splendid promenade of the gardens. 
 
 Even land, though imperishable, may be consumed in the shape of the value 
 received for it. It has been asserted, that France lost nothing by the sale of her 
 national domains after the revolution, because they were all sold and transferred 
 to French subjects; but what became of the capital paid in the shape of purchase- 
 money, when it left the pockets of the purchasers ? Was it not consumed and lost ? 
 
 *Tn the execution of the national military enterprise, two different values pass 
 through the hands of the government or its agents : 1. The value paid in taxes by 
 the public at large: 2. The value received in supplies and services from the par- 
 ties affording them. For the first of these no return whatever is made ; for the 
 second, an equivalent is paid in wages or purchase-money. Wherefore, there it 
 has no ground for saying that the government refunds with one hand what is 
 received with the other ; that the whole transaction is a mere circulation of value, 
 and causes no loss to the nation ; for the government returns but one, where it 
 receives two ; the loss of the other half falls upon the community at large. 
 Thus, the national, being but the aggregate of individual wealth, is diminished 
 to the extent of the total consumption of the government, minus the product 
 of the public establishment ; as we shall presently see more in detail. 
 
 fit has been seen in the concluding chapter of Book II. that, inasmuch as 
 population is always commensurate with production, the obstruction of the pro- 
 gressivt multiplication of products is a preventive check to the further multipli- 
 cation of the human race ; and that the waste of capital, the extinction of in- 
 dustry, and the exhaustion of the sources of production, amount to positive deci- 
 umtion of those m actual existence. A wicked or ignorant administration may, 
 iii this way, be a far more destructive scourge, than war with all its atrocities. 
 
CHAP VI. ON CONSUMPTION. 417 
 
 in folly and absurdity, instead of aiming at any return of value, 
 actually spend that substance in bringing down upon the nation 
 calamities innumerable; practise exactions the most cruel and arbi- 
 tiary, to forward schemes the most extravagant and wicked; first 
 rifle the pockets of the subject, to enable them afterwards to urge 
 him to the further sacrifice of his blood. Nothing, but the obstinacy 
 of human passion and weakness, could induce me again and again 
 to repeat these unpalatable truths, at the risk of incurring the charge 
 of declamation. 
 
 . The consumption effected by the government* forms so large a 
 portion of the total national consumption, amounting sometimes to a 
 sixth, a fifth, or even a fourth partf of the total consumption of the 
 
 * By government, I mean, the ruling power in all its branches, and under 
 whatever constitutional form ; it would be wrong to limit the term to the execu- 
 tive branch alone ; the first enactment of a law is as much an act of authority, 
 as its subsequent enforcement. 
 
 f The consumption of a nation may undoubtedly exceed its aggregate annual 
 icvenue; but we can hardly suppose that of Great Britain to have done so; for 
 she has evidently been advancing in opulence, up to the present time, whence it 
 may be inferred, that her consumption, at the very utmost, only equals her reve- 
 nue. Gcntz, who will hardly be accused of underrating the financial resources 
 of that country, estimated her total annual revenue at no more than two hundred 
 millions sterling ; Dr. Beeke at two hundred and eighteen millions, inclusive of 
 one hundred millions for the revenues of industry. Granting her to have made 
 some further progress since those estimates were made, and that her total reve- 
 nue in 1813 had advanced to two hundred and twenty-four millions, we are told 
 by Colquhoun, in his Wealth, Power, and Resources of the British Empire, that, 
 her public expenditure in that year amounted to one hundred and twelve mil- 
 lions. By this statement it should seem, that her public expenditure then 
 amounted to the half of the total expenditure of the nation ! Moreover, the ex- 
 penses of her central government do not include all her public charges ; there 
 are to be added, county and parish rates, poor rates, &c. &c. The business of 
 government might be conducted, even in extensive empires, at a charge of not 
 more than one per cent, upon the aggregate of individual revenue ; but, to attain 
 this degree of perfection, a vast improvement is still requisite in the department 
 of practical policy. (1) 
 
 (1) We copy f'om a Treatise on the Taxation of the British Empire, by R. 
 Montgomery Mortin, published in London, in 1833, the following note : " Lord 
 Liverpool said, in 1822, that the annual income of Great Britain, after making 
 allowances for the reduction of rents, and the diminution of the profits of trade 
 since the war, may be stated to be from 250,000,000*. to 280,000,000*. sterling. 
 Now if the population of Great Britain in 1833 be taken in round numbers at 
 16 millions, and the average expenditure for each individual be so low as one 
 shilling per day, or 18*. 5s. a-year, the annual income would be 452,000,000*. 
 and double that sum if the average expenditure of each individual were taken at 
 two shillings per day, which would not be an unreasonable calculation : applying 
 the same rule to Ireland, but giving the average expenditure of each individual 
 ?o low as sixpence a-day, on a population of eight millions, the annual income 
 of Ireland would be 73,000,000*. Thus the annual income of the United King 
 dom in 1833, is upwards of 500,000,000*. sterling on the lowest computation." 
 
 Estimating, on such authority, the annual income of Great Britain and Ireland 
 at 500 millions sterling, we perceive that this income, even after the payment oi 
 the taxes, enormous as they have been, is much greater now than at any former 
 of her history ; and there therefore can be no doubt that a continue* 
 3C 
 
4is ON CONSUMPTION. BOOK III. 
 
 community, that the system acted upon by the government, must 
 needs have a vast influence upon the advance or decline of the na- 
 tional prosperity. Should an individual take it into his head, that 
 the more he spends the more he gets, or that his profusion is a virtue ; 
 or should he yield to the powerful attractions of pleasure, or the 
 suggestions of perhaps a reasonable resentment, he will in all proba- 
 bility be ruined, and his example will operate upon a very small 
 circle of his neighbours. But a mistake of this kind in the govern- 
 ment, will entail misery upon millions, and possibly end in the na- 
 tional downfal or degradation. It is doubtless very desirable, that 
 private persons should have a correct knowledge of their personal 
 interests; but it must be infinitely more so, that governments should 
 possess that knowledge. Economy and order are virtues in a 
 1 private station ; but, in a public station, their influence upon national 
 y happiness is so immense, that one hardly knows how sufficiently to 
 extol and honour them in the guides and rulers of national cond'uct. 
 
 An individual is fully sensible of the value of the article he is 
 consuming; it has probably cost him a world of labour, perseverance, 
 and economy; he can easily balance the satisfaction he derives from 
 its consumption against the loss it will involve. But a government 
 is not so immediately interested in regularity and economy, nor does 
 it so soon feel the ill consequences of the opposite qualities. Besides, 
 private persons have a further motive than even self-interest ; their 
 feelings are concerned; their economy may be a benefit to the 
 objects of their affection ; whereas, the economy of a ruler accrues 
 to the benefit of those he knows very little of; and perhaps he is but 
 husbanding for an extravagant and rival successor. 
 
 Nor is this evil remedied, by adopting the principle of hereditary 
 rule. The monarch has little of the feelings common to other men 
 in this respect. He is taught to consider the fortune of his descend- 
 ants as secure, if they have ever so little assurance of the succes- 
 sion. Besides, the far greater part of the public consumption is not 
 personally directed by himself; contracts are not made by himself, 
 hut by his generals and ministers; the experience of the world 
 hitherto all tends to show, that aristocratical republics are more 
 economical, than either monarchies or democracies. 
 
 Neither are we to suppose, that the genius which prompts and 
 excites great national undertakings, is incompatible with the spirit 
 of public order and economy. The name of Charlemagne stands 
 among the foremost in the records of renown ; he achieved the con- 
 quest of Italy, Hungary, and Austria ; repulsed the Saracens ; broke 
 the Saxon confederacy ; and obtained at length the honours of the 
 purple. Yet Montesquieu has thought it not derogatory to say of 
 
 augmentation of the national capital must take place, even in defiance of many 
 obstructions. The public expenditure, too, of the same kingdom, is in course of 
 gradual reduction. During the late war, as has been observed by our author, on 
 the authority of Colquhoun, the public expenditure of the year 1813 amounted 
 to 112 millions, whereas in 1830 it was about 34 millions, in 1831, 33 millions, 
 ind in 1832 not so much by 100,OOOZ. sterling. AMERICAN EDITOR. 
 
CHAP. VI. ON CONSUMPTION. 419 
 
 him, that " the father of a family might take a lesson of good house- 
 keeping from the ordinances of Charlemagne. His expenditure was 
 conducted with admirable system ; he had his demesnes valued with 
 care, skill, and minuteness. We find detailed in his capitularies 
 the pure and legitimate sources of his wealth. In a word, such were 
 his regularity and thrift, that he gave orders for the eggs of his 
 poultry-yards, and the surplus vegetables of his garden, to be 
 brought to market."* The celebrated Prince Eugene, who dis- 
 played equal talent in negotiation and administration as in the 
 field, advised the Emperor Charles VI. to take the advice of mer- 
 chants and men of business, in matters of finance.f Leopold, when 
 Grand Duke of Tuscany, towards the close of the 18th century, 
 gave an eminent example of the resources, to be derived from a 
 rigid adherence to the principles of private economy, in the ad- 
 ministration of a state of very limited extent. In a few years, he 
 made Tuscany one of the most flourishing states of Europe. 
 
 The most successful financiers of France, Suger, Abbe de St. 
 Dennis, the Cardinal D'Amboise, Sully, Colbert, and Necker, have 
 all acted on the same principle. All found means of carrying into 
 effect the grandest operations by adhering to the dictates of private 
 economy. The Abbe de St. Dennis furnished the outfit of the second 
 crusade ; a scheme that required very large supplies, although one I 
 am far from approving. The Cardinal furnished Louis XII. with 
 the means of making his conquest of the Milanese. Sully accumu- 
 lated the resources, that afterwards humbled the house of Austria. 
 Colbert supplied the splendid operations of Louis XIV. Necker 
 provided the ways and means of the only successful war waged by 
 France in the 18th century. J 
 
 Those governments, on the contrary, that have been perpetually 
 pressed with the want of money, have been obliged, like individuals, 
 to have recourse to the most ruinous, and sometimes the most dis- 
 graceful, expedients to extricate themselves. Charles the Bald put 
 his titles and safe-conducts up to sale. Thus, too, Charles II. of 
 England sold Dunkirk to the French king, and took a bribe of 
 80,0007. from the Dutch, to delay the sailing of the English expe- 
 dition to the East Indies, 1680, intended to protect their settlements 
 in that quarter, which, in consequence, fell into the hands of the 
 Dutchmen.^ Thus, too, have governments committed frequent acts 
 
 * Esprit des Z/ot>, liv. xxxi. c. 18. 
 
 f Memoires du Prince Eugene par luimeme, p. 187. The authenticity of thia 
 work has been contested, as well as the Testament Politique of Richelieu. If 
 not themselves the authors, they must at least have been men of equal capacity, 
 of which there is still less probability. 
 
 | He contrived to meet the charges of the American war, without the impo- 
 sition of any additional taxes. He has been reproached, indeed, with having 
 incurred heavy loans ; but it is obvious, that, so long as he found means to pay 
 the interest upon them without fresh taxation, they were nowise burthensome 
 upon the nation ; and that the interest must have been defrayed by letrenchment 
 of the expenditure. 
 
 5 Raynal. Histoire des Etab. des Europ. dans les Indes^ torn. ii. p. 36 
 
420 ON CONSUMPTION. BOOK III. 
 
 of ban ruptcy, sometimes in the shape of adulteration of their coin, 
 and sometimes by open breach of their engagements. 
 
 Louis XIV. towards the close of his reign, having utterly ex- 
 hausted the resources of a noble territory, was reduced to the paltry 
 shift of creating the most ridiculous offices, making his counsellors 
 of state, one an inspector of fagots, another a licenser of barber- wig- 
 makers, another, visiting inspector of fresh, or taster of salt, butter, 
 and the like. Such paltry and mischievous expedients can never 
 long defer the hour of calamities, that must sooner or later befal the 
 extravagant and spendthrift governments. " When a man will not 
 listen to reason," says Franklin, " she is sure to make herself felt." 
 
 Fortunately, an economical administration soon repairs the mis- 
 chiefs of one of an opposite character. Sound health can not be 
 restored all at once; but there is a gradual and perceptible improve- 
 ment ; every day some cause of complaint disappears, and some new 
 faculty comes again into play. Half the remaining resources of a 
 nation, impoverished by an extravagant administration, are neutral- 
 ized by alarm and uncertainty ; whereas, credit* doubles those of a 
 nation", blessed with one of a frugal character. It would seem, that 
 there exists in the politic, to a stronger degree than even in the 
 natural, body a principle of vitality and elasticity, which can not 
 be extinguished without the most violent pressure. One can not 
 look into the pages of history, without being struck with the rapidity, 
 with which this principle has operated. It has nowhere been more 
 strikingly exemplified, than in the frequent vicissitudes that our 
 own France has experienced since the commencement of the revo- 
 lution. Prussia has afforded another illustration in our time. The 
 successor of Frederick the Great squandered the accumulations of 
 that monarch, which were estimated at no less a sum than 42 millions 
 of dollars, and left behind him, besides, a debt of 27 millions. In 
 less than eight years, Frederick William III. had not only paid off 
 his father's debts, but actually began a fresh accumulation ; such is 
 the power of economy, even in a country of limited extent and 
 resources. 
 
 * The expressions, credit is declining, credit is reviving, are common in the 
 mouths of the generality, who are, for the most part, ignorant of the precise 
 meaning of credit. It does not imply confidence in the government exclusively ; 
 for the bulk of the community have no concern with government, in respect to 
 their private affairs. Neither is it exclusively applied to the mutual confidence 
 of individuals ; for a person in good repute and circumstances, does not forfeit 
 them all at once; and, even in times of general distress, the forfeiture of indi- 
 vidual character is hy IK means so universal, as to justify the assertion, that 
 credit is at an end. It vrould rather seem to imply, confidence in future events. 
 The temporary dread of taxation, arbitrary exaction, or violence, will deter num- 
 bers from exposing their persons or their* property ; undertakings, however pro- 
 mising and well-planned, become too hazardous ; new ones are altogether dis- 
 couraged, old ones feel a diminution of profit; merchants contract their opera- 
 tions; and consumption in general falls off,, in consequence of the decline and 
 the uncertainty of individual revenue. There can be no confidence in future 
 ?vents, either under an enterprising, ambitious, or unjust government, or under 
 one, that is wanting in strength, decision, or method. Credit, like crystallizq- 
 r.ion, con only take place in a state of quiescence. 
 
CHAP. VI. ON CONSUMPTION. 491 
 
 SECTION II. 
 Of the principal Objects of National Expenditure. 
 
 In the preceding section, it has been endeavoured to show, that, 
 since all consumption by the public is in itself a sacrifice of value, 
 an evil balanced only by such benefit, as may result to the commu- 
 nity from the satisfaction of any of its wants, a good administration 
 will never spend for the mere sake of spending, but take care to 
 ascertain that the public benefit, resulting, in such instance, from the 
 satisfaction of a public want, shall exceed the sacrifice incurred in 
 its acquirement. 
 
 A comprehensive view of the principal public wants of a civilized 
 community, can alone qualify us to estimate with tolerable accuracy 
 the sacrifice it is worth while for the community to make for their 
 gratification.* 
 
 The public consumes little else, but what have been denominated 
 Immaterial products, that is to say, products destroyed as soon as 
 created ; in other words, the services or agency, either of human 
 beings, or of other objects, animate or inanimate.! 
 
 It consumes the personal service of all its functionaries, civil, 
 judicial, military, or ecclesiastical. It consumes the agency of land 
 and capital. The navigation of rivers and seas, utility of roads and 
 ground open to the public, are so much agency derived by the pub- 
 lic from land, of which either the absolute property, or the beneficial 
 enjoyment, is vested in the public. Where capital has been vested 
 in the land, in the shape of buildings, bridges, artificial harbours, 
 causeways, dikes, canals, &c. the public then consumes the agency, 
 or the rent of the land, plus the agency, or the interest, of the capi- 
 ta) so vested. 
 
 Sometimes the public maintains establishments of productive 
 industry for instance, the porcelain manufacture of Sevres, the 
 Gobelin tapestry, the salt-works of Lorraine and of the Jura, &c., 
 in France. When concerns of this kind bring more than their ex- 
 penditure, which is but rarely the case, they furnish part of the na- 
 tional revenue, and must by no means be classed among the items 
 of national charge. 
 
 Of the Charge of Civil and Judicial Administration. 
 
 The, chaige of civil and judicial administration is made up, 
 partly oi r the specific allowances of magistrates and other officers, 
 
 7* 
 
 * A mere sketch is all that can be expected in a work like the present: a com- 
 plete treatise on government would be equally appropriate with a survey of the 
 arts, when it became incidentally necessary to touch upon the processes of 
 manufacture. Yet, either would be a valuable addition to literary wealth. 
 
 fThis rule must be taken with some qualification. The habitual largesses of 
 corn, distributed by the emperors to the people of ancient Rome, were material 
 objects of public consumption. So likewise the provisions of all kinds consumed 
 in hospitals and prisons, and the fireworks used on occasions of public display or 
 
 er, for the amusement of the people at large. 
 36 
 
4 o 2 ON CONSUMPTION. BOOK III. 
 
 and partly of such degree of pomp arid parade, as may be deemed 
 /necessarv in the execution of their duties. Even if the burthen of 
 that pomp and parade be thrown wholly or partially upon the public 
 functionary, it must ultimately fall upon the shoulders of the public, 
 for the salary of the functionary must be raised, in proportion to tho 
 appearance he is expected to make. This observation applies to every 
 description of functionary, from the prince to the constable include 
 consequently, a nation, which reverences its prince only when our 
 rounded with the externals of greatness, with guards, horse and 
 foot, laced liveries, and such costly trappings of royalty, rcual pay 
 dearly for its taste. If, on the contrary, it can be content, to ieypect 
 simplicity rather than pageantry, and obey the laws, though unaided 
 by the attributes of pomp and ceremony, it will save in proportion. 
 This is what made the charges of government so light in many of 
 the Swiss cantons, before the revolution, and in the North American 
 colonies before their emancipation. It is well known, that those 
 colonies, though under the dominion of England, had separate 
 governments, of which they respectively defrayed the charge ; yet 
 the whole annual expenditure all together amounted to no more than 
 64,7007. sterling. " An ever memorable example," observes Smith, 
 " at how small an expense three millions of people may not only be 
 \ governed, but well governed."* 
 
 * It should be recollected, however, that they were at no charge of defence 
 from external attack, except in respect to the savage tribes of the interior. 
 
 From the official account of the receipts and disbursements of the United 
 States, in the year 1806, presented by Mr. Gallatin, then Secretary of the Trea- 
 sury, it appears that the total expenditure fell short of twelve millions of dollars, 
 of which eight millions went to pay the interest of the public debt ; leaving a 
 sum of four millions only for the charge of government, that is to say, the civil, 
 judicial, military, and other public functions of a population of twelve millions: 
 which is wholly defrayed by taxes on imports. (1) 
 
 (1) At the period to which our author here refers, namely, the year 1806, the 
 actual expenditure by the government of the United States, for that year, accord- 
 ing to the report of the Secretary of the Treasury, was 15,070,093 dollars 97 cents, 
 and of this amount, according to the same authority, 8,989,884 dollars 61 cents, 
 was on account of the extinguishment of the principal and interest of the public 
 debt. The population of the United States, for the same year, was only about 6 
 millions ; for, according to the official enumerations, the population, in the year 
 1600, was 5,305,925, and in the year 1810, was 7,239,814. Now the charges 
 of the government, exclusive of the payment of the public debt, it will be seen, 
 amounted then to 6,080,209 dollars 36 cents, or an expenditure equal to more 
 *han treble the amount given by our author. 
 
 The whole public expenditure of the people of the United States necessarily 
 embraces the local disbursements of the different states, as well as the expendi- 
 ture of the general government. Of the former, we have, as yet, no means of 
 presenting our readers with any accurate or official account, and we will not 
 venture to indulge in any loose estimates. Of the latter, however, we are en- 
 abled to furnish a tabular view, extracted from the letter of the Secretary of the 
 Treasury to the Chairman of the Committee of the House of Representatives 
 on Retrenchment, April 9, 1830, and from the subsequent annual Treasury Re- 
 ports, which will exhibit an authentic and accurate view of the receipts and 
 expenditures of the Federal Government, from the 4th of March, 1789, the 
 period of its commencement, to the 31st of December, 1832, the last date to 
 which the accounts have been all made up. 
 

 CHAP. VL 
 
 ON CONSUMPTION. 
 
 423 
 
 Causes entirely of a political nature as well as the form of govern- 
 ment which they help to determine, have an influence in apportion- 
 ing the salaries of public officers, civil and judicial, the charge of 
 public display, and those likewise of public institutions and establish- 
 
 We also subjoin the last official revision of the population returns of the seve- 
 ral states and territories, according to the five enumerations of the years 1790, 
 1600, 1810, 1820, and 1830. 
 
 RECEIPTS 
 
 From March 4, 1789, to December 31, 1833. 
 
 YEARS. 
 
 CUSTOMS. 
 
 TOTAL. 
 
 From March 4, 1789, to 
 
 
 Dec. 31, 1791 $4,399,473 09 
 
 $10,210,025 75 
 
 " " 1792 3,443,070 85 
 
 8,740,766 77 
 
 " " 1793 4,255,606 56 
 
 5,720,624 28 
 
 " " 1794 
 
 4,801,065 28 
 
 10,041,101 65 
 
 44 " 1795 
 
 5,588,461 26 
 
 9,419,802 79 
 
 " " 1796 6,567,987 94 
 
 8,740,329 65 
 
 " " 1797 7,549,649 65 
 
 8,758,916 40 
 
 " " 1798 7,106,061 93 
 
 8,209,070 07 
 
 " " 1799 6,610,449 31 
 
 12,621,459 84 
 
 " " 1800 9,080,932 73 
 
 12,451,184 14 
 
 " " 1801 10,750,778 93 
 
 12,945,455 95 
 
 " " 1802 12,438,235 74 
 
 15,001,391 31 
 
 " " 1803 10,479,417 61 
 
 11,064,097 63 
 
 " " 1804 11,098,565 33 
 
 11,835,840 02 
 
 " " 1805 
 
 12,936,487 04 
 
 13,689,508 14 
 
 " " 1806 
 
 14,667,698 17 
 
 15,608,823 78 
 
 ' " 1807 
 
 15,845,521 61 
 
 16,398,019 26 
 
 " " 1808 
 
 16,363,550 58 
 
 17,062,544 09 
 
 " " 1809 
 
 7,296,020 58 
 
 7,773,473 12 
 
 " " 1810 
 
 8,583,309 31 
 
 12,144,206 53 
 
 " " 1811 
 
 13,313,222 73 
 
 14,431,838 14 
 
 " " 1812 
 
 8,958,777 53 
 
 22,639,032 76 
 
 " " 1813 
 
 13,224,623 25 
 
 40,524,844 95 
 
 " " 1814 
 
 5,998,772 08 
 
 34,559,536 95 
 
 " " 1815 
 
 7,282,942 22 
 
 50,961,237 60 
 
 " " 1816 
 
 36,306,874 88 
 
 57,171,421 82 
 
 " " 1817 
 
 26,283,348 49 
 
 33,833,592 33 
 
 " " 1818 
 
 17,176,385 00 
 
 21,593,936 66 
 
 " " 1819 
 
 20,283,608 76 
 
 24,605,665 37 
 
 " " 1820 
 
 15,005,612 15 
 
 20,881,493 68 
 
 " " 1821 
 
 13,004,447 15 
 
 19,573,703 72 
 
 " " 1822 
 
 17,589,761 94 
 
 20,232,427 94 
 
 " " 1823 
 
 19,088,433 44 
 
 20,540,666 26 
 
 " " 1824 
 
 17,878,325 71 
 
 24,381,212 79 
 
 ' " 1825 20,098,713 45 
 
 26,840,858 02 
 
 1 " 1826 23,341,331 77 
 
 25,260,434 21 
 
 * " 1827 
 
 19,712,283 29 
 
 22,966,363 96 
 
 1 " 1828 
 
 23,205,523 64 
 
 24,763,629 23 
 
 1 " 1829 
 
 22,681,965 91 
 
 24,767,122 22 
 
 ' " 1830 
 
 21,922,391 39 
 
 24,844,116 51 
 
 " " 1831 24,224,441 97 
 
 28,526,820 82 
 
 " " 1832 28,465,237 21 
 
 31,865,561 16 
 
 " " 1833 29,032,508 91 
 
 33,948,426 25 
 
 
 $623,941,576 17 
 
 $878,150,589 52 
 
424 
 
 ON CONSUMPTION. 
 
 BOOK III. 
 
 ments. Thus, in a despotic government, where the subject holds 
 his property at the will of the sovereign, who fixes himself the 
 charge of his household, that is to say, the amount of the public 
 money which he chooses to spend on his personal necessities and 
 pleasures, and the keeping up of the royal establishment, that charge 
 will probably be fixed at a higher rate, than where it is arranged and 
 
 EXPENDITURES 
 
 From March 4, 1789, to December 31, 1833. 
 
 YEARS. 
 
 PUBLIC DEBT. 
 
 TOTAL. 
 
 From March 4, 1789, to 
 
 
 
 Dec. 31, 1791 
 
 $5,287,949 50 
 
 $7,207,539 08 
 
 " " 1792 
 
 7,263,665 99 
 
 9,141,569 67 
 
 " " 1793 
 
 5,819,505 29 
 
 7,529,575 55 
 
 " " 1794 
 
 5,801,578 09 
 
 9,302,124 74 
 
 " " 1795 
 
 6,084,411 61 
 
 10,435,069 65 
 
 " " 1796 
 
 5,835,846 44 * 
 
 8,367,776 84 
 
 " " 1797 
 
 5,792,421 82 
 
 8,626,012 78 
 
 " " 1798 
 
 3,990,294 14 
 
 8,613,517 68 
 
 " " 1799 
 
 4,596,876 78 
 
 11,077,043 50 
 
 " M 1800 
 
 4,578,369 95 
 
 11,989,739 92 
 
 " " 1801 
 
 7,291,707 04 
 
 12,273,376 94 
 
 " " 1802 
 
 9,539,004 76 
 
 13,276,084 67 
 
 " " 1803 
 
 7,256,159 43 
 
 11,258,983 67 
 
 " " 1804 
 
 8,171,787 45 
 
 12,624,646 36 
 
 " " 1805 
 
 7,369,889 79 
 
 13,727,124 41 
 
 " " 1806 
 
 8,989,884 61 
 
 15,070,093 97 
 
 " " 1807 
 
 6,307,720 10 
 
 11,292,292 99 
 
 " " 1808 
 
 10,260,245 35 
 
 16,764,584 20 
 
 " " 1809 
 
 6,452,554 16 
 
 13,867,226 30 
 
 " " 1810 
 
 8,009,904 46 
 
 13,319,986 74 
 
 " " 1811 
 
 8,009,204 05 
 
 13,601,808 91 
 
 " " 1812 
 
 4,449,622 45 
 
 22,279,121 15 
 
 " " 1813 
 
 11,108,128 44 
 
 39,190,520 36 
 
 " " 1814 
 
 7,900,543 94 
 
 38,028,230 32 
 
 " M 1815 
 
 12,628,922 35 
 
 39,582,493 35 
 
 " " 1816 
 
 24,871,062 93 
 
 48,244,495 51 
 
 " " 1817 
 
 25,423,036 12 
 
 40,877,646 04 
 
 " 1818 
 
 21,296,201 62 
 
 35,104,875 40 
 
 " " 1819 
 
 7,703,926 29 
 
 24,004,199 73 
 
 " " 1820 
 
 8,628,494 28 
 
 21,763,024 85 
 
 " " 1821 
 
 8,367,093 62 
 
 19,090,572 69 
 
 " " 1822 
 
 7,848,949 12 
 
 17,676,592 63 
 
 " " 1823 
 
 5,530,016 41 
 
 15,314,171 00 
 
 " " 1824 
 
 16,568,393 76 
 
 31,898,538 47 
 
 " " 1825 
 
 12,095,344 78 
 
 23,585,804 72 
 
 " " 1826 
 
 11,041,032 19 
 
 24,103,398 46 
 
 " " 1827 
 
 10,003,668 39 
 
 22,656,765 04 
 
 " " 1828 
 " " 1829 
 
 12,163,438 07 
 12,383,800 77 
 
 25,459,479 52 
 25,071,017 59 
 
 " " 1830 
 
 11,355,748 22 
 
 24,585,281 55 
 
 " " 1831 
 
 16,174,378 22 
 
 30,038,446 12 
 
 " " 1832 
 
 17,840,309 29 
 
 34,356,698 06 
 
 " 1833 
 
 1,543,543 38 
 
 24,257,298 49 
 
 
 $409,633,680 45 
 
 $866,534,848 56 
 
CHAP. VI. 
 
 ON CONSUMPTION. 
 
 425 
 
 contested between the representatives of the prince and of the tax 
 payers respectively. 
 
 The salaries of inferior public officers in like manner deperid, 
 partly upon their individual importance, and partly upon the gene- 
 ral plan of government. Their services are dear or cheap to the pub- 
 lic, not merely in proportion to what they actually cost, but likewise 
 in proportion as they are well or ill executed. A duty ill performed 
 is dearly bought, however little be paid for it ; it is dear too, if it 
 be superfluous, or unnecessary ; resembling in this respect an article 
 of furniture, that, if it do not answer its purpose, or be not wanted, 
 is merely useless lumber. Of this description, under the old regime 
 of France, were the officers of high-admiral, high-steward of the 
 household, the king's cup-bearer, the master of his hounds, and a 
 variety of others, which added nothing even to the splendour of 
 royalty, and were merely so many means of dispensing personal 
 favour and emolument. 
 
 For the same reason, whenever the officers of government arc 
 
 POPULATION OF THE UNITED STATES, 
 According to Five Enumerations; from the Official Revision. 
 
 States. 
 
 1790. 
 
 1800. 
 
 1810. 
 
 1820. 
 
 1830. 
 
 
 96,540 
 141,899 
 85,416 
 378,717 
 69,110 
 238,141 
 340,120 
 184,139 
 434,373 
 59,096 
 319,728 
 748,308 
 393,751 
 249,073 
 82,548 
 
 35,791 
 73,077 
 
 151,719 
 
 183,762 
 154,465 
 423,245 
 69,122 
 251,002 
 586,756 
 211,949 
 602,365 
 64,273 
 341,548 
 880,200 
 478,103 
 345,591 
 162,101 
 
 ' 8,850 
 
 105,602 
 220,955 
 45,365 
 
 4,875 
 
 14,093 
 
 228,705 
 214,360 
 217,713 
 472,040 
 77,031 
 262,042 
 959,949 
 249,555 
 810,091 
 72,674 
 380,546 
 974,622 
 555,500 
 415,115 
 252,433 
 20,845 
 40,352 
 76,556 
 261,727 
 406,511 
 230,760 
 24,520 
 12,282 
 20,845 
 24,023 
 
 298,335 
 244,161 
 235,764 
 523,287 
 83,059 
 275,202 
 1,372,812 
 277,575 
 1,049,458 
 72,749 
 407,350 
 1,065,379 
 638,829 
 502,741 
 340,987 
 127,901 
 75,448 
 153,407 
 422,813 
 564,317 
 581,434 
 147,178 
 55,211 
 66,586 
 33,039 
 
 399,955 
 269,328 
 280,652 
 610,408 
 97,199 
 297,665 
 1,918,608 
 320,823 
 1,348,233 
 76,748 
 447,040 
 1,211,405 
 737,987 
 581,185 
 516,823 
 309,527 
 136,621 
 215,739 
 681,904 
 687,917 
 937,903 
 343,031 
 157,455 
 140,445 
 39,834 
 34,730 
 31,639 
 30,388 
 
 New Hampshire . . 
 
 Massachusetts . . . 
 Rhode Island . . . 
 Connecticut .... 
 New York 
 
 New Jersey .... 
 Pennsylvania . . . 
 Delaware 
 
 Maryland 
 
 Virginia . 
 
 North Carolina . . 
 South Carolina . . 
 Georsf'a . . 
 
 Alabama 
 
 Mississippi . 
 
 
 Tennessee 
 
 
 Ohio 
 
 
 
 Missouri . 
 
 District of Columbia 
 Florida Territory . 
 Michigan Territory 
 Arkansas Territory 
 
 
 
 . 
 
 4,762 
 
 8,896 
 14,273 
 
 
 
 
 Total .... 
 
 1 
 
 3,929,827 
 
 5,305,925 7,239,814 9,638,131 12,866,020 
 AMERICAN EDITOR. 
 
 36* 3D 
 
426 ON CONSUMPTION. BOOK III. 
 
 needlessly multiplied, the people are saddled with charges, which 
 are not necessary to the maintenance of public order. It is only 
 giving an unnecessary form to that benefit, or product, which is not 
 at all the better of it, if indeed it be not worse.* A bad government, 
 that can not support its violence, injustice, and exaction, without a 
 multitude of mercenaries, satellites, and spies, and gaols innumer- 
 able, makes its subjects pay for its prisons, spies, and soldiers, which 
 nowise contribute to the public happiness. 
 
 On the other hand, a public duty may be cheap, although very 
 liberally paid. A low salary is wholly thrown away upon an inca- 
 pable and inefficient officer ; his ignorance will probably cost the 
 public ten times the amount of his salary ; but the knowledge and 
 activity of a man of ability are fully equivalent to the pay he re- 
 ceives ; the losses he saves to the public, and the benefits derived 
 from his exertions, greatly outweigh his personal emolument, even 
 if settled on the most liberal scale. 
 
 There is real economy in procuring the best of every thing, even 
 at a larger price. Merit can seldom be engaged at a low rate, be- 
 cause it is applicable to more occupations than one. The talent, that 
 makes an able minister, would, in another profession, make a good 
 advocate, physician, farmer, or merchant; and merit will find both 
 employment and emolument in all these departments. If the public 
 service offer no adequate reward for its exertion, it will choose some 
 other more promising occupation. 
 
 Integrity is like talent ; it can not be had without paying for it, 
 which is not at all wonderful ; for the honest man can not resort to 
 those discreditable shifts and contrivances, which dishonesty looks 
 to as a supplemental resource. 
 
 The power, which commonly accompanies the exercise of public 
 functions, is a kind of salary, that often far exceeds the pecuniary 
 emolument attached to them. It is true, that in a well ordered 
 state, where law is supreme, and little is left to the arbitrary con- 
 trol of the ruler, there is little opportunity of indulging the caprice 
 and love of domination implanted in the human breast. Yet the 
 discretion, which the law must inevitably vest in those who are to 
 enforce it, and particularly in the ministerial department, together 
 with the honour commonly attendant on the higher offices of the 
 state, have a real value, which makes them eagerly sought for, 
 even in countries where they are by no means lucrative. 
 
 The rules of strict economy would probably make it advisable to 
 abridge all pecuniary allowance, wherever there are other suffi- 
 cient attractions to excite a competition for office, and to confer it 
 on none but the wealthy, were there not a risk of losing, by 
 the incapacity of the officer, more than would be gained by the 
 
 *An example occurs to me of a city of France, whose municipal administra- 
 tion was both mildly and efficiently conducted before 1789, at a charge of 1000 
 crowns per annum only, but under the imperial government, though it nost 
 30,000 jr. (5,580 dollars) afforded no security against the caprice and arbitrary 
 will of the sovereign. 
 
CHAP. VL ON CONSUMPTION. 427 
 
 abridgment of his salary. This, as Plato well observes in his 
 Republic, would be like entrusting the helm to the richest man 
 on board. Besides, there is some danger, that a man, who gives 
 his services for nothing, will make his authority a matter of gain, 
 however rich he maybe. The wealth of a public functionary is 
 no security against his venality : for ample fortune is commonly 
 accompanied with desires as ample, arid probably even more am- 
 ple, especially if he have to keep up an appearance, both as a 
 man of wealth and a magistrate. Moreover, supposing what is not 
 altogether impossible, namely, that one can meet with wealth united 
 with probity, and with, besides, the activity requisite to the due 
 performance of public duty, is it wise to run the risk of adding the 
 preponderance of authority to that of wealth, which is already but 
 too manifest ? With what grace could his employers call to account 
 an agent, who could assume the merit of generosity, both with the 
 people and with the government? There are, however, some ways, 
 in which the gratuitous services of the rich may be employed with 
 advantage; particularly in those departments, that confer more honour 
 than power : as in the administration of institutions of public char- 
 ity, or of public correction or punishment. 
 
 In France under the old regime, the government, when harassed 
 with the want of money, was in the habit of putting up its offices 
 to sale. This is the very worst of all expedients; it introduces all 
 the mischiefs of gratuitous service ; for the emolument is then no 
 more, than the interest of the capital expended in the purchase of 
 the office; and has the additional evil of costing to the state as much 
 as if the service w r ere not gratuitously performed ; for the public 
 remains charged with the interest of a capital, that has been con- 
 sumed and lost. 
 
 It has been sometimes the practice to consign certain civil func- 
 tions, such as the registry of births, marriages, and deaths, to the 
 ecclesiastical body, whose emoluments, arising from their clerical 
 duties, may be supposed to enable them to execute these without 
 pay. But there is always danger in confiding the execution of 
 civil duties to a class of men, that pretend to a commission from 
 a still higher than a national authority.* 
 
 In spite of every precaution, the public or the monarch will never 
 be served so well or so cheaply as individuals. Inferior public 
 
 * Several times during 1 the last century the Molinist priesthood refused to 
 execute their clerical duties in favour of the Jansenists, in spite of all the govern- 
 ment could do ; on the pretence, that it was better to obey the divine command 
 a.s conveyed by the voice of the Pope, than that of any human authority (a) 
 
 (a) This inconvenience can arise only in countries, where there is an exclusive 
 national church, subjected, in matters of doctrine and discipline, to an indepen- 
 dent or external superior: as in countries embracing 1 the faith of Rome. But 
 there is another inconvenience, that has been much dwelt upon by an eminent 
 divine of the Scottish church ; viz. the inconvenience of directing 1 the attention 
 of the priesthood from its clerical to civil functions, and, by a confusion of such 
 different duties, abridging the benefit of division of labour T 
 
428 ON CONSUMPTION. BOOK III. 
 
 agents can not be so narrowly watched by their superiors, as pri- 
 vate ones; nor have the superiors themselves an equal interest in 
 vigilant superintendence. Besides, it is easy enough for under- 
 lings to impose on a superior, who has many to look after, is per- 
 haps placed at a distance, and can give but little attention to each 
 individually; and whose vanity makes him more alive to the offi- 
 cious zeal of his inferior, than to the real service and utility, that 
 the public good requires. As to the monarch and the nation, who 
 are the parties most interested in good public administration, 
 because it consolidates the power of the one and enlarges the hap- 
 piness of the other, it is next to impossible for them to exert a per- 
 petual and effectual control. In most cases, this duty must of 
 necessity devolve on agents, who will deceive them when it is their 
 interest "to do so, as is proved by abundance of examples. "Pub- 
 lic services," says Smith, " are never better performed than w 7 hen 
 their reward comes only in consequence of their being performed, 
 and is proportioned to the diligence employed in performing them." 
 Accordingly, he recommends, that the salaries of judges should be 
 paid at the 'final determination of each suit, and the share of each 
 judge proportioned to their respective trouble in the progress of it. 
 This would be some encouragement to the diligence of each parti- 
 cular judge, as well as to that of the court, in bringing litigation to 
 an end. There would be some difficulty in applying this method 
 to all the branches of the public service ; and it would probably 
 introduce as great abuses in the opposite way ; but it would at least 
 be productive of one good ; viz. preventing the needless multipli- 
 cation of offices. It would likewise give the public the same 
 advantage of competition as is enjoyed by individuals, in respect to 
 the services they call for. 
 
 Not only are the time and labour of public men in general better 
 paid for than those of other persons, besides being often wasted by 
 their own mismanagement, without the possibility of an efficient 
 check ; but there is often a further enormous waste, occasioned by 
 compliance with the customs of the country, and court etiquette. It 
 would be curious to calculate the time wasted in the toilet, or to 
 estimate, if possible, the many dearly-paid hours lost, in the course 
 of the last century, on the road between Paris and Versailles. 
 
 Thus, in the governments of Asia, there is an immense waste of 
 the time of the superior public servants in tedious and ceremo- 
 nious observances. The monarch, after allowing for the hours of 
 customary parade, and those of personal pleasure, has little time 
 left to look after his own affairs, which, consequently, soon go 
 to ruin. Frederick II. of Prussia, by adopting a contrary line of 
 conduct, and by the judicious distribution and apportionment of his 
 time, contrived to get through a great deal of business himself. By 
 ihis means, he really lived longer than older men than himself, and 
 succeeded in raising his kingdom to a first-rate power. His other 
 ^ieat qualities, doubtless, contributed to his success; but they would 
 not have been sufficient, without a methodical arrangement of his 
 
 c. 
 
CHAP. VI. ON CONSUMPTION. 420 
 
 Of Charges, Military and Naval. 
 
 When a nation has made any considerable progress in commerce, 
 manufacture, and the arts, and its products have, consequently, 
 become various and abundant, it would be an immense inconve- 
 nience, if every citizen were liable to be draggeu from a productive 
 employment, which has become necessary to society, for the pur- 
 poses of national defence. The cultivator of the soil works no 
 longer for the sustenance of himself and family only, but also for 
 that of many other families, who are either owners of the soil, arid 
 share in its produce, or traders and manufacturers, that supply him 
 with articles he cannot do without. He must, therefore, cultivate a 
 larger extent of surface, must vary his tillage, keep a larger stock of 
 cattle, and follow a complex mode of cultivation that will fully 
 occupy his leisure between seed-time and harvest.* 
 
 Still less can the trader and manufacturer afford thus to sacrifice 
 time and talents, whereof the constant occupation, except during the 
 intervals of rest, is necessary to the production, from which they are 
 to derive their subsistence. 
 
 The owners of land let out to farm may, undoubtedly, serve as 
 soldiers without pay; as, indeed, the nobility and gentry do, in some 
 measure, in monarchical states ; but they are, for the most part, so 
 much accustomed to the sweets of social existence, so little goaded 
 by necessity towards the conception and achievement of great enter- 
 prises, and feel so little of the enthusiasm of emulation and esprit de 
 corps, that they commonly prefer a pecuniary sacrifice to that of 
 comfort, and possibly of life. And these motives operate equally 
 with the owners of capital. 
 
 All these reasons have led individuals, in most modern states, to 
 consent to a taxation, that may enable the monarch or the republic 
 to defend the country against external violence with a hired and pro- 
 fessional soldiery, who are, however, too apt to become the tools of 
 their leader's ambition or tyranny. 
 
 When war has become a trade, it benefits, like all other trades, 
 from the division of labour. Every branch of human science is 
 pressed into its service. Distinction or excellence, whether in the 
 capacity of general, engineer, subaltern, or even private soldier, can 
 not be obtained without long training, perhaps, and constant prac- 
 tice. The nation, which should act upon a different principle, would 
 lie under the disadvantage of opposing the imperfection, to the per- 
 fection, of art. Thus, excepting the cases, in which the enthusiasm 
 of a whole nation has been roused to action, the advantage has uni- 
 
 * The Greeks, until the second Persian war, and the Romans, until the siege- 
 if Veii, regularly made their military campaigns in that interval. Nations of 
 hunters or shepherds, that pay little attention to the arts, and none to agriculture, 
 like the Tartars and Arabs, are less circumscribed in time, and can prosecute their 
 warlike enterprises in any quarter, that promises booty, and furnishes pasturage 
 Hence the vast area of the conquests of Attila, Genghis Khan, and Tamerlanf 
 and of the Moors and the Turks. 
 
430 ON CONSUMPTION. BOOK III. 
 
 family been on the side of a disciplined and professional soldiery. 
 The Turks, although professing the utmost contempt for the arts of 
 their Christian neighbours, are compelled by the dread of extermi- 
 nation, to be their scholars in the art of war. The European powers 
 were all forced to adopt the military tactics of the Prussians; and, 
 when the violent agitation of the French revolution pressed every 
 resource of science to the aid of the armies of the republic, the ene- 
 mies of France were obliged to follow the example. 
 
 This extensive application of science, and adaptation of fresh 
 means and more ample resources to military purposes, have made 
 war far more expensive now than in former times. It is necessary 
 now-a-days, to provide an army beforehand, with supplies of arms, 
 ammunition, magazines of provision, ordnance, &c., equal to the con- 
 sumption of one campaign at the least. The invention of gunpowder 
 has introduced the use of weapons more complex and expensive, and 
 very chargeable in the transport, especially the field and battering 
 trains. Moreover, the wonderful improvement of naval tactics, the 
 variety of vessels of every class and construction, all requiring the 
 utmost exertion of human genius and industry ; the yards, docks, 
 machinery, store-houses, &c. have entailed upon nations addicted to 
 war almost as heavy an expense in peace, as in times of actual hos- 
 tility ; and obliged them not only to expend a great portion of their 
 income, but to vest a great amount of capital likewise in military 
 establishments. In addition to which, it is to be observed, that the 
 modern colonial system, that is to say, the system of retaining the 
 sovereignty of towns and provinces in distant parts of the world, 
 has made the European states open to attack and aggression in the 
 most remote quarters of the globe, and the \vhole world the theatre 
 of warfare, when any of the leading powers are the belligerents.* 
 
 Wealth has, consequently, become as indispensable as valour to 
 the prosecution of modern warfare ; and a poor nation can no longer 
 withstand a rich one. Wherefore, since wealth can be acquired 
 only by industry and frugality, it may safely be predicted, that 
 every nation, whose agriculture, manufacture, and commerce, shall 
 be ruined by bad government, or exorbitant taxation, must infallibly 
 fall under the yoke of its more provident neighbours. We may 
 further conclude, that henceforward national strength will accom- 
 pany national science and civilization ; for none but civilized nations 
 can maintain considerable standing armies ; so that there is no reason 
 to apprehend the future recurrence of those sudden overthrows of 
 civilized empires by the influx of barbarous tribes, of which history 
 affords many examples. 
 
 War costs a nation more than its actual expense ; it costs besides, 
 all that would have been gained, but for its occurrence. 
 
 When Louis XIV. in 1672, resolved in a fit of passion, to chas- 
 
 * II has been calculated that every soldier, brought into the field by Great 
 Britain, during her last war with America, cost her twice as much as one on the 
 continent of Europe. And the other charges of warfare must of course be ag- 
 gravated by the distance in an equal ratio. 
 
CHAP. VI. ON CONSUMPTION. 43 j 
 
 tise the Dutch for the insolence of their newspaper writers, Boreel. 
 the Dutch ambassador, laid before him a memorial showing that 
 France through the medium of Holland, sold produce annually to 
 foreign nations, to the amount of sixty millions fr. at the then scale 
 of price; which will fall little short of 120 millions (22,000,000 of 
 dollars) at the present. But the court treated his representa^^s a? 
 the mere empty bravado of an ambassador. ^f^ 
 
 To conclude : the charges of war would be very ^ncdrrectly esti- 
 mated, were we to take no account of the havo*and destruction it 
 occasions ; for that one at least of the beltigerents, whose territory 
 happens to be the scene of operation 4 ?; must be exposed to its 
 ravages. The more industrious the nation, the more does it suffer 
 from warfare. When it penetrates into a district abounding in agri- 
 cultural, manufacturing, and commercial establishments, it is like a 
 (ire in a place full of combustibles; its fury is aggravated, and the 
 devastation prodigious. Smith calls the soldier an unproductive 
 labourer ; would to God he were nothing more, and not a destruc- 
 tive one into the bargain ! he not only adds no product of his own (a) 
 to the general stock of wealth, in return for the necessary subsist- 
 ence he consumes, but is often set to work to destroy the fruits of 
 other people's labour and toil, without doing himself any benefit. 
 
 The tardy, but irresistible expansion of intelligence will probably 
 operate a still further change in external political relations, and with 
 it a prodigious saving of expenditure for the purposes of war. 
 Nations will be taught to know that they have really no interest in 
 fighting one another; that they are sure to suffer all the calamities 
 incident to defeat, while the advantages of success are altogether 
 illusory. According to the international policy of the present day, 
 the vanquished are sure to be taxed by the victor, and the victor by 
 domestic authority: for the interest of loans must be raised by tax- 
 ation. There is no instance on record, of any diminution of 
 national expenditure being effected by the most successful issue of 
 hostilities. And, what is the glory it can confer more than a mere 
 toy of the most extravagant price, that can never even amuse 
 rational minds for any length of time 1 Dominion by land or sea 
 will appear equally destitute of attraction, when it comes to be 
 generally understood, that all its advantages rest with the rulers, and 
 that the subjects at large derive no benefit whatever. To private 
 individuals, the greatest possible benefit is entire freedom of inter- 
 course, which can hardly be enjoyed except in peace. Nature 
 prompts nations to mutual amity; and, if their governments take 
 upon themselves to interrupt it, and engage them in hostility, they 
 are equally inimical to their own people, and to those they \va. 
 against. If their subjects are weak enough to second the ruinous 
 vanity or ambition of their rulers in this propensity, I know not 
 
 () This is too generally expressed. Where security from external attack is 
 only to be had by means of a professional soldiery, the soldier is a productive 
 dffent productive of the immaterial product, security from external attack, 
 which, under certain circumstances, none can be more valuable. T. 
 
ON CONSUMPTION. BOOK III. 
 
 now to distinguish such egregious folly and absurdity, from that of 
 the brutes that are trained to fight and tear each other to pieces, for 
 the mere amusement of their savage masters. 
 
 But human intelligence will not stand still ; the same impulse that 
 has hitherto borne it onwards, will continue to advance it yet further.* 
 The ^rv circumstance of the vast increase of expense attending 
 natiorHlrfare has made it impossible for governments henceforth 
 to en^a^WiStjyithout the public assent, express or implied ; arid 
 that assent willbe>btained with the more difficulty, in proportion as 
 the public shall become^more generally acquainted with their real 
 interest. The national rmrfc^ry establishment will be reduced to 
 what is barely sufficient to repel external attack ; for which purpose 
 little more is necessary, than a small body of such kinds of troops as 
 can not be had without long training and exercise; as of cavalry and 
 artillery. For the rest, nations will rely on their militia, and on the 
 excellence of their internal polity: for it is next to impossible to 
 conquer a people unanimous in their attachment to their national 
 institutions ; and their attachment will always be proportionate to 
 the loss they will incur by a change of domination.! 
 
 Of the Charges of Public Instruction. 
 
 Two questions have been raised in political economy; 1. Whether 
 the public be interested in the cultivation of science in all its 
 branches'? 2. Whether it be necessary, that the public should be a/ 
 the expense of teaching those branches, it has an interest in cultivat 
 ing ? 
 
 Whatever be the position of man in society, he is in constant de- 
 pendence upon the three kingdoms of nature. His food, his clothing, 
 his medicines, every object either of business or of pleasure, is sub 
 ject to fixed laws ; and the better those laws are understood, the 
 more benefit will accrue to society. Every individual, from tho 
 common mechanic, that works in wood or clay, to the prime minis- 
 ter that regulates with the dash of his pen the agriculture, the breed- 
 ing of cattle, the mining, or the commerce of a nation, will perform 
 his business the better, the better he understands the nature of things, 
 and the more his understanding is enlightened. 
 
 For this reason, every advance of science is followed by an in- 
 
 * Those who deny the progressive influence of human reason must have 
 studied history to very little purpose. The perfidy and cruelty of war have con- 
 siderably abated, in Europe, more than in Asia or America, and most of all 
 amongst the most polished of the European nations. The ungenerous character 
 of some recent military enterprises roused so much public indignation, as to 
 make them recoil upon the projectors with ruinous violence. 
 
 f I am here speaking of the only sure reliance in an enlightened age. A peo- 
 ple, that has nothing to lose by a change of domination, may defend itself with 
 the most determined gallantry. The Mussulman will rush on certain destruc- 
 tion, in defence of a prince and a faith, that are neither of them worth defending. 
 But political and religious prejudice will sooner or later fall to the ground ; and 
 ,;ave mankind to seek for some more reasonable object of devotion. 
 
CHAP. VI. ON CONSUMPTION. 433 
 
 crease of social happiness. A new application of the lever, or of the 
 power of wind or water, or even a method of reducing the friction 
 of bodies, will, perhaps, have an influence on twenty different arts. 
 An uniformity of weights and measures, arranged upon mathematical 
 principles, would be a benefit to the whole commercial world, if ii 
 were wise enough to adopt such an expedient. An important dis- 
 covery in astronomy or geology may possibly afford the means of 
 ascertaining the longitude at sea with precision, which would be an 
 immense advantage to navigation all over the world. The naturali- 
 sation in Europe of a new botanical genus or species might possibly 
 influence the comfort of many millions /of individuals.* 
 
 Among the numerous classes of science, theoretical and practical, 
 which it is the interest of the public to advance and promote, there 
 are fortunately many, that individuals have a personal interest in 
 pursuing, and which the public, therefore, is not called upon to pay 
 the expense of teaching. Every adventurer in any branch of indus- 
 try is urged most strongly by self-interest to learn his business and 
 whatever concerns it. The journeyman gains in his apprenticeship, 
 besides manual dexterity, a variety of notions and ideas only to be 
 learnt in the work-shop, and which can be no otherwise recompensed, 
 than by the wages he will receive. 
 
 But it is not every degree or class of knowledge, that yields a 
 benefit to the individual, equivalent to that accruing to the public. 
 In treating above f of the profits of the man of science, I have shown 
 the reason, why his talents are not adequately remunerated ; yet 
 theoretical is quite as useful to society as practical knowledge ; for 
 how could science ever be applied to the practical utility of mankind, 
 unless it were discovered and preserved by the theorist? It would 
 rapidly degenerate into mere mechanical habit, which must soon 
 decline ; and the downfall of the arts would pave the way for the 
 return of ignorance and barbarism. 
 
 In every country that can at all appreciate the benefits to be de- 
 rived from the enlargement of human faculties, it has been deemed 
 by no means a piece of extravagance, to support academies and 
 learned institutions, and a limited number of very superior schools, 
 intended not as mere repositories of science, and of the most approved 
 mode of instruction, but as a means of its still further extension. 
 But it requires some skill in the management, to prevent, such esta- 
 blishments from operating as an impediment, instead of a further- 
 ance, to the progress of knowledge, and as an obstruction rather than 
 as an avenue to the improvement of education. Long before the 
 revolution, it had become notorious, that most of our French univer- 
 sities had been thus perverted from the intention of their founders. 
 
 * Should the expected success attend the attempt to naturalise in Europe the 
 flax of New Zealand, which is greatly superior to that of Europe in the length 
 and delicacy of the fibre, as well as in the abundance of the crop, it is possible 
 that fine linen may be produced at the rate now paid for the coarsest quality, 
 which wouM greatly improve the cleanliness and health of the lower classes* 
 
 f Book II. chap. 7. sect. 2. 
 
 37 3E 
 
434 ON CONSUMPTION. BOOK III. 
 
 All the principal discoveries were made elsewhere; and most of 
 them had to encounter the weight of their influence over the rising 
 generation and credit with men in power.* (1) 
 
 From this example, we may see how dangerous it is, to entrust 
 them with any discretionary control. If a candidate presents him- 
 self for examination, he must not be referred to teachers, who are 
 at the same time judges and interested parties, sure to think well of 
 their own scholars, and ill of those of every body else. The merit 
 of the candidate should alone decide, and not the place where he 
 happens to have studied, nor the length of his probation; for to oblige 
 a student in any science, medicine for instance, to learn it at a par- 
 ticular place, is, possibly, to prevent his learning it better elsewhere; 
 and, to prescribe any fixed routine of study, is, possibly, to prevent 
 his fixing a shorter road. Moreover, in deciding upon comparative 
 merit, there is much unfairness to be apprehended from the esprit de 
 corps of such communities. 
 
 Encouragement may, with perfect safety, be held out to a mode 
 of instruction of no small efficacy; I mean, the composition of good 
 elementaryf works. The reputation and profit of a good book in 
 
 * What was denominated an University, under the reign of Napoleon, was a 
 still more mischievous institution ; being, in fact, but a most expensive and vexa- 
 tious contrivance, for depraving the intellectual faculties of the rising genera- 
 tion, by substituting, in the place of just and correct notions of things, opinions 
 calculated to perpetuate the political slavery of their country. 
 
 f Under this head, I would include, the fundamental parts of knowledge in 
 every department, and the familiar instruction adapted to each specific calling, 
 respectively ; such as would impart at a cheap rate to the hatter, the metal- 
 founder, the potter, the dyer, &c., the general principles of their respective arts. 
 Works of this kind keep up a constant channel of communication between the 
 practical and theoretical branches, and enable them to profit mutually by each 
 other's experience. 
 
 (1) [" It is chiefly," observes DUGALD STEWART, " in judging of questions 
 coming home to their business and bosoms, that casual associations lead mankind 
 astray ; and of such associations, how incalculable is the number arising from 
 false systems of religion, oppressive forms of government, and absurd plans of 
 education. The consequence is, that while the physical and mathematical dis- 
 coveries of former ages present themselves to the hand of the historian, like 
 masses of pure and native gold, the truths which we are here in quest of may be 
 compared to tro?i, which although at once the most necessary and the most widely 
 diffused of all the metal?, commonly requires a discriminating eye to detect its 
 existence, and a tedious as well as nice process, to extract it from the ore." 
 
 "To the same circumstance it is owing, that improvements in Moral and in 
 Political Science do not strike the imagination with nearly so great force as the 
 discoveries of the Mathematician or of the Chemist. When an inveterate preju- 
 dice is destroyed by extirpating the casual associations on which it was grafted, 
 how powerful is the new impulse given to the intellectual faculties of man ! 
 Yet how slow and silent the process by which the effect is accomplished ! 
 VVero it not, indeed, for a certain class of learned authors, who, from time to 
 !ime, heave the log into the deep, we should hardly believe that the reason of 
 1 he species is progressive. In this respect, the religious and academical estab- 
 lishments in some parts of Europe are not without their use to the historian 
 of tii** human mind. Immovably moored to the same station by the strength of 
 
CHAP. VI. ON CONSUMPTION. 
 
 this class do not indemnify the labour, science, atod skill, requisite to 
 its composition, (a) A man must be a fool to serve the public in this 
 line where the natural profit is so little proportioned to the benefit 
 derived to the public. The want of good elementary books will 
 never be thoroughly supplied, until the public shall hold out tempta- 
 tions, sufficiently ample to engage first-rate talents in their compo- 
 sition. It does not answer to employ particular individuals for the 
 express purpose ; for the man of most talents will not always suc- 
 ceed the best : nor to offer specific premiums ; for they are often 
 bestowed on very imperfect productions, and the encouragement 
 ceases the moment the premium is awarded. But merit in this kind 
 should be paid proportionately to its degree, and always liberally, 
 A good work will thus be sure to be superseded by a better, till per- 
 fection is at last attained in each class. And I must observe, by the 
 way, that there is no great expense incurred by liberally rewarding 
 excellence ; for it must always be extremely rare ; and what is a 
 great sum to an individual, is a small matter to the pockets of a 
 nation. 
 
 These are the kinds of instruction most calculated to promote 
 national wealth, and most likely to retrograde, if not in some measure 
 supported by the public. There are others, which are essential to 
 the softening of national manners, and stand yet more in need of 
 that support. 
 
 When the useful arts have arrived at a high degree of perfection, 
 and labour has been very generally and minutely subdivided, the 
 occupation of the lowest classes of labourers is reduced to one or two 
 operations, for the most part simple in themselves, and continually 
 repeated: to these their whole thought and attention are directed; 
 and from them they are seldom diverted by any novel or unforeseen 
 occurrence: their intellectual faculties, being rarely or never called 
 into play, must of course be degraded and brutified, and themselves 
 rendered incapable of uttering two words of common sense out of 
 their peculiar line of business, and utterly devoid of any generous 
 ideas or elevated notions. Elevation of mind is generated by enlarg- 
 ed views of men and things, and can never exist in a being incapa- 
 ble of conceiving the general bearings and connexions of objects. A 
 plodding mechanic can conceive no connexion between the inviola- 
 bility of property and public prosperity, or how he can be more 
 interested in that prosperity, than his more wealthy neighbour; but 
 is apt to consider all these important benefits as so many encroach- 
 ments on his rights and happiness. A certain degree of education, 
 
 (a) This can only be true where the demand for such works is limited. In 
 England, works of instruction are probably amongst the most profitable to the 
 authors. T. 
 
 their cables, and I he weight of their anchors, they enable him to measure Iho 
 rapidity of the cur rent by which the rest of the world are borne along." 
 
 Vide Pi eface to Stewart's Dissertations, p. 28, Boston edition'] 
 
 AMERICAN EDITOR 
 
i; 
 
 436 ON CONSUMPTION. BOOK III. 
 
 of reading, of reflection while at work, and of intercourse with per- 
 sons of his own condition, will open his mind to these conceptions, 
 as well as introduce a little more delicacy of feeling into his conduct, 
 as a father, a husband, a brother, or a citizen. 
 
 But, in the vast machinery of national production, the mere ma- 
 nual labourer is so placed, as to earn little or nothing more than a 
 bare subsistence. The most he can do is, to rear his young family, 
 and bring them up to some occupation : he cannot be expected to 
 give them that education, which we have supposed the well-being of 
 society to require. If the community wish to have the benefit of 
 more knowledge and intelligence in the labouring classes, it must 
 dispense it at the public charge. 
 
 This object may be obtained by the establishment of primary 
 schools, of reading, writing, and arithmetic. These are the ground- 
 work of all knowledge, and are quite sufficient for the civilization of 
 the lower classes. In fact, one can not call a nation civilized, nor 
 consequently possessed of the benefits of civilization, until the peo- 
 le at large* be instructed in these three particulars : till then it will 
 je but partially reclaimed from barbarism. With the help of these 
 advantages alone, it may safely be affirmed, that no transcendent ge- 
 nius or superior mind will long remain in obscurity, or be prevented 
 from displaying itself to the infinite benefit of the community. 
 The faculty of reading alone, will, for a few dollars, put a man in pos- 
 session of all that eminent men have said or done, in the line to 
 which the bent of genius impels. Nor should the female part of the 
 creation be shut out from this elementary education ; for the public 
 is equally interested in their civilization ; and they are indeed the 
 first, and often the only teachers of the rising generation. 
 
 It would be the more unpardonable in governments to neglect the 
 business of education, and abandon to their present ignorance the 
 great majority of the population in those nations of Europe, that 
 pretend to the character of refinement and civilization, now that the 
 improved methods of mutual instruction, that have been tried with 
 such complete success, afford a ready and most economical means of 
 universally diffusing knowledge amongst the inferior classes.* 
 
 * According- to the new method, introduced by Lancaster, and perfected by 
 subsequent teachers, a single master with very little aid of books, pens, or paper, 
 can rapidly and effectually teach reading, writing, and vulgar arithmetic, to five 
 or six hundred scholars at a time. This truly economical result is produced, 
 by taking advantage of the slightest superiority of intelligence of one above 
 another, and directing the motive of emulation, natural to the human breast, 
 towards an useful object. A large school is commonly divided into forms, con- 
 sisting each of eight children, as nearly equal in advancement as possible, and 
 instructed by a child somewhat more advanced, called the Monitor. These 
 forms again are divided into eight classes; of which the lowest learns to pro- 
 nounce the letters of the alphabet, and to trace their figures rudely with the 
 finger upon sand spread out upon a flat board ; and the highest is able to write upon 
 paper, and to practise the four rules of arithmetic. The children of each form 
 re ranged according to their progress; and whoever cannot give the answer, ia 
 :1nrnediatel) superseded by a more apt scholar. As soon as a child is pe-fected 
 is, one class, he is tiansferred to the next in degree. The lessons are received, 
 
CHAP VI. ON CONSUMPTION. 437 
 
 Thus, none but elementary and abstract science, the highest and 
 the lowest branches of knowledge, are so much less favoured in the 
 natural course of things, and so little stimulated by the competition 
 of demand, as to require the aid of that authority, which is created 
 purposely to watch over the public interests. Not that individuals 
 have no interest in the support and promotion of these, as well as of 
 the other, branches of knowledge ; but they have not so direct an 
 interest, the loss occasioned by their disappearance is neither so 
 immediate nor so perceptible ; a flourishing empire might retrograde, 
 until it reached the confines of barbarism, before individuals had 
 observed the operating cause of its decline. 
 
 I would not be understood to find fault with public establishments 
 for purposes of education, in other branches than those I have been 
 describing. I am only endeavouring to show, in what branches a 
 nation may wisely, and with due regard to its own interest, defray 
 the charge out of the public purse. Every diffusion of such know- 
 ledge, as is founded upon fact and experience, and does not proceed 
 upon dogmatical opinions and assertions, every kind of instruction, 
 that tends to improve the taste and understanding, is a positive good ; 
 and, consequently, an institution calculated to diffuse it must be ben- 
 eficial. But care must be taken,, that encouragement of one branch 
 shall not operate to discourage another. This is the general mis- 
 chief of premiums awarded by the public ; a private teacher or in- 
 stitution will not be adequately paid, where the same kind of in- 
 struction is to be had for nothing, though, perhaps, from inferior 
 teachers. There is, therefore, some danger, that talent may be 
 superseded by mediocrity ; and a check be given to private exertions, 
 from which the resources of the state might expect incalculable 
 benefit. 
 
 The only important science, which seems to me not susceptible 
 of being taught at the public charge, is that of moral philosophy, 
 which may be considered as either experimental or doctrinal. The 
 former consists in the knowledge of moral qualities, and of the 
 chain of connexion between events dependent upon human will ; 
 and forms indeed a part of the study of man, which is best pursued 
 by social converse and intercourse. The latter is a series of max- 
 ims and precepts, possessing very little influence upon human con- 
 duct, which is best guided in the relations of public and of private 
 life, by the operation of good laws, of good education, and of good 
 example.* 
 
 sometimes in a sitting posture, and sometimes upright, with slates affixed to the 
 walls. The instruction is thus always accommodated to the age and faculties of 
 the child ; it necessarily arrests and rewards his attention ; and involves that 
 personal activity, essential to the infant frame. The whole is conducted in a 
 single apartment, and usually under the superintendence of a single master or 
 Distress. The general adoption of thin method will probably be tor some tirm 
 >pposed by custom and prejudice; but its utility and conformity to the order 01 
 lature will ensure its ultimate and universal prevalence. 
 
 * I am strongly disposed to say the same of logic. Were nothing taught, but 
 rhat is consistent with truth and good sense, logic would follow of itself ** * 
 27 * 
 
433 ON CONSUMPTION. BOOK III. 
 
 The sole encouragement to virtue and good conduct, thtt can be 
 relied on, is, the interest that every body has in discovering and em- 
 ploying no persons but those of good character. Men the most in- 
 dependent in their circumstances want something more to make 
 them happy ; that is to say, the general esteem and good of inion of 
 their fellow-creatures; and these can only be acquired b} putting 
 on the appearance at least of estimable qualities, which it is much 
 easier to acquire than to simulate. The influence of the sovereign 
 or ruling body, upon the manners of the nation, is very extensive, 
 because it employs a vast number of people ; but it operates less ben- 
 eficially than that of individuals, because it is less interested in em- 
 ploying none but persons of integrity. If to its luke warn mess in 
 this particular be added, the example of immorality and contempt 
 for honesty and economy too frequently held out to people by their 
 rulers, the corruption of 'national morals will be wonderfully accele- 
 rated.* But a nation may be rescued from moral degradat on by 
 the re-action of opposite causes. Colonies are, for the most part, 
 composed of by no means the most estimable classes of the mother- 
 country : in a very short time, however, when the hopes of return 
 are wholly abandoned, and the settlers have made up their minds 
 to pass the rest of their lives in their new abode, they gradual 'y feel 
 the necessity of conciliating the esteem of their fellow-citizen?, and 
 the morals of the colony improve rapidly. By morals, I mean the 
 general course of human conduct and behaviour. 
 
 These are the causes, that have a positive influence upon naional 
 morality. To these must be added, the effect of education in gene- 
 ral, in opening the eyes of mankind to their real interests, and soft- 
 ening the temper and disposition. 
 
 Religious instruction ought, strictly speaking, to be defraye 1 by 
 the respective religious communions and societies, each of \\ hich 
 regards the opinions of the rest as heretical, and naturally revo'ts at 
 the injustice of contributing to the propagation of w r hat it d< ems 
 erroneous, if not criminal. 
 
 . Of the Charges of Public Benevolent Institutions. 
 
 It has been much debated, whether individual distress has any 
 title to public relief. I should say none, except inasmuch as it is 
 an unavoidable consequence of existing social institutions. If ii 'fir- 
 matter of course: all the teaching- in the world will never make a man a good 
 reasoner, whose notions and ideas of things are unsound and erroneous ; und, 
 with the foundation of just notions, he will require no teaching- to make him 
 reason well. Just ideas of things are only to be acquired by attentive examina- 
 tion; by taking* account of every particular concerning them, and of nothing but 
 vhat concerns them ; which is the object of all knowledge in general, and by no 
 means of logic alone. 
 
 * The bad example of a vicious prince is of the most fatal tendency ; it is noto- 
 rious to all the world, and protected and abetted by public authority ; and it is. 
 wire to be reflected by the subservience of courtiers to the extreme point of imi- 
 tative servility 
 
CHAP. VI. ON CONSUMPTION. 439 
 
 mity and want be the effect of the social system, they have a title 
 to public relief: provided always, that it be shown, that the same 
 system affords no means of prevention or cure. But it would be 
 foreign to the matter to discuss the question of right in this place. 
 All we need do is, to consider benevolent institutions with regard to 
 their nature and consequences. 
 
 When a community establishes at the public charge any institu- 
 tion for benevolent purposes, it forms a kind of saving-bank, to 
 which every member contributes a portion of his revenue, to entitle 
 him to claim a benefit, in the event of accident or misfortune. The 
 wealthy are generally impressed with an idea, that they shall never 
 stand in need of public charitable relief; but a little less confidence 
 would become them better. No man can reckon in his own case 
 upon the continuance of good fortune, with as much certainty as 
 upon the permanence of wants and infirmities ; the former may desert 
 him ; but the latter are inseparable companions. It is enough -to 
 Know, that good fortune is not inexhaustible, to infuse an apprehen- 
 sion that it may some day or other be exhausted : one has but to 
 look round, and this apprehension will be confirmed by the experi- 
 ence of numbers, whose misfortunes were to themselves quite unex- 
 pected. 
 
 Hospitals for the sick, alrnshouses and asylums for old age and 
 infancy, inasmuch as they partially relieve the poorer classes from 
 the charge of maintaining those who are naturally dependent on 
 them, and thereby to allow population to advance somewhat more 
 rapidly, have a natural tendency a little to depress the wages of 
 labour. That depression would be greater still, if such establish- 
 ments should be so multiplied, as to take in all the sick, aged, and 
 infants of those classes, who would then have none but themselves 
 to provide for out of their wages. If they were entirely done away, 
 there would be some rise of wages, although not sufficient to main- 
 tain so large a labouring population, as may be kept up with their 
 help ; for the demand for their labour would be somewhat reduced 
 by the advance of its price. 
 
 From these two extreme suppositions, we may judge of the effect 
 of those efforts to relieve indigence, which all nations have made in, 
 some degree or other; and see the reason, why the distress and 
 relief go on increasing together, although not exactly in the same 
 ratio. 
 
 Most nations preserve a middle course bet\veen the two extremes, 
 affording public relief to a part only of those, who are helpless from 
 age, infancy, or casual sickness. Of the rest they endeavour to ricl 
 themselves in one of two ways ; either by requiring certain qualifi- 
 cations in the applicants, whether of age, of specific disease, or, 
 perhaps, of mere interest and favouritism ; or by limiting narrowly 
 the extent of the relief, giving it upon hard terms to the applicants, 
 or attaching some degree of shame to the acceptance.* 
 
 *At Paris, the limitation of relief afforded by the Hospice des Incurables, and 
 those of Petites Maisons, of St. Louis, of Charite, and many others, is of lh 
 
440 ON CONSUMPTION. Boon III. 
 
 It is a distressing reflection, that there are no other methods of 
 confining the number of applicants for relief within the means 
 tvailaole to the community, except the offer of hard conditions, or 
 the want of a patron. It "were to be desired, that asylums of the 
 more comfortable class, instead of favouritism, should be open to 
 unmerited misfortune only; and that, to prevent improper nomina- 
 tions, the pretensions of the candidate should be ascertained by the 
 inquest of a jury. The rest can probably be protected from too 
 ^reat an influx of indigence, by no other means consistent with hu- 
 manity, except the observance of severe, though impartial, discipline, 
 sufficient to invest them with some degree of terror^ 
 
 This evil does not apply to the asylums devoted to invalid soldiers 
 and sailors. The qualification is so plain and intelligible, that the 
 doors ought to be shut against none who are possessed of it ; and 
 the comforts of the institution can never increase the number of 
 ipplicants. Their being nursed in the public asylums with the same 
 domestic care and comfort, as are to be found in the homes of per- 
 sons in the same class of life, and indulged in repose, and some even 
 of the whims of ola 1 age, will undoubtedly somewhat enhance the 
 charge, that is to say, so far as it might "prolong lives, that other- 
 wise might fall a sacrifice to wretchedness ; but this is the utmost 
 increase of charge ; and it is one, that neither patriotism nor hu- 
 manity will grudge.* 
 
 The houses of industry, that are multiplying so rapidly in America, 
 Holland, Germany, and France, are noble and excellent institutions 
 of public benevolence. They are designed to provide all persons of 
 sound health with work according to their respective capacities ; 
 some of them are open to any workman out of employ, that chooses 
 io apply ; others are a kind of houses of correction, where vagrants, 
 beggars, and offenders, are kept to work for fixed periods. Con- 
 victs have sometimes been set to hard labour in their respective 
 vocations, during their confinement ; whereby the public has been 
 wholly or partially relieved from the charge of keeping up gaols, and 
 a method contrived for reforming the morals of the criminals, and 
 rendering them a blessing, instead of a curse, to society. 
 
 Indeed, such establishments can hardly be reckoned among the 
 items of public charge; for, the moment their production equals 
 their consumption, they are no longer an incumbrance to any body. 
 They are of immense benefit in a dense population, where, amidst 
 
 former kind ; the admissions to the Hotel-Dieu, Bicetre, Saltpetriere, and En- 
 fans-Trouves, are suhject to a limitation of the latter kind. As the numher of 
 applicants duly qualified for admission in the establishment first mentioned always 
 exceeds their capacity, the choice must ultimately be decided by favour or interest. 
 * Yet it is well worth consideration, whether it be not more to the advantage, 
 Soth of the state and of its pensioners, to maintain them at their own homes 
 npon a fixed income, or to board them out with individuals. The Abbe de St. 
 Pierre, whose mind was ever actively at work for the public good, has estimated 
 the charge of maintaining the invalids in their sumptuous establishment at Paris, 
 
 o be three times as much as that of their maintenance at their respective homes 
 
 \nnnles Polit. p. 209. 
 
CHAP. VI. ON CONSUMPTION. 441 
 
 the vast variety of occupations, some must unavoidably je in a state 
 of temporary inaction. The perpetual shiftings of commerce, the 
 introduction of new processes, the withdrawing of capital from a 
 productive concern,, accidental fire, or other calamity, may throw 
 numbers out of employment ; and the most deserving individual 
 may, without any fault of his own, be reduced to the extreme of 
 want. In these institutions, he is sure of earning at least a subsist- 
 ence, if not in his own line, in one of a similar description. 
 
 The grand obstacle to such establishments is, the great outlay of 
 capital they require. They are adventures of industry, and as such 
 must be provided with a variety of tools, implements, and machines, 
 besides raw material of different kinds to work upon. Before they 
 can be said to maintain themselves, they, must earn enough to pay 
 the interest of the capital embarked, as well as their current ex- 
 penses. 
 
 The favour shown them by the public authority, in the gratuitous 
 supply of the capital and buildings, and in many other particulars, 
 would make them interfere with private undertakings, were they not 
 subjection the other hand, to some peculiar disadvantages. They 
 are obliged to confine their operations to such kinds of work, as sort 
 with the feebleness and general inferiority in skill of the inmates, 
 and can not direct them to such as may be most in demand. More- 
 over, it is in most of them a matter of regulation and police, to lay 
 by always the third or fourth part of the labourer's wages or earn- 
 ings, as a capital to set him up, on his quitting the establishment : 
 this is an excellent precaution, but prevents their working at such 
 cheap rates, as to drive all competition out of the market. 
 
 Although the honour, attached to the direction and management 
 of institutions of public benevolence, will generally attract the 
 gratuitous service of the affluent and respectable part of the com- 
 munity, yet, when the duties become numerous and laborious, they 
 are commonly discharged by gratuitous administrators with the 
 most unfeeling negligence. It was probably by no means wise, to 
 subject all the hospitals of Paris to a general superintendence. At 
 London, each hospital is separately administered ; and the whole are 
 managed with more economy and attention in consequence. A 
 laudable emulation is thereby excited amongst the managers of rival 
 establishments; which affords an additional proof of the practicabi- 
 lity and benefit of competition in the business of oublic administra- 
 tion. 
 
 Of the Charges of Public Edifices and Works. 
 
 I shall not here attempt to enumerate the great variety of works 
 requisite for the use of the public ; but merely lay down some gene- 
 ral rules, for calculating, their cost to the nation. It is often impos 
 sible to estimate with any tolerable accuracy the public benefit de- 
 rived from them. How is one to calculate the utility, that is to say, 
 the pleasure which the inhabitants of a city derive from a puDlic 
 
 3F 
 
442 ON CONSUMPTION. BOOK III. 
 
 terrace or promenade? It is a positive benefit to have, within an 
 easy distance of the close and crowded streets of a populous town, 
 some place where the population can breathe a pure and wholesome 
 atmosphere, and take health and exercise, under the shade, of a 
 grove, or with a verdant prospect before the eye ; and where school- 
 boys can spend their hours of recreation; yet this advantage it 
 would be impossible to set a precise value upon. 
 
 The amount of its cost, however, may be ascertained or estin ated. 
 The cost of every public work or construction consists : 
 
 1. Of the rent of the surface whereon it is erected ; which rent 
 amounts to what a tenant would give to the proprietor. 
 
 2. Of the interest of the capital expended in the erection. 
 
 3. Of the annual charge of maintenance. 
 
 Sometimes, one or more of these items may be curtailed. When 
 the soil, whereon a public work is erected, will fetch nothing from 
 either a purchaser, or a tenant, the public will be charged with 
 nothing in the nature of rent ; for no rent could be got if the spot 
 had never been built on. A bridge, for instance, costs nothing but 
 the interest of the capital expended in its construction, and the 
 annual charge of keeping it in repair. If it be suffered to fall into 
 decay, the public consumes, annually, the agency of the capital 
 vested, reckoned in the shape of interest on the sum expended, and, 
 gradually, the capital itself, into the bargain; for, as soon as the 
 bridge ceases to be passable, not only is the agency or rent of ?he 
 capital lost, but the capital is gone likewise. 
 
 Supposing one of the dikes in Holland to have cost in the outset, 
 20,000 dollars ; the annual charge on the score of interest, at 5 } er 
 cent, will be 1000 dollars; and, if it cost 600 dollars more in the 
 keeping it up, the total annual charge will be 1600 dollars. 
 
 The same mode of reckoning may be applied to roads and cana Is. 
 If a road be broader than necessary, there is annually a loss of the 
 rent of all the superfluous land it occupies, and, besides, of all the 
 additional charge of repair. Many of the roads out of Paris are 
 180 feet wide, including the unpaved part on each side; whereas, a 
 breadth of 60 feet would be full wide for all useful purposes, ai d 
 would be quite magnificent enough, even for the approaches to a 
 great metropolis. The surplus is only so much useless splendoui ; 
 indeed, I hardly know how to call it so; for the narrow pavemei t 
 in the centre of a broad road, the two sides of which are impassable 
 the greater part of the year, is an equal imputation upon the libei - 
 ality, and upon the good sense and taste of the nation. It gives ;i 
 disagreeable sensation, to see so much loss of space, more particu- 
 larly if it be badly kept. It appears like a wish to have magnificent 
 roads, witnout having the means of keeping them uniform and in 
 good condition ; like the palaces of the Italian nobles, that never feel 
 1 he effects of the broom. 
 
 Be it as it may, on the sides of the road I am speaking of, there 
 .-s a space of 120 feet, that might be restored to cultivation ; that is to 
 say, 48 acres to the ordinary league. Add together the rent of the 
 
CHAP. VI. ON CONSUMPTION. 443 
 
 surplus land, the interest of the sum expended in the first cost and 
 preparation, and the annual charge of keeping up the unnecessary 
 space, which is something, badly as it is kept up ; you will then 
 ascertain the sum France pays annually for the very questionable 
 honour of having roads too wide, by more than the half, leading to 
 streets too narrow, by three-fourths.* 
 
 Roads and canals are costly public works, even in countries where 
 they are under judicious and economical management. Yet, proba- 
 bly, in most cases, the benefits they afford to the community far ex- 
 ceed the charges. Of this the reader may be convinced, on reference 
 to what has been said above of the value generated by the mere 
 commercial operation of transfer from one spot to another,! and of 
 the general rule, that every saving in the charges of production is so 
 much gain to the consumer.^ Were we to calculate what would be 
 the charge of carriage upon all the articles and commodities that now 
 pass along any road in the course of a year, if the road did not exist, 
 and compare it with the utmost charge under present circumstances, 
 the whole difference that would appear, will be so much gain to the 
 consumers of all those articles, and so much positive and clear net 
 profit to the community. 
 
 Canals are still more beneficial ; for in them the saving of carriage 
 is still more considerable. || 
 
 Public works of no utility, such as palaces, triumphal arches, 
 monumental columns, and the like, are items of national luxury. 
 They are equally indefensible, with instances of private prodigality. 
 The unsatisfactory gratification afforded by them to the vanity of the 
 prince or the people, by no means balances the cost, and often the 
 misery they have occasioned. 
 
 * With all this waste of space in the great roads of France, there are in none 
 of them either paved or gravelled foot-ways, passable at all seasons, or stone 
 seats, for the travellers to rest upon, or places of temporary shelter from the 
 weather, or cisterns to quench the thirst; all which might be added with a very 
 trifling expense. 
 
 | Book I. chap. 9. Book II. chap. 3. 
 
 To say, that if the road were not in existence, the charge of transport could 
 never be so enormous as here suggested, because the transport would never take 
 place at all, and people would contrive to do without the objects of transport, 
 would be a strange way of eluding the argument. Self-denial of this kind, 
 enforced by the want of means to purchase, is an instance of poverty, not of 
 wealth. The poverty of the consumer is extreme, in respect to every object he is 
 thus made too poor to purchase ; and he becomes richer in respect to it, in pro 
 portion as its price or value declines. 
 
 || In lieu of canals, iron rail-roads from one town to another will probably be 
 one day constructed. The saving in the cost of transport would probably 
 exceed the interest of the very heavy expense in the outset. Besides the addi- 
 tional facility of movement, roads of this kind would remedy the violent jolting 
 of passengers and goods. Undertakings of such magnitude can only be prose- 
 cuted in countries where capital is very abundant, and where the government 
 inspires the adventurers with the firm assurance of reaping themselves the profit 
 of the adventure. 
 
444 ON CONSUMPTION. BOOK III 
 
 CHAPTER VII. 
 
 OF THE ACTUAL CONTRIBUTORS TO PUBLIC CONSUMPTION. 
 
 A PORTION of the objects of public consumption have, in some very 
 rare instances, been provided by a private individual. We see occa- 
 sional acts of private munificence, in the erection of a hospital, the 
 laying out of a road, or of public gardens upon the land, and at the 
 cost, of an individual. In ancient times, examples of this kind were 
 more frequent, though much less meritorious. The private opulence 
 of the ancients was commonly the fruit of domestic, or provin- 
 cial, plunder and peculation, or perhaps the spoil of a hostile nation, 
 purchased with the blood of fellow-citizens. Among the moderns, 
 though such excesses do sometimes occur, individual wealth is, in the 
 great majority of cases, the fruit of personal industry and economy. 
 In England, where there are so many institutions founded and sup- 
 ported by private funds, most of the fortunes of the founders and 
 supporters have been acquired in industrious occupations. It re- 
 quires a greater exertion of generosity to sacrifice wealth, acquired 
 by a long course of toil and self-denial, than to give away what has 
 been obtained by a stroke of good fortune, or even by an act of 
 lucky temerity. 
 
 Among the Romans, a further portion of the public consumption 
 was supplied directly by the vanquished nations who were subjected 
 to a tribute which the victors consumed. 
 
 In most modern states, there is some territorial property vested, 
 either in the nation at large, or in the subordinate communities, cities, 
 towns, and villages, which is leased out, or occupied directly by the 
 public. In France, most of the public lands of tillage and pasturage, 
 with their appurtenances, are let out on lease ; the government re- 
 serving only the national forests under the direct administration of its 
 agents. The produce of the whole forms a considerable item in the 
 catalogue of public resources. 
 
 But these resources consist, for the most part, of the produce of 
 taxes levied upon the subjects or citizens. These taxes are some- 
 times national, that is, levied upon the whole nation, and paid into 
 the general treasury of the state, whence the public national expendi- 
 ture is defrayed ; and sometimes local, or provincial, that is, levied 
 upon the inhabitants of a certain canton or province only, and paid 
 into the local treasury, whence are defrayed the local expenses. 
 
 It is a principle of equity, that consumption should be charged to 
 those who derive gratification from it ; consequently, those countries 
 must be pronounced to be the best governed, in respect of taxation, 
 where each class of inhabitants contributes in taxation proportionately 
 Lo the benefit derived by it from the expenditure. 
 
 Every individual and class in the community is benefited by the 
 central administration, or, in other words, the general government . 
 
CHAP, m ON CONSUMPTION. 445 
 
 so likewise of the security afforded by the national military estab 
 lishment ; for the provinces can hardly be secure from external 
 attack, if the enemy have possession of the metropolis, and can 
 thence overawe and control them ; imposing laws upon districts 
 where his force has not penetrated, and disposing of the lives and 
 property even of such as have not seen the face of an enemy. For 
 the same reason the charge of fortresses, arsenals, and diplomatic 
 agents is properly thrown upon the whole community. 
 
 It would seem, that the administration of justice should be classed 
 among the general charges, although the security and advantage it 
 affords have more of a local character. When the magistracy of 
 Bordeaux arrests and tries an offender, the public internal security of 
 France is unquestionably promoted. The charge of gaols and court- 
 houses necessarily follows that of the magistracy. Smith has ex- 
 pressed an opinion, that civil justice should be defrayed by the liti- 
 gating parties ; which would be more practicable than at present, 
 were the judges in the appointment of the parties in each particular 
 case, and no otherwise in the nomination of the public authority, 
 than inasmuch as the choice might be limited to specified persons of 
 approved knowledge and integrity. They would then be arbitra- 
 tors, and a sort of equitable jurors, and might be paid proportion- 
 ately to the matter in dispute without regard to the length of the 
 suit; and would thus have an obvious interest in simplifying the 
 process, and sparing their own time and trouble, as well as in 
 attracting business by the general equity of their decisions, (a) 
 
 But local administration and local institutions of utility, pleasure, 
 instruction, or beneficence, appear to yield a benefit exclusively to 
 the place or district where they are situated. Wherefore, it should 
 seem, that their expenses ought to fall, as in most countries they do, 
 upon the local population. Not but that the nation at large derives 
 some benefit from good provincial administration, or institutions. A 
 stranger has access to the public places, libraries, schools, walks, 
 and hospitals of the district; but the principal benefit unquestionably 
 results to the immediate neighbourhood. 
 
 It is good economy to leave the administration of the local re- 
 ceipts and disbursements to the local authorities; particularly where 
 
 (o) Our author seems in this passage to have become a convert to the opinion 
 of Smith, in respect to the civil tribunals of a nation, from which he had ex- 
 pressed his dissent, in former editions. Though arbitration may be a very good 
 mode of settling civil suits, where the parties are both anxious to come to a set- 
 tlement, and indeed is frequently resorted to, and should always be encouraged; 
 yet it is manifest, that there must be a compulsory tribunal for the obstinate, or 
 refractory. And, since security of person and property is the main object of 
 social institutions, it is but just, that invasion in a particular instance should be 
 repelled and deterred at the public charge. In strict justice, the invader shotAl 
 be held to make good the whole damage ; and so he is or ought to be, in the 
 shape of costs, fine, damages, or otherwise. But it is not consistent with equity 
 that the sufferer should be deterred from pursuing his claim, by superadding a 
 proportion of the outlay upon the judicial establishments to the charge of wit- 
 nesses and agents, which he must necessarily advance, and to the risk of :n- 
 
 in the delinquent, even in the event of ultimate success. T. 
 38 
 
446 ON CONSUMPTION. BOOK III. 
 
 they are appointed by those, whose funds they administer. There 
 is much less waste, when the money is spent under the eye of those 
 who contribute it, and who are to reap the benefit ; besides, the ex 
 pense L< better proportioned to the advantage expected. When one 
 passes through a city or town badly paved and ill-conditioned, or 
 sees a canal or harbour in a state of dilapidation, one may conclude, 
 in nine ~,ases out of ten, that the authorities, who are to administer 
 the funds appropriated to those objects, do not reside on the spot. 
 
 In this particular, small states have an advantage over more exten- 
 sive ones. They have more enjoyment from a less expenditure upon 
 objects of public utility or amusement; because they are at hand to 
 see that the funds, destined to the object, are faithfully applied. 
 
 CHAPTER VIH. 
 
 OP TAXATION. 
 
 SECTION I. 
 
 Of the Effect of all kinds of Taxation in general. 
 
 TAXATION is the transfer of a portion of the national products 
 from the hands of individuals to those of the government, for the 
 purpose of meeting the public consumption or expenditure. What- 
 ever be the denomination it bears, whether tax, contribution, duty, 
 excise, custom, aid, subsidy,* grant, or free gift, it is virtually a bur- 
 then imposed upon individuals, either in a separate or corporate 
 character, by the ruling power for the time being, for the purpose 
 of supplying the consumption it may think proper to make at their 
 expense ; in short, an impost, in the literal sense. 
 
 It would be foreign to the plan of this work, to inquire in whom 
 the right of taxation is or ought to be vested. In the science of 
 political economy, taxation must be considered as matter of fact, and 
 not of right ; and nothing further is to be regarded, than its nature, 
 
 * What avails it, for instance, that taxation is imposed by consent of the peo- 
 ple or their representatives, if there exists in the state a power, that by its acts 
 can leave the people no alternative but consent 1 De Lolme, in his Essay on 
 the English Constitution, says that the right, of the Crown to make war is nu- 
 gatory, while the people have the right of refusing the supplies for carrying it 
 on. May it not be said, with much more truth, that the right of the people to 
 deny the supplies is nugatory, when the crown has involved them in a predica- 
 ment that makes consent a matter of necessity 1 The liberiies of Great Britain 
 have no real security, except in the freedom of the press , which rests itself, 
 rather upon the habits and opinions of the nation, than upon legal enactments 
 or judicial decisions. A nation is free, when it is bent on freedom ; and the most 
 formidable obstacle to the establishment of civil liberty is the absence of the 
 desire for it 
 
CHAP. VII L ON CONSUMPTION. 447 
 
 the sourco whence it derives the values it absorbs, and its effect upon 
 national and individual interests. The province of this science ex- 
 tends no further. 
 
 The object of taxation is, not the actual commodity, but the 
 value of the commodity, given by the tax-payer to the tax-gatherer. 
 Its being paid in silver, in goods, or in personal service, is a mere 
 accidental circumstance, which maybe more or less advantageous to 
 the subject or to the sovereign. The essential point is, the value of 
 the silver, the goods, or the service. The moment that value is part- 
 ed with by the tax-payer, it is positively lost to him ; the momen 
 it is consumed by the government or its agents, it is lost to all the 
 world, and never reverts to, or re-exists in society, This, I appre- 
 hend, has already been demonstrated, when the general effect of pub- 
 lic consumption was under consideration. It was there shown, that 
 however the money levied by taxation may be refunded to the na- 
 tion, its value is never refunded ; because it is never returned gra- 
 tuitously, or refunded by the public functionaries, without receiving 
 an equivalent in the way of barter or exchange. 
 
 The same causes, that we have found to make unproductive con- 
 sumption nowise favourable to reproduction, prevent taxation from 
 at all promoting it. Taxation deprives the producer of a product, 
 which he would otherwise have the option of deriving a personal 
 gratification from, if consumed unproductively, or of turning to 
 profit, if he preferred to devote it to an useful employment. One pro- 
 duct is a means of raising another ; and, therefore, the subtraction of 
 a product must needs diminish, instead of augmenting, productive 
 power. 
 
 It may be urged, that the pressure of taxation impels the produc- 
 tive classes to redouble their exertions, and thus tends to enlarge the 
 national production. I answer, that, in the first place, mere exertion 
 can not alone produce, there must be capital for it to work upon, and 
 capital is but an accumulation of the very products, that taxation 
 takes from the subject : that, in the second place, it is evident, that 
 the values, which industry creates expressly to satisfy the demands 
 of taxation, are no increase of wealth; for they are seized on and de- 
 voured by taxation. It is a glaring absurdity to pretend, that taxa- 
 tion contributes to national wealth, by engrossing part of the national 
 produce, and enriches the nation by consuming part of its wealth. 
 Indeed, it would be trifling with my reader's time, to notice such a 
 fallacy, did not most governments act upon this principle, and had 
 not well-intentioned and scientific writers endeavoured to support 
 and establish it* 
 
 * By the same reasoning it has been attempted to prove, that luxury and bar- 
 ren consumption operate as a stimulus to production. Yet they are less mis- 
 chievous than taxation ; inasmuch as they redound to the personal gratification 
 of the party himself: whereas, to use the expedient of taxation as a stimulative 
 to increased production, is to redouble the exertions of the community, for th<? 
 sole purpose of multiplying 1 its privations, rather than its enjoyments. For, if 
 increased taxation bo applied to the support of a complex, overgrown, and osten 
 tatious internal administration, or of a superfluous and disproportionate military 
 -^tablishment, that may act as a drain of individual wealth, and of the flower 
 
448 ON CONSUMPTION. BOOK 111 
 
 If, from the circumstance, that the nations most grievously taxed 
 ire those most abounding in wealth, as Great Britain, for example, 
 we are desired to infer, that their superior wealth arises from their 
 heavier taxation, it would be a manifest inversion of cause and effect. 
 A man is not rich, because he pays largely ; but he is able to pa} 
 largely, because he is rich. It would be not a little ridiculous, if a 
 man should think to enrich himself by spending largely, because he 
 sees a rich neighbour doing so. It must be clear, that the rich man 
 spends, because he is rich ; but never can enrich himself by the act 
 of spending 
 
 Cause and effect are easily distinguished, when they occur in suc- 
 cession ; but are often confounded, when the operation is continuous 
 and simultaneous. 
 
 Hence, it is manifest, that, although taxation may be, and often is, 
 productive of good, when the sums it absorbs are properly applied, 
 yet, the act of levying is always attended with mischief in the outset. 
 And this mischief good princes and governments have always en- 
 deavoured to render as inconsiderable to their subjects as possible, by 
 the practice of economy, and by levying, not to the full extent of 
 the people's ability, but to such extent only as is absolutely una- 
 \oidable. That rigid economy is the rarest of princely virtues, is 
 owing to the circumstance of the throne being constantly beset with 
 individuals, who are interested in the absence of it; and who are al- 
 ways endeavouring, by the most specious reasoning, to impress the 
 conviction, that magnificence is conducive to public prosperity, and 
 that profuse public expenditune is beneficial to the state. It is the 
 object of this third book to expose the absurdities of such repre- 
 sentations. 
 
 Others there are, who are not impudent enough to pretend, thai 
 public profusion is a public benefit ; yet undertake to show by arith- 
 metical deduction, that the people are scarcely burthened at all, and 
 are equal to a much higher scale of taxation. As Sully tells us in 
 his Memoirs, " The ear of the prince is assailed by a set of flattering 
 advisers, who think to make their court to him by perpetually sug- 
 gesting new ways of raising money ; discharged functionaries, for 
 the most part, whose experience of the sweets of office has left no 
 other impression, than the tincture of the baneful art of fiscal extor- 
 tion; and who seek to recommend themselves to power and favour, 
 by commending it to the lips of royalty."* 
 
 Others suggest financial projects, and ways and means for filling 
 the coffers of the prince, as they assert, without fleecing the subject. 
 But no plan of finance can give to the government, without taking 
 either from the people, or from the government itself in some other 
 way; unless it be a downright adventure of industry. Something 
 can not be produced out of nothing by a mere touch of the wand. 
 However an operation may be cloaked in mystery, however often 
 
 of the national youth, and an aggressor upon the peace and happiness of domes- 
 he life, will not this be paying as dearly for a grievous public nuisance, as if it 
 u-ere a benefit of the first magnitude 1 
 * Memoir es, liv. xx. 
 
CHAP. VIII. ON CONSUMPTION. 410 
 
 we may twist and turn and transform values, there are but two ways 
 of obtaining them, namely, creating oneself, or taking from others. 
 The best scheme of finance is, to spend as little as possible ; and the 
 best tax is always the lightest. 
 
 Admitting these premises, that taxation is the taking irom in- 
 dividuals a part of their property* for public purposes; that the value 
 levied by taxation never reverts to the members of the community, 
 after it has once been taken from them ; and that taxation is not itself 
 a means of reproduction ; it is impossible to deny the conclusion, 
 that the best taxes, or, rather those that are least bad, are 
 
 ] Such as are the most moderate in their ratio. 
 
 2. Such as are least attended with those vexatious circumstances, 
 that harass the tax-payer without bringing any thing into the public 
 exchequer. 
 
 3. Such as press impartially on all classes. 
 
 4. Such as are least injurious to reproduction. 
 
 5. Such as are rather favourable than otherwise to the national 
 morality; that is to say, to the prevalence of habits, useful and bene- 
 ficial to society. 
 
 These positions are almost self-evident; yet I shall proceed to 
 illustrate them successively, with some few observations. 
 
 1. Of such as are most moderate in their ratio. 
 
 Since taxation does, in point of fact, deprive the tax-payer of a 
 product, which is to him, either a means of personal gratification, or 
 a means of reproduction, the lighter the tax is, the less must be the 
 privation. 
 
 Taxation, pushed to the extreme, has the lamentable effect of 
 impoverishing the individual, without enriching the state. We may 
 readily conceive how this can happen, if we recall to our attention 
 the former position; viz. that each tax-payer's consumption, whether 
 productive or not, is always limited to the amount of his revenue. 
 No part of his revenue, therefore, can be taken from him without 
 necessarily curtailing^his consumption in the same ratio. This must 
 needs reduce the demand for all those objects he can no longer con- 
 sume, and particularly those affected by taxation. The diminution 
 of demand must be followed by diminution of the supply of pro- 
 duction ; and, consequently, of the articles liable to taxation. Thus, 
 the tax-payer is abridged of his enjoyments, the producer of, his 
 profits, and the public exchequer of its receipts.f 
 
 *It is hardly necessary to controvert an opinion, entertained by sovereigns in 
 times past, respecting 1 the property of their subjects. We find Louis XIV. 
 writing in these terms, professedly for the instruction of his son in matters of 
 government : " Kings are absolute lords naturally possessing the entire and un- 
 controlled disposal of all property, whether belonging to the church or to th^ 
 laity, to be exercised at all times with due regard to economy, and to the general 
 interests of the state." (Euvres de Louis XIV., Memoires Hist. A. D. 1668. 
 
 fin France, before 1789, the average annual consumption of salt was esti- 
 mated at 9 Ibs. per head in the districts subject to the gabelle, and at 18 Iba. 
 per head in those exempt from that impost. De Monthieu, Influence des divei * 
 Iwnots. p. 141 Thus, taxation in this form obstructed the production of A 
 
 38* 3G 
 
150 ON CONSUMPTION. BOOK III. 
 
 This is the reason why a tax is not productive to the public 
 exchequer, in proportion to its ratio ; and why it lias become a sort 
 
 >f apophthegm, that two and two do not make four in the arithmetic 
 >f finance. Excessive taxation is a kind of suicide, whether laid 
 ipon objects of necessity, or upon those of luxury ; but, there is this 
 iistinction, that, in the latter case, it extinguishes only a portion of 
 the products on which it falls, together with the gratification they 
 are calculated to afford ; while, in the former, it extinguishes both 
 production and consumption, and the tax-payer into the bargain. 
 
 Were it not almost self-evident, this principle might be illustrated, 
 by abundant examples of the profit the state derives from a moderate 
 scale of taxation, where it is sufficiently awake to its real interests. 
 
 When Turgot, in 1775, reduced to ^ the market-dues and duties 
 of entry upon fresh sea-fish sold in Paris, their product was nowise 
 diminished. The consumption of that article must, therefore, have 
 
 ioiibled, the fishermen and dealers must have doubled their concerns 
 ;md their profits; and, since population always increases with 
 increasing production, the number of consumers must have been 
 enlarged; and that of producers must have been enlarged likewise; 
 for an increase of profits, that is to say of individual revenue, mul- 
 tiplies savings, and thus generates the multiplication of capital and 
 of families ; and that very increase of production will, beyond all 
 doubt, augment the product of taxation in other branches; to say 
 nothing of the popularity accruing to the government from the alle- 
 viation of the national burthens. 
 
 The government agents, who farm or administer the collection of 
 the taxes, very often abuse their interest and authority, to construe 
 
 of this article in the districts subjected to it, and reduced to \ the enjoyment it 
 was capable of affording ; to say nothing of the other mischiefs resulting from 
 it; the injury to tillage, to the feeding of cattle, and to the preparation of salted 
 ^oods ; the popular animosity against the collectors of tax, the consequent in- 
 crease of crime and conviction, and the consignment to the galleys of numerous 
 individuals, whose industry and courage might have been made available to the 
 increase of national opulence. 
 
 In 1604, the English government raised the duties on sugar 20 per cent. It 
 might have been expected, that their average product to the public exchequer 
 would have been advanced in the same ratio ; L e. from 2,778,OOOZ. the former 
 amount, to 3,330,OOOZ. : instead of which the increased duties produced but 
 ii,537,OOOZ. ; exhibiting an absolute deficit. Speech of Henry Brougham, Esq., 
 M. P., March 13, 1817. 
 
 The people of Great Britain might consume French wines at a very little 
 advance upon the prices of France, and have the enjoyment of an unadulterated, 
 wholesome, and exhilarating beverage, costing perhaps a shilling a bottle. But 
 the exorbitant duty upon this article has reduced its import and the product of 
 *he duty to a very trifle; and thus, the sole benefit resulting from the tax to the 
 British nation is, the total privation of a cheap and wholesome object of con- 
 sumption. 
 
 The two last examples are a sufficient answer to the objection taken by 
 Ricardo to this passage of rny text; on the ground that taxation is not injurious 
 t-o production ii the aggregate, inasmuch as the consumption of the state itself 
 replaces that of individuals, which is annihilated by the tax. A tax, that robs 
 'he ind : vidual, without benefit to the exchequer, substitutes no public consnmp- 
 nuin xv'-utevcr. <n place of the private consumption it extinguishes. 
 
CHAP. VIIL ON CONSUMPTION. 45] 
 
 all doubtful points of fiscal law in their own favour, and sometimes 
 to create obscurity for the purpose of profiting by it. The effect is 
 precisely the same, as if the scale of taxation were raised pro tanto.* 
 Turgot adopted a contrary course, and made it a rule to lean 
 always to the side of the tax-payer. The public contractors made 
 a great outcry at this innovation, declaring that it was impossible 
 for them to fulfil their engagements, and offering to collect on the 
 government account and risk. The event, however, falsified their 
 predictions by an actual increase of the receipts. The greater lenity 
 in the collection proved so advantageous to production, and the con- 
 sumption, consequent upon it, that the profits, which had before not 
 exceeded 1 0,550,000 Kv., rose to 60,000,0007ru. ; an advance which 
 could hardly be credited, if it were not attested by unquestionable 
 evidence.f 
 
 We are told by Humboldt,J to whom we are indebted for a variety 
 of valuable information, that in thirteen years from 1778, during 
 which time Spain adapted a somewhat more liberal system of 
 government in regard to her American dependencies, the increase 
 of the revenue in Mexico alone amounted to no less a sum than 100 
 millions of dollars; and that she drew from that country, during the 
 same period, an addition in the single article of silver, to the amount 
 of 14,500,000 dollars. We may naturally suppose, that, in those 
 years of prosperity, there was a corresponding, and rather greater 
 increase of individual profits; for that is the source, whence all 
 public revenue is derived. 
 
 A similar course of conduct has invariably been followed by a 
 similar effect ; and it is a great satisfaction to a writer of liberal 
 
 * Of this, a striking instance is given in a work entitled, Diverses Idees sur la 
 Legislation et P Administration, par M. C. St. Paul. One of the principal 
 bankers of Paris having died in 1817, the duty on legacies and inheritance was 
 levied upon the aggregate of his credit-account, and not upon the balance, after 
 deducting the debits ; and this by virtue of a proviso in the revenue laws, which 
 charges the duty upon the gross estate of a defunct, and not upon the residue 
 after the discharge of the outstanding claims. The danger of fraud upon the 
 revenue in stating the account, is not sufficient to justify the exaction of more 
 than is fairly due. 
 
 The same department is in the habit of giving no notice to the executors or 
 other parties, of the payments falling due, until after the legal time has expired, 
 in the hope of incurring the penalty of default. The revolution had abolished 
 this official and fiscal severity ; but it was revived by the imperial government, 
 and has been acted upon ever since. A clerk or officer has no chance of promo- 
 tion, unless he shows a disposition on all occasions to postpone the interests of 
 the public to those of the exchequer. 
 
 f GEucres de Turgot, torn. i. p. 170. The accounts of the farmers-genera] 
 were minutely stated, and rigidly investigated, because the crown participated 
 in their profits. 
 
 \ Essai Pol. sur la Nouvelle Espagne, liv. v. c. 12. 
 
 This position is further confirmed by an instance menti&ned in a letter, no- 
 dressed in 1785, by the then Marquis of Lansdowne to the Abbe Morellet, stating, 
 'that in respect to the article of tea, the good effect of the reduction of duty had 
 surpassed all expectation. The amount of sale had advanced from 5,000,000 
 Ibs. to 12,000,000 Ibs., in spite of many unfavourable circumstances . "Reside* 
 
452 ON CONSUMPTION. BOOR III 
 
 principles to be able to prove by experience, that moderation is the 
 best policy.* 
 
 Upon the same principles, it will be easy to demonstrate in the 
 next place, that the taxes least mischievous are : 
 
 2. Such as are least attended with those vexatious circumstances, 
 that harass the tax-payer, without bringing any thing into the public 
 exchequer. 
 
 It has been held by many, that the costs of collection are no very 
 great evil, inasmuch as they are refunded to the community in some 
 other shape. On this head, I must refer my readers to what has 
 been already observed.f These costs are no more refunded, than 
 the net proceeds of the taxes themselves; because both the one and 
 the other consists in reality, not of the money, wherein the taxes 
 are paid, but of the value, wherewith the tax-payer produces that 
 money, and the value which the government again procures with it : 
 which latter is destroyed and consumed outright. 
 
 The necessities of princes have operated far more effectually than 
 their regard to the public good, to introduce the practice of better 
 order and economy in the financial departments of most European 
 states during the two last centuries, than in former times. The 
 people are generally made to bear as much as they can well stand 
 under ; so that every saving in the charge of collection has gone to 
 swell the receipts of the exchequer. 
 
 Sully tells us in his Memoirs,J that, for about 6 millions of dollars 
 brought into the royal treasury, in 1598, by means of taxation, indi- 
 viduals were out of pocket about 30 millions of dollars, and assures 
 us, that he had with great pains ascertained the fact, however incre- 
 dible it might appear. Under the administration of Necker, upon a 
 
 which, smuggling- had been so much crippled, that the public revenue had been 
 increased to a degree that astonished every body.' 
 
 * This doctrine has been combated by Ricardo, in his Principles of Political 
 Economy and Taxation. That writer maintains, that since the amount and the 
 product of industry are always proportionate to the quantum of the capital en- 
 gaged in it, the extinction of one branch by taxation must needs be compensated 
 by the product of some other, towards which the industry and capital, thrown 
 out of employ, will naturally be diverted. I answer, that whenever taxation 
 diverts capital from one mode of employment to another, it annihilates the profits 
 of all who are thrown out of employ by the change, and diminishes those of the 
 rest of the community ; for industry may be presumed to have chosen the most 
 profitable channel. I will go further, and say, that a forcible diversion of the 
 current of production annihilates many additional sources of profit to industry. 
 Besides, it makes a vast difference to the public prosperity, whether the indivi- 
 dual or the state be the consumer. A thriving and lucrative branch of industry 
 promotes the creation and accumulation of new capital ; whereas, under the 
 pressure of taxation, and accumulation of new capital, it ceases to be lucrative ; 
 capital diminishes gradually instead of increasing; wealth and production decline 
 in consequence, and prosperity vanishes, leaving behind the pressure of unre- 
 nit'ing taxation. Ricardo has endeavoured to introduce the unbending maxims 
 r geometrical demonstration ; in the science of political economy, there k no 
 method less worthy of reliance. 
 
 Chap. V. sect. I. \ Liv. xx. 
 
CHAT. VIIL ON CONSUMPTION. 453 
 
 revenue of about 110 millions of dollars, the charges of collection 
 amounted to no more than 10 millions of dollars ; yet, under his 
 management, there were 250,000 persons employed in the collection: 
 most of them, however, had other collateral occupations. The charge 
 was, therefore, about 101 per cent. ; yet this is much higher than the 
 rate at which the business is done in England.* 
 
 Besides the charge of collection, there are other circumstances, 
 that are burthensome to the people without being productive of gain 
 to the public revenue. Law-suits, imprisonment and other preventive 
 measures, entail additional expense, without procuring the smallest 
 increase of revenue. And this addition is sure to fall on the most 
 necessitous class of tax-payers ; for the other classes pay without 
 litigation or constraint. Such odious means of enforcing the pay- 
 ment of taxes are precisely the same as demanding of a man 12 
 dollars because he has not wherewithal to pay 10 dollars. Rigour 
 is never necessary to enforce taxation where it presses lightly on the 
 resources of individuals; but when a state is so unfortunate, as to be 
 obliged to impose heavy burthens, of two evils, the process of levy- 
 by distress is preferable to that of personal constraint. For at any 
 rate, by seizing and selling the tax-payer's goods, and thereby raising 
 the arrears of his taxes, he is compelled to pay no more than is due; 
 and the whole of what he does pay goes into the public purse. 
 
 On this account it is, that works executed by the public requisi- 
 tion of labour, as the roads were in France under the old regime, 
 are always a mischievous kind of taxation. The time lost by the 
 labourers put in requisition in coming three or four leagues, perhaps, 
 to their work, and that which is always wasted by people who get 
 no pay, and work against their inclination, is all a dead loss to the 
 public, with no return of revenue. Even supposing the work to be 
 well executed, there is often more loss incurred by the interruption 
 of the regular agricultural pursuits, than gain made from the com- 
 pulsory employment that has been substituted. Turgot called upon 
 the surveyors and engineers of the respective provinces for an esti- 
 mate of the average expense, one year with another, of keeping up 
 old roads, and constructing the usual number of new ones, directing 
 them to make their calculations on the most liberal scale. The esti- 
 mate of the annual expense, made in compliance with his orders, 
 amounted to 2 millions of dollars for the whole kingdom: whereas, 
 according to the calculations of Turgot, the old corvee system in- 
 volved a sacrifice to the nation of 8 millions of dollars.f 
 
 Days of rest, enjoined either by law, or by custom and usage too 
 powerful to be infringed upon, are another kind of taxation, pro- 
 ductive of nothing to the public purse. 
 
 * Under the system of Napoleon, which made civilization retrograde to this, 
 as well as in most other particulars, the charges of collection in which must be 
 included the charge of privation and the irrecoverable arrears, weie much more 
 considerable; but the full extent of the mischief he caused is not yet ascertained. 
 
 f Necker reckons the corvee at four millions of dollars only ; but probably h< 
 takes account of nothing", but the value the day-labour exacted ; and does not 
 notice the injury resulting from this method of supplying; the public necessities. 
 
454 ON CONSUMPTION. BOOK HI. 
 
 3. Such as press impartially on all classes. 
 
 Taxation being a burthen, must needs weigh lightest on each 
 individual, when it bears upon all alike. When it presses inequitably 
 upon one individual or branch of industry, it is an indirect, as well 
 as a direct, incumbrance ; for it prevents the particular branch or 
 the individual from competing on even terms with the rest. An 
 exemption, granted to one manufacture, has often been the ruin of 
 several others. Favour to one is most commonly injustice to all 
 others. 
 
 The partial assessment of taxation is no less prejudicial to the 
 public revenue, than unjust to individual interests. Those who are 
 too lightly taxed, are not likely to cry out for an increase ; and those 
 who are too heavily taxed, are seldom regular in their payments. 
 The public revenue suffers in both ways. 
 
 It has been questioned whether it be just to tax that portion of 
 revenues, which is spent on luxuries, more heavily than that spent on 
 objects of necessity. It seems but reasonable to do so ; for taxation 
 is a sacrifice to the preservation of society and of social organization, 
 which ought not to be purchased by the destruction of individuals. 
 Yet, the privation of absolute necessaries implies the extinction of 
 existence. It would be somewhat bold to maintain, that a parent 
 is bound in justice to stint the food or clothing of his child, to furnish 
 his contingent to the ostentatious splendour of a court, or the need- 
 iess magnificence of public edifices. Where is the benefit of social 
 institutions to an individual, whom they rob of an object of positive 
 enjoyment or necessity in actual possession, and offer nothing in re- 
 turn, but the participation in a remote and contingent good, which 
 any man in his senses would reject with disdain? 
 ""But how is the line to be drawn -between necessaries and super- 
 fluities? In this discrimination, there is the greatest difficulty, for 
 ihe terms, necessaries and superfluities, convey no determinate or 
 absolute notion, but always have reference to the time, the place, 
 the age, and the condition of the party ; so that, \vere it laid down 
 as a general rule, to tax none but superfluities, there would be no 
 knowing where to begin and where to stop. All that we certainly 
 know is, that the income of a person or a family may be so confined, 
 as barely to suffice for existence ; and may be augmented from that 
 minimum upwards by imperceptible gradation, till it embrace every 
 gratification of sense, of luxury, or of vanity; each successive grati- 
 fication being one step further removed from the limits of strict 
 necessity, till at last the extreme of frivolity and caprice is arrived 
 ?it; so that, if it be desired to tax individual income, in such manner 
 MS to press lighter, in proportion as that income approaches to the 
 confines of bare necessity, taxation must not only be equitably ap- 
 fortioned, but must press on revenue with progressive gravity.* 
 
 In fact, supposing taxation to be exactly proportionate to indi 
 vidual income, a tax often per cent, for instance, a family possessed 
 f fiO,OOQ dollars per annum would pay 6000 dollars in faxes, leav 
 
 ife. 
 
 ' fluiti 
 

 CIIAP. VIII. ON CONSUMPTION. if>f, 
 
 ing a clear residue of 54,000 dollars for the family expcnuimre. 
 With such an expenditure, the family could not only live in abun- 
 dance, but could stiil enjoy a vast number of gratifications bv no 
 means essential to happiness. Whereas another family, with an 
 income of 60 dollars, reduced by taxation to 54 dollars per annum, 
 would, With our present habits of life, and ways of thinking, be 
 stinted in the bare necessaries of subsistence. Thus, a tax merely 
 proportionate to individual income would be far from equitable; 
 and this is probably what Smith meant, by declaring it reasonable, 
 that the rich man should contribute to the public expenses, not merely 
 in proportion to the amount of his revenue, but even somewhat more. 
 For my part, I have no hesitation in going further, and saying, that 
 taxation can not be equitable, unless itsjia.Ua.is .progressive.* 
 
 4. Such as are least injurious to reproduction. 
 
 Of the values, whereof taxation deprives individuals, a great part 
 would, undoubtedly, if left at the disposal of the individuals them- 
 selves, have gone to the satisfaction of their wants and appetites : 
 but some part w r ould have been laid by, and have gone to the further 
 accumulation of productive capital. Thus, all taxation may be said 
 to injure reproduction, inasmuch as it prevents the accumulation of 
 productive capital. 
 
 This effect is more direct and serious, whenever the tax-payer is 
 obliged to withdraw a part of the capital already embarked, for the 
 purpose of enabling him to pay the tax; which case, as Sismondi 
 has shrewdly observed, resembles the exaction of a tithe upon grain 
 at seed-time, instead of harvest-time. Of this kind is the tax or; 
 legacies and successions. An heir, succeeding to a property of 
 20,000 dollars, and called upon for a tax of 5 per cent, upon it, will 
 pay it, not out of his ordinary income, burthened as it is already 
 with the ordinary taxes, but out of the inheritance, which is thereby 
 reduced to 19,000 dollars. Wherefore, if it happen to be a vested 
 capital of 20,000 dollars and be reduced by the tax to 19,000 dollars, 
 the national capital will be diminished to the amount of the 1000 
 dollars thus diverted into the public exchequer. 
 
 It is the same with all taxes upon the transfer of property. The 
 owner of land worth 20,000 dollars, will get but 19,000 dollars foi 
 it, if the purchaser be saddled with a tax of 5 per cent. The seller 
 will have a disposable capital of 19,000 dollars only, in lieu of land 
 worth 20,000 dollars ; and the national capital will sustain a loss oi 
 the difference. Should the purchaser be so bad an arithmetician, as 
 
 * Wealth of Nations, book v. c. 2. It has been objected, that a progressive 
 scale of taxation presents the disadvantage of operating- as a penalty to detf > 
 activity and frugality from the accumulation of capital. But it must be obvjout-, 
 that taxation of all kinds subtracts a portion only, and generally a very moderate 
 portion, of the addition made to the fortune of an individual ; so that every oti^ 
 has a much stronger inducement to invite, than penalty to deter, accurnulatior.-. 
 If a person had to pay 40 dollars more in taxes, upon every addition of 200 do; 
 lars to his revenue, still he would multiply his enjovrnents in a larger ratio than 
 his sacrifices. Vide what is said in Sect. 4. of the same Chapter, on the subject 
 of the land-tax of England. Ibid. 
 
456 ON CONSUMPTION. BOOK III 
 
 lo pay the full value of the land, without allowing for the tax, he 
 will sacrifice a capital of 21,000 dollars in the purchase of value to 
 the amount of but 20,000 dollars. In either case, the loss to the 
 national capital will be the same; although in the latter, it will fall 
 upon the purchaser instead of the seller. 
 
 Taxes, upon transfer, besides the mischief of pressing upon capital, 
 are a clog to the circulation of property. But, has the public any 
 interest in its free circulation? So long as the object is in existence, 
 is it not as well placed in one hand as in another ? Certainly not 
 The public has a perpetual interest in the utmost possible freedon 
 of its circulation ; because by that means it is most likely to get into 
 the hands of those, who can make the most of it. Why does one 
 man sell his land? but because he thinks he can lay out the value to 
 more advantage in some channel of productive industry. And why 
 does another buy it? but because he wishes to invest a capital, that 
 is lying idle, or less productively vested ; or because he thinks it 
 capable of improvement. fThe transfer tends to augment the national 
 income, because it tends to augment the income of the two contract- 
 ing parties. If they be deterred by the expenses of the transfer, 
 those expenses will have prevented this probable increase of the 
 national income. 
 
 Such taxes, however, as encroach upon the productive capital of 
 the community, and consequently abridge the demand for labour 
 and the profits of industry within the community, possess, in a very 
 high degree, one quality, which that distinguished political econo- 
 mist, Arthur Young, has pronounced to be an essential requisite in 
 taxation, namely, the facility and cheapness of collection.* Since 
 taxation presents at best but a choice of evils, a nation, heavily 
 burthened, will probably do well, in submitting to a moderate impost 
 upon capital. 
 
 Taxes upon law-proceedings, and, generally, all that is paid to 
 law-officers and agents, are taxes upon capital. (1) For litigation to 
 
 *This is the reason, why it has been found practicable to raise the duty on 
 registration to its present high scale. Were it reduced, the product to the ex- 
 chequer would probably be equally great ; and the nation would enjoy the benefit 
 of greater freedom of circulation, besides experiencing less encroachment upon 
 its capital. 
 
 (1) Taxes upon law proceedings are the most grievous and oppressive that 
 have ever been resorted to, and since the appearance of Mr. Bentham's work on 
 Law taxes, no one, who has read it, can doubt their impolicy. It is said in the 
 Edinburgh Review (vol. 27, page 358.), " that one day Mr. Rose, in Mr. Pitt's 
 presence, took Mr. Bentham aside, and informed him that they had read the 
 pamphlet that its reasoning was unanswerable and that it was resolved there 
 should be no more such taxes." " Yet Budget after Budget," remarks the re- 
 viewer, "has since been formed, in which those duties have made a part; and 
 Mr. Pitt himself was found to patronize them upon his return to office in 1804." 
 All the arguments ever brought forward in support of this objectionable impost, 
 have been triumphantly refuted by Mr Bentham, in this work, which it is said 
 ,! the same Review, "for closeness of reasoning, has not perhaps been equalled, 
 JMI! fot excellence of style, has certainly never been surpassed." 
 
 AMERICAN EDITOR. 
 
CHAP. VIII. ON CONSUMPTION. 457 
 
 not proportionate to the income of the suitors, but to accident, U 
 the complexity of family interests, and to the imperfections of the 
 law itself. 
 
 Forfeitures are equally a tax on capital. 
 
 The influence of taxation upon production is not confined to the 
 circumstance of diminishing one of its sources, that is to say, capital ; 
 it operates besides in the nature of a penalty, inflicted upon certain 
 branches of production and consumption. Patents, licenses to fol- 
 low any specified calling, and, generally, all taxes, that bear directly 
 upon industry, are liable to tlr's objection; but, when moderate in 
 their ratio, industry will contrive to surmount such obstacles with- 
 out much difficulty. 
 
 Nor is industry affected only by taxes bearing directly upon it; 
 it is indirectly affected by such also, as bear upon the consumption 
 of the articles it has to work upon. 
 
 The products consumed in reproduction are, for the most part, 
 those of primary necessity; and taxes, that discourage such products, 
 must be injurious to reproduction. This is more especially the case 
 in respect to those raw materials of manufacture, which can only be 
 consumed reproductively. An excessive duty upon cotton, checks 
 the production of all articles, wherein that substance is worked up.-* 
 
 Brazil is a country abounding in animal productions, that might 
 be cured and exported, if they were allowed to be salted. Its 
 fisheries are very productive, and cattle so abundant, that they are 
 killed merely for the sake of the hide. Indeed, it is thence that our 
 tanneries in Europe are in a great measure supplied. But the salt 
 duties prevent the export of either fish or meat; and thus, for the 
 sake of a revenue of about 200,000 dollars perhaps, incalculable 
 mischief is done to the productive powers of the country, as well as 
 to the public revenue, which they might be made to yield. 
 
 In like manner, as taxation operates in the nature of a penalty, to 
 discourage reproductive consumption, it may be employed to check 
 consumption of an unproductive kind; in which case it has the 
 two-fold advantage, of subtracting no value from reproductive in- 
 vestment, and of rescuing values from unproductive consumption, 
 to be employed in a manner more beneficial to the community. 
 This is the advantage of all taxes upon luxuries.f 
 
 *In both England and France, premiums are given upon the importation of 
 specific raw materials, with a view to encourage manufacture. This is an error 
 on the opposite side. Upon this principle, instead of a tax on the product of 
 Jand, a bounty should be given to all who would take the trouble to cultivate , 
 for domestic agriculture furnishes the raw material of most manufactures; aa 
 grain in particular, which is transformed, through the mediation of human exer- 
 tion, into value of various kinds, exceeding that consumed in the process. Cus- 
 toms or duties of import upon any article whatever are equally equitaoie with 
 direct taxes upon land; both are positive evils; but the lighter the tax, the 
 smaller the injury. 
 
 f When it is absolutely necessary to lay a tax upon a particular kind of con- 
 sumption or industry, which it is desirable not to extinguish altogether, the bur- 
 then must be light in the commencement, and increased gradually and cau- 
 39 3 FT 
 
458 ON CONSUMPTION. BOOK HI.. 
 
 . When sums, levied by taxation upon capita], instead of being 
 simply expended by the government, are laid out upon productive 
 objects ; or, when individuals contrive to make good the deficiency 
 out of their private savings, the positive mischief of taxation is then 
 balanced by a counteracting benefit. The proceeds of taxation are 
 reproductively vested, when laid out in improving the internal com- 
 munications, constructing harbours, or other such works of utility. 
 Governments sometimes employ a part of the revenue thus realised 
 in adventures of industry. Colbert did so, when he made advances to 
 the manufacturers of Lyons. The governments of Hamburgh, and 
 of some other places in Germany, were in the habit of embarking 
 their revenues in productive undertakings; and it is said, that the 
 authorities of Berne were in the habit of so employing a part of its 
 revenues every year: but such instances are of very rare occurrence. 
 
 5. Such as' are rather favourable than otherwise to the national 
 morality ; that is to say, to the prevalence of habits, useful arid bene- 
 ficial to society. 
 
 Taxation influences the habits of a nation, in the same way as it 
 operates upon its production and consumption, that is, by imposing 
 a pecuniary penalty upon specified acts ; and it is, moreover, pos- 
 sessed of the grand requisites to render punishment effectual; 
 namely, moderation and difficulty of evasion.* Without reference, 
 therefore, to the purposes of finance and revenue, it is a powerful 
 engine in the hands of government, for either corrupting or reform- 
 ing the national morals, and may be directed to the promotion of 
 idleness or industry, extravagance or economy. 
 
 The tax of five per cent, upon all lands devoted to productive 
 husbandry, and the exemption of pleasure-grounds, which existed in 
 France before the revolution, operated, of course, as a premium upon 
 luxury, and a penalty upon agricultural enterprise. 
 
 The tax of one per cent, upon the redemption of ground-rents and 
 rent-charges was virtually a penalty upon an act, equally advantage- 
 ous to the parties and to the community at large ; a fine upon the 
 meritorious exertions of prudent land-owners to pay off their incum- 
 b ranees. 
 
 The law of Napoleon, exacting from each scholar, educated in a 
 private academy, a specified payment into the chests of the public 
 universities, operated as a penalty upon that mode of education, 
 which alone can soften national manners and fully develope the 
 faculties of the human mind.f 
 
 tiously. But if it be desired to repress or annihilate a mischievous class of con- 
 Biimption or industry, the full weight of the tax should be thrown upon it at 
 once. 
 
 * The efficacy of the characteristics of punishment has been placed beyond 
 all doubt by Beccaria, in his tract, Dei delitti e dclle pene. 
 
 I- This species of tax is still more iniquitous, because it must fall either upon 
 orphans, or upon parents, who are disposed to submit to personal privations, for 
 the purpose of rearing valuable citizens; because it is heavier in proportion to the 
 number of children, and the degree of privation of the parent; and because it is 
 disproportionate to the means of the individual, poor and rich being taxed alike. 
 
CHAP. VIII. ON CONSUMPTION. 459 
 
 When- a government derives a profit from the licensing of lotteries 
 and gambling-houses, what does it else but offer a premium to a .vice 
 most, fatal to domestic happiness, and destructive of national pros 
 perity ? How disgraceful is it, to see a government thus acting as 
 the pander of irregular desires, and imitating the fraudulent conduct 
 it punishes in others, by holding out to want and avarice the bait of 
 hollow and deceitful chance!* 
 
 On the contrary, taxes, that check and confine the excesses of 
 vanity and vice, besides yielding a revenue to the state, operate as 
 a means of prevention. Humboldt mentions a tax upon cock-fight- 
 ing, which yields to the Mexican government 45,000 dollars per 
 annum, and has the further advantage of checking that cruel and 
 barbarous diversion. 
 
 Exorbitant or inequitable taxation promotes fraud, falsehood, and 
 perjury. Well-meaning persons are presented with the distressing 
 alternative, of violating truth, or sacrificing their interests in favour 
 of less scrupulous fellow-citizens. They can not but feel involun- 
 tary disgust, at seeing acts, in themselves innocent, and sometimes 
 even useful and meritorious, branded with the name, and subjected 
 to all the consequences, of criminality. 
 
 These are the principal rules, by which present or future taxa- 
 tion must be weighed, with a view to the public prosperity. After 
 these general remarks, which are applicable to taxation in all its 
 
 A parent of moderate fortune, with one son only, pays as much to the university 
 as all the rest of his taxes together: if he have more sons than one, he is still 
 worse off. Thus was this institution converted by the usurper into an instru- 
 ment of fiscal extortion, sufficient of itself to have insured the relapse into bar- 
 barism, even had it never been made the medium of instilling false ideas or 
 habits of servility. The pretext, of making the profits of private establishments 
 contribute to the expense of compulsory tuition, is by no means satisfactory 
 Supposing the tuition of the public Lyce.es to be, of all others, the best calculated 
 to train up useful citizens ; and, admitting the justice of compelling a father, or 
 a teacher to his choice, to bring his pupil to the lectures of the authorized pro- 
 fessors, still the parties, least in need of this instruction, are those already placed 
 in private establishments of education, and entrusted to teachers of their own 
 selection. It may be for the interest of the community at large, to dispense par- 
 ticular classes of learning gratuitously ; but it is the greatest oppression to force 
 learning upon individuals, and make them pay dear for it into the bargain. If 
 any one class in particular ought to defray the charge of moderate gratuitous 
 tuition, it is that, which has no children of its own, and is in the reception of 
 all the benefits of social life, without being subject to all its burthens. 
 
 * Lotteries and games of hazard, besides occupying capital unprofitably, in 
 volve the waste of a vast deal of time, that might be turned to useful account, 
 and this item of expenditure can never redound to the profit of the exchequer. 
 They have the further mischievous effect of accustoming mankind to look to 
 rhance alone for what their own talents or enterprise might attain ; and to seek 
 for personal gain, rather in the loss of others, than in the original sources of 
 wealth. The reward of active energy appears paltry beside the bait of a capital 
 prize. Moreover, lotteries are a sort of tax, that, however voluntarily incurred, 
 lulls almost wholly upon the necessitous; for nothing, but the pressure of want 
 can drive mankind to adventure, with the chances manifestly against them 
 The sums thus embarked are, for the most part, the portion of misery , or. 
 in worse, the fruit of actual crime. 
 
460 ON CONSUMPTION. BOOK II* 
 
 branches, it may be useful to examine the various modes of assess 
 rnent : in other words, the methods adopted for procuring money 
 from the subject ; as well as to inquire, upon what classes of the 
 community the burthen principally falls. 
 
 SECTION II. 
 
 Of the different Modes of Assessment, and the Classes they press upc , 
 
 respectively. 
 
 Taxation, as we have seen above, is a requisition by the govern- 
 ment upon its subjects for a portion of their products, or of their 
 value. It is the business of the political economist to explain the 
 effects resulting from the nature of the products put in requisition, 
 and from the mode of apportioning the burthen, as well as upon 
 whom the burthen of the charge really falls, since it must inevitably 
 fall upon some one or other. The application of the above principles 
 in a few specific instances will show, how they may be applied in 
 all others. 
 
 The public authority levies the values taken in the way of tax- 
 ation, sometimes in the shape of money, sometimes in kind, accord- 
 ing to its own wants, or the ability of the tax-payer. In whatever 
 shape it is paid, the actual contribution of the tax-payer is always 
 of the value of the article he gives. If the government, wanting or 
 pretending to want corn, or leather, or woollens, makes a requisi- 
 tion of those articles upon the tax-payer, and obliges him to furnish 
 them in kind, the tax paid amounts exactly to what the payer has 
 expended in procuring those articles, or what he could have sold 
 them for, if the government had not taken them from him. This 
 is the only way of ascertaining the amount of the tax, whatever 
 price or rate the government may set upon it in the plenitude of its 
 power. 
 
 So, likewise, the charges of collection, in whatever shape they 
 may appear, are always an aggravation of the assessment, whether 
 they accrue to the profit of the state or not. If the tax-payer be, 
 obliged to lose his time, or transport his goods, for the purpose of 
 paying the tax, the whole of the time lost, or expense of transport, 
 is an aggravation of the tax. 
 
 Among the contributions, that a government exacts from its sub- 
 jects, should likewise be comprised, all the expenses which its politi- 
 cal conduct may bring upon the nation. Thus, in estimating the 
 expenses of war, we must include the value of equipment and 
 pocket-money, with which the military are supplied by them- 
 selves or their families ; the value of the time lost by the militia ; 
 the sums paid for exemption and substitutes; the full charge of 
 quarters for the troops; the pillage and destruction they maybe 
 guilty of; the presents and attentions lavished on them by friends 
 r countrvmen on their return; to all which must be added, the 
 
CHAP. VIII. ON CONSUMPTION. 40 1 
 
 alms extorted from pity and compassion by the misery consequent 
 upon such misrule. For, in fact, none of these values need have been 
 taken from the members of the community under a better system 
 of government. And, although none of them have gone into the 
 treasury of the monarch, yet have they been paid by the people, 
 and their amount is as completely lost, as if they had contributed to 
 the happiness of the human species. 
 
 Hence, we may form some notion of the extent of the national 
 sacrifices. But, from what source are they drawn ? Doubtless, 
 either from the annual product of the national industry, land, and 
 capital ; that is to say, from the national revenue ; or from the values 
 previously saved and accumulated ; that is to say, from the national 
 capital. 
 
 When taxation is moderate, the subject can not only pay his 
 taxes wholly out of his revenue, but will not be altogether disabled 
 from besides saving some part of that revenue : and although some 
 of the tax-payers may be obliged to trench upon their capital for 
 the payment of their taxes, the loss to the general stock is amply 
 reimbursed by the savings, which this happy state of affairs allows 
 others to effect. 
 
 But it is far otherwise, when military despotism or usurped au- 
 thority extorts excessive contributions. Gieat part of the taxes 
 is then taken from the vested and accumulated capital ; and, if the 
 country be long subjected to its domination, the revenues of each 
 successive year are progressively reduced, and the ruin and depopu- 
 lation of the country, will recoil upon its rulers, unless their down- 
 fall be accelerated by their own folly and excesses. 
 
 Under the protecting influence of just and regular government, 
 on the contrary, there is a progressive annual enlargement of the 
 profits and revenues, on which taxation is to be levied ; and that 
 taxation, without any alteration of its ratio, gradually becomes more 
 productive by the mere multiplication of taxable products. 
 
 Nor is the government more deeply interested in moderating the 
 ratio of taxation, than its impartial assessment upon every class of 
 individual revenue, and its equal pressure upon all. In fact, when 
 revenue is partially affected, taxation sooner reaches the extreme 
 limits of the ability of some classes, while others are scarcely touched 
 at all : it becomes vexatious and destructive, before it arrives at the 
 highest practical ratio. The burthen is galling, not because of its 
 weight, but because it does not rest upon all shoulders alike. 
 
 The different methods employed to reach individual revenues, 
 may be classed under two grand divisions direct, and indirect, 
 taxation ; the former is the absolute demand of a specific portion of 
 an individual's real or supposed revenue ; the latter, a demand of a 
 specific sum on each act of consumption of certain specified objects, 
 to which that income may be applied. 
 
 In neither case, is the real subject of taxation that commodity, on 
 which the estimate is made, and which forms the grounu-work oi 
 the demand for the tax ; or of necessity that value, whereof a part is 
 39* 
 
4G2 ON CONSUMPTION. BOOK HI. 
 
 taken by the state ; individual revenue is the only real subject of tax- 
 ation ; a'nd the specific commodity is selected only as a more or less 
 effective means of discovering and attacking that revenue. If indi- 
 vidual honesty could in every case be relied on, the matter would be 
 simple enough ; all that would be requisite would be, to ask each 
 person the amount of his annual profits, that is to say, his annual reve- 
 nue. The contingent of each would be readily settled, and one tax 
 only necessary, which would be at the same time the most equitable, 
 and the cheapest in the collection. This was the method adopted at 
 Hamburgh, before that city fell into misfortune ; but it can never be 
 practised, except in a republic of small extent, and very moderately 
 taxed. 
 
 As a means of assessing direct taxation proportionately to the 
 respective revenues of the tax-payers, governments sometimes com- 
 pel the production of leases by landlords, or, where there is no lease, 
 set a value on the land, and demand a certain proportion of that value 
 from the proprietor; this is called a land-tax.* Sometimes they 
 estimate the revenue by the rent of the habitation, and the number 
 of servants, horses, and carriages kept, and make the assessment 
 accordingly. This is called in France, the tax on moveables.f 
 Sometimes they calculate the profits of each person's profession or 
 calling, by the extent of the population and district where it is fol- 
 lowed. This is called in France, the license-tax. J All these differ- 
 ent modes of assessment are expedients of direct taxation. 
 
 In the assessment of indirect taxation, and such as is intended to 
 bear upon specific classes of consumption, the object itself is alone 
 attended to, without regard to the party who may incur the charge. 
 Sometimes a portion of the value of the specific product is demanded 
 at the time of production; as in France, in the article of salt. Some- 
 times the demand is made on entry, either into the state, as in the 
 duties of import ; or into the towns only, as in the duties of entry. j| 
 Sometimes a tax is demanded of the consumer at the moment of 
 transfer to him from the last producer; as in the case of the stamp 
 duty in England, and the duty on theatrical tickets in France. 
 Sometimes the government requires a commodity to bear a particular 
 mark, for which it makes a charge, as in the case of the assay-mark 
 of silver, and stamp on newspapers. Sometimes it monopolizes the 
 manufacture of a particular article, or the performance of a particular 
 kind of business ; as in the monopoly of tobacco, and the postage of 
 letters. Sometimes, instead of charging the commodity itself, it 
 charges the payment of its price ; as in the case of stamps on receipts 
 and mercantile paper. All these are different ways of raising a reve- 
 nue by indirect taxation ; for the demand is not made on any person 
 in particular, but attaches upon the product or article taxed.T 
 
 * Contribvtion-fonciere. f Mobilicre. 
 
 I Les Patentes. Douanes. \\ Octroi. 
 
 IT Not because they affect, the tax-payer indirectly; for this circumstance is 
 equally applicable to many items of direct taxation ; as, for instance, to the licen><>- 
 '.ax (patentes?) part of which falls indirectly upon the consumer, who buys of 
 &v Jirensed dealer. 
 
CHAP. VIII. ON CONSUMPTION. 463 
 
 It may easily be conceived, that a class of revenue, which may 
 escape one of these taxes, will be affected by another ; and that the 
 multiplicity of the forms of taxation gives a great approximation to 
 its equal distribution; provided always, that all are kept within the 
 bounds of moderation. 
 
 Every one of these modes of assessment has peculiar advantages 
 and peculiar disadvantages, besides the general evil of all taxation, 
 to wit, that of appropriating a part of the products of the community 
 to purposes little conducive to its happiness and reproductive powers. 
 Direct taxation, for instance, is cheap in the collection; but, on tho 
 other hand, it is paid with reluctance, and must be enforced with 
 considerable harshness and rigour. Besides,^it bears very inequitably 
 upon the individual. A rich merchant, charged only 120 dollars for 
 nis license, makes an annual profit, perhaps, of 20,000 dollars; while 
 the retailer, who can scarcely be supposed to make more than 300 
 dollars, is charged for his license 20 dollars, which is the lowest 
 rate. The revenue of the landholder is already affected by the 
 land-tax, before it is further reduced by the tax on moveables; while 
 the capitalist is subjected to the latter burthen only. 
 
 Indirect taxation has the recommendation of being levyable with 
 more ease, and with less apparent vexation or hardship. All taxes 
 are paid with reluctance, because the equivalent to be expected for 
 them, that is, the security afforded by good order and government, 
 is a negative benefit, which does not immediately interest indivi- 
 duals ; for the benefit afforded consists rather in prevention of ill, 
 than in the diffusion of good. But the buyer of the taxed commodity 
 does not suspect himself to be paying for the protection of govern- 
 ment, which probably he cares very little about ; but merely for the 
 commodity itself, which is an object of his urgent desire, although, 
 in fact, that yrue is aggravated by the tax. The inducement to 
 consume is strong enough to include the demand of the government; 
 and he readily parts with a value, that procures an immediate grati- 
 fication. 
 
 It is this circumstance, that makes such taxes appear to be volun 
 tary. And, indeed, so much so were they considered by the United 
 States before tfioir emancipation, that, although the right of the 
 British Parliament to tax America without her consent was stoutly 
 denied, yet she was ready to acknowledge the right of imposing 
 taxes upon consumption, which every body could evade if he 
 pleased, by abstaining from the articles taxed.* Personal taxes are 
 
 * Vide Examination of B. Franklin, at the bar of the House of Commons, 
 1767. Mrnnrirs, vol. i. Appendix 6. (a) 
 
 (a) Tho ilenial went to the whole of what is called internal taxation ; the 
 admission, which appears on the part of the American agents to have been a 
 concession for the sake of peace, went no farther than to external taxes for the 
 regulation of trade. And even this concession on the part of some of the agents 
 was very soon retracted, and the right of taxation denied in toto. Ibid. vol. i. 
 T 
 
464 
 
 ON CONSUMPTION. BOOK III. 
 
 viewed in a different light, and have more of the character of osten- 
 sible spoliation. 
 
 Indirect taxation is levied piecemeal, and paid by individuals 
 according to their respective ability at the moment. It involves 
 none of the perplexity of separate assessments on each province, 
 department, or individual; or of the inquisitorial inspection into 
 private circumstances; nor does it make one person suffer for the 
 default of another. The inconvenience of appeals and private ani- 
 mosities, as well as of levy by distress or imprisonment, is avoided 
 altogether. 
 
 Another advantage of indirect taxation is, that it enables the 
 government to bias the different classes of consumption; favouring 
 such as promote the public prosperity, as does reproductive con- 
 sumption of all kinds; and checking such as tend to public im- 
 poverishment, as do all kinds of unproductive consumption; dis- 
 couraging the costly and insipid indulgences of the wealthy, and 
 promoting the simpler and cheaper enjoyments of the poor and 
 industrious. 
 
 It has been objected to indirect taxation, that it entails a heavy 
 expense of collection and management, and a large establishment 
 of clerks, officers, directors, and subordinate agents ; but it is ob- 
 servable, that these charges may be vastly reduced by good admin- 
 istration. The excise and stamp-duties in England cost but 3|- per 
 cent, in the collection, in the year 1799.* There are few classes 
 of direct taxation, that are managed so economically in France. 
 
 It has been further objected, that its product is uncertain and 
 fluctuating; whereas, the public exigencies require a regular and 
 certain supply: but there has never been any lack of bidders, when- 
 ever such taxes have been let out to farm ; and experience has 
 shown, that the product of every class of taxation may always be 
 nearly estimated and safely reckoned upon, except in very rare and 
 extraordinary emergencies. Besides, taxes on consumption are 
 necessarily various ; so that, the deficit of one is covered by the 
 surplus of another. 
 
 Indirect taxation is, however, an incentive to fraud, and obliges 
 governments to brand with the character of guilt, actions that are 
 innocent in their nature ; and, consequently, to resort to a distressing 
 severity of punishment. But this mischief is never considerable, 
 until taxation has grown excessive, so as to make the temptation to 
 fraud counterbalance the danger incurred. All excess of taxation 
 is attended with this evil ; that, without enlarging the receipts of 
 the public purse, it multiplies the sufferings of the^population. 
 
 It may be observed, that consumption, and, consequently, indivi- 
 dual revenue, are unequally affected by indirect, as well as by direct, 
 taxation : for the private consumption of many articles is not pro- 
 
 * Gamier, Traduction de Smith, torn. iv. p. 438. According to Arthur Youn/r, 
 mo stamp-duties in his time cost hut 5,691Z. in the collection, upon the receipt 
 f>f 1,330,0002. ; which is less than | per cent. 
 
CIIAP. VIII. ON CONSUMPTION. 4G, r i 
 
 portionate to the revenue of the consumer. The possessor of an 
 annual revenue of 20.000 dollars does not consume in the year an 
 hundred times as much salt, as the possessor of a revenue of 200 
 dollars only. But this inequality may be obviated by the variety 
 of taxes on consumption. Moreover, it is to be recollected, that 
 such taxes fall upon incomes already charged with the taxes on 
 land and on moveables. A person, whose whole income is derived 
 from land, in respect to which he is taxed in the first instance, pays 
 on the same income a second tax under the head of moveables; and 
 a third on every taxed article, that he buys and consumes. 
 
 Although all these kinds of taxes be paid in the outset, by the 
 persons of whom they are demanded by the public authority, it 
 would be wrong to suppose, that they always ultimately fall on the 
 original payers, who, in many instances, are not the parties really 
 charged, but merely advance the tax in the first instance, and con- 
 trive^ to get indemnified wholly or partially by the consumers of 
 .heir own peculiar products. But the rate of indemnity is infinitely 
 diversified by the respective circumstances of the individuals. 
 
 Of this diversity, we may form some notion, by the consideration 
 of the following general facts : 
 
 When the taxation of the producers of a specific commodity ope- 
 rates to raise its price, part of the tax is paid by the consumers of 
 the commodity. If its price be nowise raised, it falls wholly upon 
 the producers. If the commodity, instead of being thereby ad- 
 vanoed in price, is deteriorated in quality, a portion of the tax at 
 least must fall upon the consumer; for a purchase of inferior quality 
 at equal price is equivalent to a purchase of equal quality and superior 
 price. 
 
 Every addition to price must needs reduce the number of those 
 possessed of the ability to purchase ; or, at any rate, must diminish 
 the extent of that ability.* There is much less salt consumed, when 
 it sells for three cents, than when it sells for one cent per Ib. Now, 
 the ratio of the demand to the means of production being lowered, 
 productive agency in this department is worse paid; that is to say, 
 the master-manufacturer of salt, and all the subordinate agents and 
 labourers, together with the capitalist that supplies the funds, and 
 the landlord of the premises where the concern is carried on, must 
 be content with smaller profits, because their product is less in de- 
 mand.f The productive classes, indeed, naturally strive to indemnify 
 
 * Supra, Book II. chap. I. 
 
 f The position, that the interest of the capitalist and the rent of the landlord 
 are thereby lowered, however paradoxical it may appear, is nevertheless quite 
 true. It may be asked, why should the capitalist, who makes the advance to 
 the manufacturer, or the landlord, whose land he occupies, lower their demands, 
 in consequence of a portion of the product being 1 subtracted by taxation 1 But 
 is no allowance to be made for consequent delay of payment, claims of allow- 
 ances, failures, and legal expenses] All, or at least a portion, of which must 
 fall upon the landlord and capitalist: and often without any suspicion on then 
 part, that they are thus made to participate in the burthen. In a comr>i*?y ' 
 organization the pressure of taxation is often imperceptible. 
 
4(}(5 ON CONSUMPTION. BOOK III. 
 
 themselves to the amount of the tax; but, they can never succeed to 
 the full extent, because the intrinsic value of the commodity, that, I 
 mean, which goes to pay the charges of production, is really dimin- 
 ished. So that, in fact, the tax upon an article never raises its tota" 
 price by the full amount of the tax ; because, to do so, the total 
 demand must remain the same; which it never can do. Wherefore, 
 in such cases, the tax falls, partly upon those, who still continue to 
 consume, notwithstanding the increase of price, and partly upon the 
 producers, who raise a less product, and find that, in consequence of 
 the reduced demand, they really obtain less on the sale, when the 
 tax comes to be deducted. The public revenue gains the whole 
 oxcess of price to the consumer, and the whole of the profit, which 
 the produce is thus compelled to resign. The effect is analogous to 
 that of gunpowder, which at the same time propels the bullet, and 
 makes the piece recoil. 
 
 By laying a tax upon the consumption of woollens, their consump- 
 tion is reduced, and the revenue of the wool -grower suffers in con- 
 sequence. It is true, he may take to a different kind of cultivation, 
 but we may fairly suppose, that, under all the circumstances of soil 
 and situation, the rearing of sheep was the most profitable kind of 
 culture ; otherwise, he would not have chosen it. A change in the 
 mode of cultivation must, therefore, involve a loss of revenue. But 
 the clothier and the capitalist will each be subjected to a portion of 
 the loss resulting from the tax. * 
 
 Each concurrent producer is affected by a tax on an article of 
 consumption, in proportion only to the share he may have in raising 
 the product taxed. 
 
 When the owner of the soil furnishes the greatest part of the 
 value of a product, as he does in respect to products consumed nearly 
 in the primary state, he it is that bears the greatest part of that por- 
 tion of the tax, which falls on the producers. A duty of entry upon 
 the wine imported into the towns, falls heavily upon the wine- 
 grower ; but an exorbitant excise upon lace will affect the flax-grower 
 in a degree hardly perceptible; whereas, all the other producers, the 
 Healers, the operative and speculative manufacturers, who create 
 the far greater proportion of the value of the lace, will suffer very 
 severely. 
 
 When the value of a product is partly of foreign, and partly of 
 domestic creation, the domestic producers bear nearly the whole 
 burthen of the tax. A tax upon cottons in France will reduce the 
 earnings of her cotton manufacturers, by lowering the demand for 
 ^heir product ; thus, part of the tax will fall on them. But the wages 
 -f the productive agency of the cotton-growers in America will be 
 very little affected indeed, unless there be a concurrence of other 
 circumstances. In fact, the tax would reduce the consumption in 
 
 This shows the clanger of adherence to invariable principle ; and of abandon- 
 ing the experimental method of Smith, and constructing a system of theoretical 
 deduction, as some recent English writers have done, in imitation of the econo- 
 of the last century. 
 
CHAP. VIII ON CONSUMPTION. 407 
 
 France 10 per cent, perhaps, and demand in America 1 per cent, 
 only, if the demand from France were but one-tenth of the general 
 demand upon America. 
 
 The taxation of an object of consumption, if it be one of primary 
 necessity, operates upon the price of almost all other products, and 
 consequently falls upo'n the revenues of all the other consumers. 
 An octroi upon meat, corn, and fuel, at their entry into a town, 
 enhances the price of every thing manufactured in it; while a tax 
 upon the tobacco there consumed makes no other commodity dearer; 
 the producers and consumers of tobacco alone are affected; and for 
 a very plain reason; the producer who indulges in superfluities has 
 to maintain a competition with another, who abstains from them ; 
 but, if he pays a tax upon necessaries, he need fear no competition ; 
 for his neighbours will be all in the same predicament. 
 
 The direct taxation of the productive classes must, & fortiori, 
 affect the consumers of their products, but can never raise the prices 
 of those products so much, as completely to indemnify the producer; 
 because, as I have repeatedly explained, the increased price abridges 
 the demand, and the contraction of the demand reduces the profits 
 of all the productive agency, that has been exerted in the supply. 
 
 Of the concurrent producers of a specific product, some can more 
 easily evade the effect of the tax than others. The capitalist, whose 
 capital is not absolutely vested and sunk in a particular business, may 
 withdraw it and transfer it elsewhere, from a concern that yield's 
 him a reduced interest, or has become more hazardous. The ad- 
 venturer or master-manufacturer may, in many cases, liquidate his 
 account, and transfer his labour and intelligence to some other 
 quarter. Not so the land-owner and proprietor of fixed capital.* 
 An acre of vineyard or corn-land will only produce a given quantity 
 of corn or wine, whatever be the ratio of taxation; which may tak?. 
 the J or even f of the net produce, or rent as it is called, and yet 
 the land be tilled for the sake of the remaining -| or -] : .f The rent, 
 that is to say, the portion assigned to the proprietor, will be reduced, 
 and that is all. The reason will be manifest to any one, who con- 
 siders, that in the case supposed, the land continues to raise and 
 supply the market with the same amount of produce as before ; while 
 on the other hand, the motives in which the demand originates 
 remain just as they were.J If, then, the intensity of supply and 
 
 * Vide Supra, Book I. chap. 4. for the explanation of the mode, in which the 
 land-holder concurs in production by the advance of his land ; and must, there- 
 fore, be included amongst the productive classes. 
 
 fThe cultivation need never be abandoned altogether, until taxation taket* 
 more than the whole surplus product applicable to the payment of rent; it ia 
 then worth nobody's while to cultivate at all; for not only could the proprietor 
 receive nothing 1 , the whole being; appropriated by the state; bui me farmer 
 would be compelled to pay to the state a higher rent, than he could afford. 
 
 | There is this peculiarity attending the products of agricultural industry, vli.. 
 that their average price is not raised by growing scarcity, because population in 
 fiure to decline co-extensively with the declining supply of human aliment; so 
 that the demand necessarily diminishes equally with the supply. Thus it is DC* 
 
.f S3 ON CONSUMPTION. BOOK HL 
 
 demand must both remain the same, in spite of any increase or 
 diminution of the ratio of the direct taxation upon the land, the 
 price of the product supplied will likewise remain unchanged, and 
 nothing but a change of price can saddle the consumer with any 
 portion whatever of that taxation.* 
 
 Nor can the proprietor evade the tax even by the sale of the 
 estate ; for the price or purchase-money w r ill be calculated according 
 to the revenue which may be left him by taxation. The purchaser 
 makes his estimate according to the net revenue, charges and taxes 
 deducted. If the ordinary interest on such investments of capital 
 be five per cent., an estate that before would have sold for 20,000 
 dollars, will fetch but 16,000 dollars w r hen it comes to be charged 
 with an annual tax of 200 dollars ; for its actual product to the pro- 
 prietor will riot exceed 800 dollars. The effect is precisely the same, 
 as if government were to appropriate to itself 1-5 of the land in the 
 country; which would make no difference at all to the consumers 
 of its produce.f 
 
 But property in dwelling-houses is otherwise circumstanced ; a 
 tax upon the ownership raises the rents ; for a house, or rather the 
 satisfaction it yields to the occupier, is a product of manufacture and 
 not of land ; and the high rate of house-rent reduces the production 
 and consumption of houses, in the like manner as of cloth or any 
 other manufactured commodity. Builders, finding- their profits re- 
 duced, will build less; and consumers, finding the accommodation 
 dearer, will content themselves with inferior lodging. 
 
 From all those circumstances, we may judge of the temerity of 
 asserting as a general maxim, that taxation falls exclusively upon 
 any specific class or classes of the community. It always falls upon 
 those who can find no means of evasion : for every one naturally 
 fries to shift the burthen off his own shoulders if possible ; but the 
 ability to evade it is infinitely varied, according to the various forms 
 
 found, that wheat is dearer in those countries where great part of the land is 
 thrown out of tillage, than where it is all in a high state of cultivation. In 
 Spain, wheat is not now dearer, than in the time of Ferdinand and Isabella, 
 though it is there produced in much less abundance ; for the number of mouths 
 to be fed is also much less. On the contrary, the lands of both England and 
 France were less cultivated in the middle ages than at the present day; and 
 their product of grain less abundant; yet it does not appear, from a comparison 
 of other values, that it was then much dearer than at present. The product and 
 the population were both greatly inferior ; and the slackness of demand counter- 
 balanced the slackness of supply. 
 
 * It is a mistake to suppose, that the tax must bear equally upon the proprietor 
 and the fanner, who finds the requisite capital and industry ; for taxation can 
 have no effect, either in reducing the quantity of land capable of cultivation, or 
 in multiplying the number of farmers, able and willing to undertake it; and, if 
 neither supply nor demand in this branch be varied, the ratio of the rent must 
 needs remain unaltered likewise. 
 
 f The economists were quite correct in their position, that a land or territorial 
 tax falls wholly upon the net product, and consequently, upon the proprietors; 
 hut they were wrong in extending the doctrine so far as to assert, that all otho\ 
 tnxes were defrayed out of the same fund. 
 
CHAP. VI1L ON CONSUMPTION. 469 
 
 of assessment, and the position of each individual in the social 
 system. Nay, more; it varies at different times even in the same 
 channel of production. When a commodity is in great request, the 
 holder will not part with the possession, unless indemnified for all 
 his advances, of which the tax he has paid is a part: he will take 
 nothing short of a full and complete indemnity. But, if any unlooked- 
 for occurrence should happen to lower the demand for his product, 
 he will be glad enough to take the tax upon himself, for the sake of 
 quickening the sale. There are few things so unsteady and variable, 
 as the ratio of the pressure of taxation upon each respective class of 
 the community. Those writers, who have maintained, that it bears: 
 upon any one or more classes in particular, or in any fixed or cer- 
 tain proportion, have found their theory contradicted by experience 
 at every turn. 
 
 Furthermore, the effects I have been describing, and which are 
 equally consonant to experience and to reason, are uniform in their 
 operation and of equal duration with the causes in which they origi- 
 nate. The owner of land will never be able to saddle the consumers 
 of its produce with any part of his land-tax ; not so the manufacturer 
 A manufactured commodity will invariably feel a diminution in its 
 consumption, in consequence of the price being raised by taxation, 
 supposing other circumstances to be stationary; and its production 
 will be a less profitable occupation. A person, who is neither pro- 
 ducer nor consumer of an object of luxury, will never bear any 
 portion whatever of the tax that may be laid upon it. What, then, 
 must we think of a proposition, unfortunately sanctioned by the ap- 
 probation of an illustrious body,* that has too much neglected this 
 branch of science, namely, that it is of little importance whether a 
 tax press upon one branch of revenue or another, provided it be of 
 long standing ; because every tax in the end affects every class of 
 revenue, in like manner, as bleeding in the arm reduces the circu- 
 lating blood of the whole human frame. The object of comparison 
 has no analogy whatever with taxation. Social wealth is not a 
 fluid, tending constantly to find a level. It rather resembles the 
 vegetable creation, which admits of the loss of a limb without the 
 destruction of the trunk, and in which the loss is more to be la- 
 mented, if the branch be productive, than if it be barren. But the 
 tree will bear cutting and hacking in every part, before it becomes 
 barren all over, or necessarily falls into decay. This is a far more 
 apposite case; but neither will do to reason upon. Comparisons are 
 not proofs, but mere illustrations, tending to make that intelligible, 
 which can be made out in proof without their assistance. 
 
 When speaking of taxes upon products, which I have sometimes 
 called taxes upon consumption, although not paid entirely in all 
 cases by the consumer, I have hitherto made no mention of tho 
 particular stage of production, at which the tax may be demanded. 
 
 * The French institute, which awarded the prize of merit to an Essay of 
 Canard, in support of this doctrine. 
 Ail 
 
J70 ON CONSUMPTION. BOOK ID, 
 
 or of the consequence of this particular circumstance, which deserves 
 a. little of our attention. 
 
 Products increase in value progressively, as they pass through the 
 hands of the different concurrent producers: and even the most 
 .simple undergo a variety of modifications, before they arrive at a 
 fit state for consumption. Wherefore, a tax does not take the pro- 
 portion of the value of a product which it professes, unless it be 
 levied at the precise moment, when it has arrived at the full value, 
 and has undergone all the productive modifications. If a tax be im- 
 posed on the raw material in the outset, proportioned, not to its then 
 value, but to the value it is about to receive, the producer, in whose 
 hands it happens to be, is obliged to advance a tax out of proportion 
 to the value in hand; which advance, besides being highly incon- 
 venient to himself, is refunded .with equal inconvenience by every 
 successive producer, till it reach the hands of the last, who is in turn 
 hut partially indemnified by the consumer. And there is this further 
 mischief in such an advance of tax; that it prevents the class of in- 
 dustry, which is called upon to make it, from being originally set in 
 motion, without a larger capital than the nature of the business 
 requires; and that the additional interest of the capital, which must 
 be paid, part by the consumers, and part by the producers, is so 
 much additional taxation, without any addition of public revenue.* 
 
 Thus, both theory and experience lead to the conclusion precisely 
 opposite to that drawn by the sect of economists; and show that por- 
 tion of the tax, which presses upon the consumer's revenue, to be 
 always the more burthensome, the earlier it is levied in the process 
 of production. 
 
 Direct and personal taxes, which operate to raise the price of 
 necessaries, or such as fall immediately upon necessaries, are liable 
 to this inconvenience in the highest degree: for they oblige each 
 producer to advance the personal tax on all the producers that have 
 preceded him: so that the same amount of capital will set in motion 
 a smaller amount of industry; and the tax-payers pay the tax, plus 
 a compound interest upon it, yielding no benefit to the exchequer. 
 
 Nor is this mere theory : the neglect of these principles has occa- 
 sioned may serious practical errors ; like that of the Constituent 
 
 * The duty on the import of cotton into France was, in 1812, as high as 200 
 Collars per bale, one bale with another. There were several manufactories ave- 
 raging a consumption of two bales per day ; and as the amount of duty was a 
 tiead outlay, during the whole interval between the purchase of the raw material 
 nnd the realization of the manufactured product, which may be taken at twelve 
 months, they must each have required an additional capital of 120,000 dollars 
 more than would have been requisite but for the tax; the interest of which they 
 must have charged to the consumer, or have paid out of their own profits. The 
 \vhole of it was so much addition of price to the French consumer, and aggra- 
 vation of the pressure of taxation, unproductive of a single additional dollar to 
 the public revenue. The heaviest of the national burthens of that period were 
 those that made the least figure in the annual budget of the ministry : the people 
 "uffered, in very many instances, without knowing the nature of the grievance, 
 us in the example, just cited. 
 
CHAP. VIH. ON CONSUMPTION. 471 
 
 Assembly of France, winch carried to excess the system of direct 
 taxation, especially upon land; being misled by the prevailing and 
 fashionable doctrine of the economists; that land is the source of 
 all wealth, the agriculturist the only productive labourer, and France 
 naturally and essentially an agricultural country. 
 
 It seems to me that, in the present stage of political economy, the 
 principles of taxation will be more correctly laid down as follows: 
 
 Taxation is ths taking a portion of the general product of the 
 community, which never returns to the community in the channel 
 of consumption. 
 
 It takes from the community over and above the values actually 
 brought into the exchequer, the charges of collection,* and the per 
 sonal trouble it entails ; together with all those values, of which it 
 obstructs the creation. 
 
 The privation resulting from taxation, whether voluntary or com- 
 pulsory, affects the tax-payer in his quality of producer, whenever 
 it operates to curtail his profits ; that is to say, his income or reve- 
 nue; and affects him in his character of consumer, whenever it 
 increases his expenditure, by -raising the prices of products. 
 
 And, since an increase of expenditure is precisely the same thing 
 as a diminution of revenue, whatever is taken by taxation may be 
 said to be so much deducted from the revenues of the community. 
 
 In a great majority of cases, the tax-payer is affected by taxation 
 in both his characters, of producer and consumer ; and, when he can 
 not manage to pay the public burthens out of his revenue, along with 
 his personal consumption, he must encroach upon his capital. When 
 this encroachment of one person is not counterbalanced by the sav- 
 ings of another, the wealth of the community must gradually decline. 
 
 ""The individual actually paying the tax to the tax-gatherer is not 
 always the party really charged with it, at least, not the party 
 charged with the whole that is paid. He frequently does no more 
 than advance the tax, either wholly or partially; being afterwards 
 reimbursed by the other classes of the community, in a very com- 
 plicated way, and perhaps after a vast variety of intermediate opera- 
 tions; so that a great many persons are paying portions of the tax, 
 at a time when probably they least suspect it, either in the shape of 
 the advanced price of commodities, or of personal loss, w r hich they 
 feel but can not account for. 
 
 The individuals, on whose revenues the tax ultimately falls, arc 
 the real tax-payers, and contribute value greatly exceeding the suir 
 that is brought into the exchequer, even with the addition of the 
 charges of collection. The misconduct of the government in the 
 matter of taxation, is proportioned to this excess of the payment 
 above the receipt. 
 
 A country heavily taxed may be considered in the same light as 
 one labouring under natural impediments to production. With a 
 heavy charge of production, it raises a very small product. Per 
 Foofci exertion, capital, and the productive agency of land are al' 
 
J72 ON CONSUMPTION. BOOK III 
 
 but poorly recompensed : and more is expended in earning a less 
 profit. 
 
 It is worth while on this head to recur to the principles explained 
 in the preceding book,* when describing the difference between 
 positive and relative dearness. High price resulting from taxation 
 is positive dearness : it indicates a smaller product raised by the 
 efforts of a larger amount of productive agency. Besides which, 
 taxation generally occasions a cotemporary advance of commodi- 
 ties in comparison with silver; that is to say, raises their money 
 price: and for this reason; because specie is not an annual, regene- 
 rative product, like those that are swallowed up by taxation. Go- 
 vernment is not a consumer of specie, except when it happens to 
 export it for the payment of its armies, or foreign subsidies: it 
 refunds in the purchases it makes all the specie it obtains by taxa- 
 tion : but the value levied is never refunded, f Wherefore, since 
 taxation paralyzes one part of the sources of production, and effects 
 the rapid destruction of the product of the other, when its ratio is 
 excessive, it must gradually render products more scarce in propor- 
 tion to the specie, which is not varied in quantity by the operation. 
 Now, whenever the commodities to be circulated become fewer in 
 proportion to the specie that is to circulate them, their relative value 
 to the specie must rise ; the same money will purchase a smaller 
 quantity of products. 
 
 It might be supposed, that such a superabundance of gold and 
 silver specie ought to operate in exoneration of the public : yet it. 
 can not have that effect; for, however plentiful it may be in pro- 
 portion to other commodities, still individuals can only obtain it by 
 giving their own products in exchange, and the raising of those pro- 
 ducts has become more difficult and more costly. 
 
 Besides, when money-prices grow high, and specie is conse- 
 quently reduced in relative value, it gradually takes its departure, 
 and becomes scarcer, like all other commodities: and thus a country, 
 burthened with a taxation too heavy for its productive powers, is 
 first drained of its commodities, and next of its specie; till it gradu- 
 ally reaches the extreme of penury and depopulation. 
 
 The careful study of these principles will give some insight into 
 the mode, in which the annual and really monstrous expenditure of 
 national governments, in modern times, has habituated the subject 
 to severer toil and exertion, without which it would be impossible 
 that, after providing for the subsistence, comfort, and pleasures of 
 himself and family, according to the habits of the time and place, he 
 should be able to meet the consumption of the state, and the collate- 
 ral waste and destruction it occasions, the amount of which it is 
 impossible to ascertain, though in the larger states it is confessedly 
 enormous. 
 
 * Book II. chap. 3. 
 
 { For the reason already stated, viz. that purchases, made with the proceeds 
 of taxation, are acts o r exchange, and not of restitution. 
 

 . VIII. ON CONSUMPTION. 473 
 
 This very profusion, though it proves the vices and defects of the 
 political system and organization, has been attended with one advan- 
 tage at any rate; it has operated to stimulate the approximation fr 
 perfection in the art of production, by obliging mankind to turn the 
 natural agents to better account. In this point of view, taxation has 
 certainly helped to develope and enlarge the human faculties; so 
 that, when the progress of political science shall limit taxation to the 
 supply of real public wants only, the improvements in the art of 
 production will prove a vast accession to human happiness. But, 
 should the abuses and complexity of the political system lead to the 
 prevalence, extension, increase, and consolidation of oppressive and 
 disproportionate taxation, it is much to be feared, that it may plunge 
 again into barbarism those nations, whose productive powers are 
 now the most astonishing; and the condition of the labouring classes, 
 who are always the bulk of the community, may in such nations 
 present a picture of drudgery so incessant and toilsome, as to make 
 them cast a wistful eye upon the liberty of savage existence; which, 
 though it offer no prospect of domestic comfort, at least promises 
 emancipation from perpetual exertion to supply the prodigality of a 
 public expenditure, yielding to them no satisfaction, and, perhaps 
 even operating to their prejudice, (a) 
 
 SECTION III. 
 Of Taxation in Kind. 
 
 Taxation in kind is the specific and immediate appropriation of a 
 portion of the gross product to the public service. 
 
 It has this advantage, of calling on the producer only for what he 
 
 (a) This ground of apprehension is certainly just. It has been doubted by 
 many political theorists, whether the total remission of taxation would operate 
 to improve the condition of the inferior productive classes: inasmuch, as all that 
 is now paid into the public exchequer, would quickly be appropriated by the 
 classes, who should happen to be in possession of those sources and means of 
 production, which are capable of exclusive appropriation ; and the owners of mere 
 personal agency would nowise benefit. But it should be observed, that private 
 persons have an immediate personal interest in making the most of their property ; 
 and will, on their own account, so conduct themselves, as to promote their own 
 advantage, which is the advantage of the public also, where equality of personal 
 right prevails. Wherefore, the strongest impulse of private cupidity can never 
 operate to retard the advance of productive power and national wealth, or to 
 make them retrograde ; but just the contrary. Thus, although the present con- 
 dition of the mere labourer might not be improved, his means of bettering hia 
 condition would be enlarged, by the growing increase of wealth, and by greater 
 freedom of personal agency. The extortion of private cupidity, unaided by 
 authority, must, for its own sake, regulate itself by the ability of the object of 
 it: but that of public authority is inexorable, and is restrained by no considera- 
 tion of immediate personal interest. Besides, personal suffering, occasioned by 
 the hard-heartedness of primate task-masters, is not so strong an incentive of 
 odium against public authority, as where that authority is itst:.! the osiensibiH 
 task-master. T 
 
 40* 3K 
 
474 ON CONSUMPTION. BOOK III. 
 
 lias actually in hand, in the identical shape which it happens to be 
 under. Belgium, after its conquest by France, found itself at times 
 unable to pay its taxes, in spite of abundant crops ; the war, and the 
 prohibition of exportation, obstructed the sale of its produce, which 
 the government enforced by demanding payment in money ; whereas, 
 the taxes might have been collected without difficulty, had the 
 government been content to take payment in kind. 
 
 It has the further advantage of making it equally the interest of 
 government and of the farmer to obtain plentiful crops, and improve 
 the national agriculture. The levying of taxes in kind in China, was 
 probably the origin of the peculiar encouragement, bestowed by its 
 government upon the agricultural branch of production. But, why 
 lavour one branch, when all are equally entitled to protection, be- 
 cause all contribute to bear the public burthens ? And, why has not 
 government an equal interest in supporting the other branches, 
 which it takes the trouble of extinguishing 1 
 
 It has likewise the advantage of excluding all exaction and injus- 
 tice in the collection ; the individual, when he gathers in his harvest, 
 Knows exactly what he has to pay ; and the state knows what it has 
 to receive. 
 
 This tax, which might appear at first sight to be of all others the 
 most equitable, is nevertheless of all others the most inequitable ; for 
 it makes no allowance for the advances made in the course of pro 
 duction, but is taken upon the gross, instead of the net, product 
 Take two farmers in different branches of cultivation ; the one farm 
 ing tillage-land of moderate quality ; his expenses of cultivation, 
 amounting, one year with another, say to 1600 dollars, and the gross 
 product of his farm, say to 2400 dollars, so as to yield him a net pro- 
 duct of 800 dollars only; the other farming pasturage or wood-land, 
 yielding a gross product of precisely the same amount of 2400 dol- 
 Jais: with an expense of cultivation, amounting, perhaps, to but 400 
 dollars, leaving him a net product, one year with another, of 2000 
 dollars. Suppose a tax in kind to be imposed in the ratio of 1-12 ol 
 the annual product of land of all descriptions indiscriminately. The 
 former will have to pay in sheaves of corn to the amount of 200 dol- 
 lars; the latter will pay, in cattle or in wood, an equal value of 200 
 dollars. What is the result? The one will have paid the fourth part 
 of a net revenue of 800 dollars ; the other but a tenth part of a net 
 revenue of 2000 dollars. 
 
 The revenue, that each person has for his own share, is the net 
 residue only after replacing the capital he has embarked, whatever 
 may be its amount. Is the gross amount of the sales he effects in 
 the year the annual income of the merchant? Certainly not; all 
 the income he gets is the surplus of his receipts above his ad- 
 vances ; on this surplus alone can he pay taxes, without ruin to his 
 concerns. 
 
 The ecclesiastical tithe levied in France under the old system 
 was liable to this inconvenience in part only. It attached neither 
 upon meadow, nor wood-land, nor kitchen-ground, nor many other 
 
CHAP. VIII. ON CONSUMPTION. 47 5 
 
 kinds of cultivation; and in some places was 1-18, in others 1-15 
 or 1-10 of the gross product; so that the real, was corrected bv the 
 apparent inequality. 
 
 The marechal de Vauban, in his work entitled, Dixime Royak, a 
 book replete with just views, and well worth the study of those 
 who manage national finances, proposes a tax of 1-20 of the pro- 
 duct of the land, which, in times of great emergency, might be 
 raised to 1-10. But this proposition was made as a substitute for a 
 still more inequitable system : namely, the saddling of the lands of 
 the commonalty with the whole tax, and altogether exempting the 
 lands of the nobles and clergy. The public-spirited writer, who 
 had occasion, in his character of engineer, to become personally 
 acquainted with every part of France, speaks most feelingly of trie 
 hardships resulting from the land-tax (a) of those days. And there 
 is no doubt, that the adoption of his plan at that time would have 
 been a vast relief to the country. But it was disregarded. Why? 
 Because every courtier had an interest to resist it : and this fine 
 country was left to flounder through its distresses. The conse- 
 quence was, a heavier loss of population from famine, than from the 
 sword, in the war of the Spanish succession. 
 
 The difficulty and expense of collection, together with the abuses 
 to which it is liable, are another objection to taxation in kind. The 
 immense number of agents must open a fine field for peculation. 
 The government may be imposed upon, in respect to the amount 
 collected, upon the subsequent sale and disposal, in respect to the 
 quantity damaged, as well as in the charges of storing, preservation 
 and carriage. If the tax be farmed to contractors, the profits and 
 expenses of numberless farmers and contractors must all fall upon 
 the public. 'The prosecution of the farmers and contractors would 
 require the active vigilance of administration. ' A gentleman of 
 great fortune/ says Smith, 'who lived in the capital, would be in 
 danger of suffering much by the neglect, and more by the fraud, of 
 his factors and agents, if the rents of an estate in a distant province 
 were to be paid to him in this manner. The loss of the sovereign, 
 from the abuse and depredation of his tax-gatherers, would neces- 
 sarily be much greater.'* 
 
 Various other objections have been urged against taxation in 
 kind, which it would be useless and tedious to enumerate. I shall 
 only take the liberty of remarking the violent operation upon re- 
 lative price, which must follow from so vast a quantity of produce 
 being thrown upon the market by the agents of the public revenue, 
 who are notoriously equally improvident as buyers and as sellers. 
 The necessity of clearing the storehouses to make room for the 
 fresh crop, and the ever urgent demands upon the public puise. 
 would oblige them to sell below the level, to w 7 hich the price would 
 
 * Wealth of Nations, book v. c. 2. art. I. 
 
 (a) Taille ; for the explanation of this tax, vide Wealth of Nations, book v c 
 2 art. 2. T. 
 
4 76 ON CONSUMPTION. BOOK III. 
 
 naturally be brought by the rent of the land, the wages of labour, 
 jnd the interest of the capita], engaged in agriculture; and private 
 dealers would be unable to maintain the competition. Such taxation 
 not only takes from the cultivator a portion of his product, but pte- 
 vents his turning the residue to good account. 
 
 SECTION IV. 
 Of the Territorial or Land -Tax of England. 
 
 In the year 1692, whicu was four years after the happy revolu- 
 tion, that placed the prince of Orange upon the British throne, a 
 general valuation was made of the income of all the land in the 
 country; and, upon that valuation, the land-tax continues to be 
 levied to this day ; so that the tax of four shillings in the pound, 
 upon the rents of land, is a fifth of its rent in 1692, and not of the 
 actual rent at the present day. 
 
 It may easily be conceived how much this tax must operate to 
 encourage improvements of the land. An estate that has been 
 improved so as to double the rent, does not pay double the original 
 tax; neither does it pay a less tax if it be suffered to fall into neglect 
 and impoverishment ; thus, it operates as a penalty upon negligence. 
 
 To this fixation of the tax, many writers attribute the high state 
 of the cultivation of the land in England: and doubtless it may have 
 done much to promote improvement. But, what would be thought 
 of a government that should say to a tradesman in a small way of busi- 
 ness, "You are trading in a small way upon a small capital, and con- 
 sequently pay very little in direct taxes. Borrow, and enlarge your 
 capital, extend your dealings, and increase your profits as much as you 
 can, and we will not charge you with any increase of taxes. Nay, 'fur- 
 ther, when your heirs succeed to the business, and have still further 
 extended it, they shall be assessed at precisely the same rate, and shall 
 continue subject to the same taxes only." All this might be a vast 
 encouragement to trade and manufacture ; but would there be any 
 equity in such a proceeding? and might they not advance without 
 such assistance? Has riot England herself presented the example 
 of a still more rapid improvement in commercial and manufacturing 
 industry, without any such unjust partiality? A land-owner, by 
 attention, economy, and intelligence, improves his annual income to 
 the amount, say of 1000 dollars: if the state claim a fifth of this 
 advance, there will still be a bonus of 800 dollars to stimulate and 
 reward his exertions. 
 
 It would be easy to put cases, in which the tax, becoming by its 
 fixation disproportionate to the means of the tax-payers and the 
 condition of the soil, might be productive of as much mischief, as 
 it has done good in other instances : where it would operate to 
 throw out of cultivation a class of land, that, by one cause or other, had 
 become incompetent, to pay the same ratio of taxation. We have 
 
CHAP. IX. ON CONSUMPTION. 477 
 
 seen an example of this in Tuscany. There, a census or terrier was 
 made in 1496, wherein the plains and valleys were rated very low f 
 on account of the frequent floods and inundations, which prevented 
 any regular and profitable cultivation ; while the uplands, that were 
 then the only cultivated spots, were rated very high. Since then, 
 the torrents and inundations have been confined by drainage and 
 embankment, and the plains reduced to fertility; their produce, 
 being comparatively exempt from tax, came to market cheaper than 
 that of the uplands, which, consequently, were unable to maintain 
 the competition, under the pressure of disproportionate taxation, 
 and have gradually been abandoned and deserted.* Whereas, had 
 the tax been adjusted to the change of circumstances, both might 
 have been cultivated together. 
 
 In speaking of a tax, peculiar to a particular nation, I have u?ed 
 it merely in illustration of general and universal principles. 
 
 CHAPTER IX. 
 
 OP NATIONAL DEBT. 
 
 SECTION I. 
 
 Of the Contracting Debt by National Authority, and of its general Effect. 
 
 THERE is this grand distinction between an individual borrower 
 and a borrowing government, that, in general, the former borrows 
 capital for the purpose of beneficial employment, the latter for the 
 purpose of barren consumption and expenditure. A nation bor- 
 rows, either to satisfy an unlooked-for demand, or to meet an extra- 
 ordinary emergency ; to which ends, the loan may prove effectual 
 or ineffectual : but, in either case, the whole sum borrowed is so 
 much value consumed and lost, and the public revenue remains 
 burthened with the interest upon it. 
 
 Melon maintains, that a national debt is no more than a debt from 
 the right hand to the left, which nowise enfeebles the body politic. 
 But he is mistaken ; the state is enfeebled, inasmuch as the capital 
 lent to its government, having been destroyed in the consumption 
 of it by the government, can no longer yield any body the profit, 
 or in other words, the interest, it might earn, in the character of a 
 productive means. Wherewith, then, is the government to pay the 
 interest of its debt ? Why, with a portion of the revenue arising 
 
 * Forbonnois, Principes et Observ. &c. torn. ii. p. 247. 
 
478 ON CONSUMPTION. BOOK 111. 
 
 from some other source, which it must transfer from the tax-payer 
 to the public creditor for the purpose. 
 
 Before the act of borrowing, there will have been in existence 
 two productive capitals, each of them yielding, or capable of yield- 
 ing, revenue ; that is to say, a capital about to be lent to government, 
 and a capital whereon the future tax-payers derive that revenue, 
 which is about to be applied in satisfaction of the interest upon the 
 capital lent. After the act of ' borrowing, there will remain but one 
 of these capitals ; viz. the latter of the two, whereof the revenue is 
 thenceforward no longer at the disposal of its former possessors, 
 the present tax-payers, since it must be taken in some form of tax- 
 ation or other by the government, for the sake of providing the 
 payment of interest to its creditors. The lender loses no part of 
 his revenue : the only loser is the payer of taxes. 
 
 People are apt to suppose, that, because national loans do not 
 necessarily occasion any diminution of the national money or specie, 
 therefore, they occasion, not a loss but merely a transfer, of national 
 wealth. With a view to the more ready exposure of this fallacy, I 
 have subjoined a synoptical table, showing what becomes of the sum 
 borrowed, and whence the public creditor's interest is satisfied.* 
 
 When a government borrows, it either does or does not engage 
 to repay the principal. In the latter case, it grants what is called 
 a perpetual annuity. Redeemable loans are capable of infinite 
 variety in the terms. The principal is contracted to be repaid, 
 sometimes gradually, and in the way of lottery ; sometimes by instal- 
 ments payable together with the interest, sometimes in the way of 
 increased interest, with condition to expire on the death of the 
 lender ; as in the case of tontines and life-annuities, whereof the 
 latter determine on the death of the individual lender; whereas, in 
 tontines, the full interest continues to be divided amongst the sur- 
 vivors, until the whole of the lives have expired. 
 
 Tontines and life-annuities are very improvident modes of bor- 
 rowing ; for the borrower remains throughout liable to the full rate 
 of interest, although he annually repays a part of the principal. 
 Besides, they savour of immorality ; offering a premium to egotism, 
 and a stimulus to the dilapidation of capital, by enabling the lender 
 to consume both principal and interest without fear of persona! 1 
 beggary. 
 
 The governments best acquainted with the business of borrowing 
 and lending have not, of late years at least, given any engagement 
 to repay the principal of the loan. Thus, public creditors have no 
 other way of altering the investment of their capital, except bv 
 soiling their transferable security, which they can do with more oV 
 less advantage to themselves, according to the buyer's opinion of 
 the solidity of the debtor government, that has granted the perpetual 
 annuity, f Despotic governments have always found a great diffi- 
 
 * Vide App. A. 
 
 j- In trie next section it will be explained how an unredeemable debt may be 
 "thiffuished by purchase at the market price. 
 
CHAR IX. ON CONSUMPTION. 479 
 
 culty in negotiating such loans. Where the sovereign is powerful 
 enough to violate his contracts at pleasure, or where there is a mere 
 personal contract with the reigning monarch, with a risk of dis- 
 avowal by the successor, lenders are loth to advance their money, 
 without a near and definite period of payment. 
 
 The appointment to posts and offices, under condition of an annual 
 payment, or of deposit for which the government engages to pay 
 interest, is a mode of borrowing in perpetuity, in which the loan is 
 compulsory. When once this paltry expedient is resorted to, it re- 
 quires very little ingenuity to find plausible grounds, for converting 
 almost every occupation, down to the dust-man and street-porter, 
 into patent and saleable offices. 
 
 Another mode of borrowing is, by the anticipation of revenue , 
 by which is meant, the assignment by a government of revenues riot 
 yet due, with allowance in the nature of discount, the taking up mo- 
 ney in advance from lenders, who charge a discount proportionate 
 to the risk they run from the instability of the government and pos- 
 sible deficiency of the revenue. Engagements of this kind contract- 
 ed by a government, and satisfied either out of the revenue when 
 collected, or by the issue of fresh bills upon the public treasury, con- 
 stitute what bears the uncouth English denomination of floating debt; 
 the consolidated debt being that, whereon the creditor can demand 
 the interest only, and not the principal. 
 
 National loans of every kind are attended with the universal dis- 
 advantage of withdrawing capital from productive employment, and 
 diverting it into the channel of barren consumption ; and, in coun- 
 tries where the credit of the government is at a low ebb, with the 
 further and particular disadvantage, of raising the interest of capital. 
 Who can be expected to lend at 5 per cent, to the farmer, the manu- 
 facturer, or the merchant, while he can readily get an offer of 7 or 
 8 per cent, from the government? That class of revenue which has 
 befn called, profit of capital, is thereby advanced in its ratio, at the 
 expense of the consumer: the consumption falls off, in consequence 
 of the advance in the real price of products ; the productive agency 
 of the other sources of production are less" in demand, and conse- 
 quently worse paid ; and the whole community is the sufferer, with 
 the sole exception of the capitalist. 
 
 The ability to borrow affords one main advantage to the state, 
 namely, the power of apportioning the burthen entailed by a sudden 
 emergency among a great number of successive years. In the pre- 
 sent state of public aSairs, and on the present scale of international 
 warfare, no country could support the enormous expense from its 
 ordinary annual revenue. The larger states pay in taxation nearly 
 as much as they are able ; for economy is by no means the order of 
 the day with them ; and their ordinary expenditure seldom falls 
 much short of the income. If the expenditure must be doubled to 
 save the nation from ruin, borrowing is usually the only resouice 
 unless it can make up it? mind to violate all subsisting engagements 
 and be guilty of spoliation of its own subjects and foreigners toe 
 
4SO ON CONSUMPTION. BOOK III. 
 
 The faculty of borrowing is a more powerful agent, than even gun- 
 powder ; but probably the gross abuse that is made of it, will soon 
 destroy its efficacy. 
 
 Great pains have been taken, to find in the system of borrowing, 
 as well as in taxation, some inherent advantage beyond that of sup- 
 plying the public consumption. But a close examination will expose 
 the hopelessness of such an attempt. 
 
 It iias been maintained, for instance, that the debentures and seen- 
 rities, which form a national debt, become real and substantial 
 values, existing within the community ; that the capital, of which 
 they are the evidence or representative, is so much positive wealth, 
 and must be reckoned as an item of the total substance of the nation.* 
 But it is not so ; a written contract or security is a mere evidence, 
 that such or such property belongs to such an individual. But 
 wealth consists in the property itself, and not in the parchment, by 
 which its ownership is evidenced ; therefore & fortiori, a security is 
 not even an evidence of wealth, where it does not represent an 
 actual existing value, and when it operates as a mere power of at- 
 torney from the government to its creditor, enabling him to receive 
 annually a specified portion of the revenue expected to be levied upon 
 the tax-payers at large. Supposing the security to be cancelled, as 
 it might be by a national bankruptcy, would there be any the least 
 diminution of wealth in the community ? Undoubtedly not. The 
 only difference would be, that the revenue, which before went to the 
 public creditor, would now be at the disposal of the tax-payer, from 
 \vhorn it used to be taken. 
 
 Those who tell us, that the annual circulation is increased by the 
 whole amount of the annual disbursements of the government^ 
 forget that these disbursements are made out of the annual products 
 and are a portion of the annual revenue, taken from the tax-payer, 
 which would have been brought into the general circulation just the 
 same, although no such thing as national debt had existed. The 
 tax-payer would have spent what is now spent by the public credit- 
 or; that is all. 
 
 The sale or purchase *of debentures or securities is not a produc- 
 tive circulation, but a mere substitution of one public creditor in 
 place of another. When these transfers degenerate into stock-job- 
 bing, that is to say, the making of a profit by the rise and fall ot 
 their price, they are productive of much mischief; in the first place, 
 by the unproductive employment on this object of the agent of cir- 
 culation, money, which is an item of the national capital ; and, in the 
 
 * Considerations sur les Advantages deV Existence d'une Dette publique,p. 8. 
 
 f The transferable nature of these securities does not invest them with the 
 properties of money, since they do not act in that capacity. But the use of con- 
 vertible paper, as money, operates to create a positive addition to the total na 
 tional capital , because, but for their agency in the transfer of value in general 
 it must be executed by specie, or some equally substantial item of capital. Go 
 vernmen* debentures of stock require money to circulate them, instead of acting 
 :nemselves as money. 
 
CHAP IX. ON CONSUMPTION. 481 
 
 next, by procuring a gain to one person by the loss of another ; 
 which is the characteristic of all gaming. The occupation of the 
 stock-jobber yields no new or useful product; consequently having 
 no product of his own to give in exchange, he has no revenue to 
 subsist upon, but what he contrives to make out of the unskilfulness 
 or ill-fortune of gamesters like himself. 
 
 A national debt has been said to bind the public creditors more 
 firmly to the government, and make them its natural supporters by 
 a sense of common interest ; and so it does, beyond all doubt. But, 
 as this common interest may attach equally to a bad or a good go- 
 vernment, there is just as much chance of its being an injury, as a 
 benefit to a nation. If we look at England, we shall see a vast num- 
 ber of well-meaning persons, induced by this motive to uphold the 
 abuses and misgovernment of a wretched administration. 
 
 It has been further urged, that a national debt is an index of the 
 public opinion, respecting the degree of credit which the government 
 deserves, and operates as a motive to its good conduct, and endea- 
 vours to.preserve the public opinion, of which such a debt furnishes 
 the index. This can not be admitted without some qualification. 
 The good conduct of government in the eyes of the public creditors, 
 consists in the regular payment of their own dividends ; but in the 
 eyes of the tax-payers, it consists in spending as little as possible. 
 The market-price of stock does, indeed, furnish a tolerable index of 
 the former kind of good conduct, but not of the latter. Perhaps it 
 would be no exaggeration to say, that the punctual payments of the 
 dividends, instead of being a sign of good, is in numberless instances 
 a cloak to bad, government; and, in some countries, a boon for the 
 toleration of frequent and glaring abuses. 
 
 Another argument in favour of national debt is, that it affords a 
 prompt investment to capital, which can find no ready and profitable 
 employment, and thus must, at any rate, prevent its emigration. If 
 it do, so much the worse : it is a bait to tempt capital towards its 
 destruction, leaving the nation burthened with the annual interest, 
 which government must provide. It is far better that the capital 
 should emigrate, as it would probably return sooner or later : and 
 then its interest for the mean time will be chargeable to foreigners. 
 A national debt of moderate amount, the capital of which should 
 have been well and judiciously expended in useful works, might 
 indeed be attended with the advantage of providing an investment 
 for minute portions of capital, in the hands of persons incapable of 
 turning them to account, who would probably keep *hem locked up, 
 or spend them by driblets, but for the convenience of such an invest- 
 ment. This is perhaps the sole benefit of a national debt ; and even 
 this is attended with some danger ; inasmuch as it enables a govern- 
 ment to squander the national savings. For, unless the principal be 
 spent upon objects of permanent public benefit, as on roads, canals, 
 or the like, it were better for the public, that the capital should re 
 main inactive, or concealed ; since, if the public lost the use of it, ai 
 least it would not have to pay the interest. 
 41 3L 
 
482 ON CONSUMPTION. BOOK III 
 
 Thus, it may be expedient to borrow, when capital must be spent 
 by a government, having nothing but the usufruct at its command 
 but \ve are not to imagine, that, by the act of borrowing, the pub'ic 
 prosperity can be advanced. The" borrower, whether a sovereign, 
 or an individual, incurs an annual charge upon his revenue, besides 
 impoverishing himself to the full amount of the principal, if it be 
 consumed ; and nations never borrow but with a view to consume 
 outright. 
 
 SECTION II. 
 Of public Credit, its Basis, and the Circumstances that endanger its Solidity. 
 
 Public credit is the confidence of individuals in the engagements 
 of the ruling power, or government. This credit is at the extreme 
 point of elevation, when the public creditor gets no higher interest, 
 than he would by lending on the best private securities; which is a 
 clear proof, that the lenders require no premium of insurance to 
 cover the extra risk they incur, and that in their estimation there is 
 no such extra risk. Public credit never reaches this elevation, ex- 
 cept where the government is so constituted, as to find great diffi- 
 culty in breaking its engagements, and where, moreover, its re- 
 sources are known to be equal to its wants; for which latter reason, 
 public credit is never very high, unless where the financial accounts 
 of the nation are subject to general publicity. 
 
 Where the public authority is vested in a single individual, it is 
 next to impossible, that public credit should be very extensive : for 
 there is no security, beyond the pleasure and good faith of the 
 monarch. When the authority resides in the people, or its repre- 
 sentatives, there is the further security of a personal interest in the 
 people themselves, who are creditors in their individual, and debtors 
 in their aggregate character ; and therefore, can not receive in the 
 former, without paying in the latter. This circumstance alone 
 would lead us to presume, that now, when great undertakings are 
 so costly as to be effected by borrowing alone, representative go- 
 vernments will acquire a marked preponderance in the scale of 
 national power, simply on account of their superior financial re- 
 sources, without reference to any other circumstance. 
 
 In one light, the obligations of government inspire more confi- 
 dence than those of individuals, that is to say, by the greater solidity 
 of its resources. Trie resources of the most responsible individual 
 may fail suddenly and totally, or at least to such an extent, as to 
 disable him from performing his engagements. 
 
 Numerous commercial failures, political or national calamities, 
 litigation* fraud or violence, may ruin him entirely; but the sup- 
 piies of a government are derived from such various quarters, that 
 the individual calamities of its subjects can operate but partially upon 
 
CHAP. IX. ON CONSUMPTION. 483 
 
 the revenue of the state. There is also another thing, that facilitates 
 the borrowing of government even more than the credit it is fairly 
 entitled to ; and that is, the great facility of transfer presented to the 
 stockholder. Public creditors always reckon upon the possibility of 
 withdrawing by the sale of their debentures, before the occurrence 
 of embarrassment or bankruptcy; and, even where they contemplate 
 such a risk, generally consider some advance of the rate of interest 
 a sufficient premium of insurance against it. 
 
 Moreover, it is observable, that the sentiments of lenders and 
 indeed of mankind upon all occasions, are more powerfully operated 
 upon by the impressions of the moment, than by any other motive; 
 experience of the past must be very recent, and the prospect of the 
 future very near, to have any sensible effect. The monstrous breach 
 of faith on the part of the French government in 1721, in regard to 
 its paper-money and the Mississippi share-holders, did not prevent 
 the ready negotiation of a loan of 200,000,000 liv. in 1759; nor did 
 the bankrupt measures of the Abbe Terrai in 1772 prevent the 
 negotiation of fresh loans in 1778 and every subsequent year. 
 
 In other points of view, the credit of individuals is better founded 
 than that of the government. There is no compulsory process 
 against the latter, for the breach of its engagements ; nor do govern- 
 ments ever husband the national resources with nearly the care and 
 attention of individuals. Besides, in the event of external or internal 
 subversion, individuals may withdraw their property from the wreck 
 much better than governments can. 
 
 Public credit affords such facilities to public prodigality, that 
 many political writers have regarded it as fatal to national pros- 
 perity. For, say they, when governments feel themselves strong in 
 the ability to borrow, they are too apt to intermeddle in every 
 political arrangement, and to conceive gigantic projects, that lead 
 sometimes to disgrace, sometimes to glory, but always to a state of 
 financial exhaustion ; to make war themselves, and stir up others 
 to do the like; to subsidize every mercenary agent, and deal in the 
 blood and the consciences of mankind ; making capital, which should 
 be the fruit of industry and virtue, the prize of ambition, pride, and 
 wickedness. 
 
 A nation, which has the power to borrow, and yet is in a state of 
 political feebleness, will be exposed to the requisitions of its more 
 powerful neighbours. It must subsidize them in its defence; must 
 purchase peace ; must pay for the toleration of its independence, 
 which it generally loses after all ; or perhaps must lend, with the 
 certain prospect of never being repaid. 
 
 These are by no means hypothetical cases : but the reader is left 
 to make the application himself. 
 
 By the establishment of sinking-funds, well-ordered governments 
 have found means to extinguish and discharge their redeemable 
 debt. The constant operation of this contrivance contributes more 
 than any thing else to the consolidation of public credit. The mode 
 of proceeding is simply this: 
 
184 ON CONSUMPTION. BOOK III 
 
 Suppose that the state borrows 100 millions of dollars' at an in- 
 terest of 5 per cent. ; to pay that interest, it must appropriate a portion 
 of the national revenue to the amount of 5 millions of dollars. For 
 this purpose, it usually imposes a tax calculated to produce this 
 sum annually. If the tax be made to produce somewhat more, say 
 5,462,400 dollars, and the surplus of 462,400 dollars be thrown into 
 a particular fund, and laid out annually, in the purchase of govern- 
 ment debentures to that amount in the market, and if, moreover, in 
 addition to this surplus, the interest likewise upon the debt thus 
 extinguished, be annually employed in such purchases, the whole 
 principal debt will be extinguished at the end of fifty years. This 
 is the mode in which a sinking-fund operates. The efficacy of this 
 expedient depends upon the progressive power of compound in- 
 terest; that is to say, the gradual augmentation of the interest of 
 capital, by the addition of interest upon the arrears of interest, 
 reckoned from certain stated periods. 
 
 It is obvious, that, by an annual instalment of not more than 10 
 per cent, upon its own interest, the principal of a debt bearing an 
 interest of 5 per cent, may be extinguished in less than 50 years. 
 However, the sale of the debentures being voluntary, if the holders 
 will not sell at par, that is to say, at 20 years purchase, the redemp- 
 tion, in this way, will take somewhat longer time ; but this very 
 state of the market will be a convincing proof of the high ratio of 
 national credit. On the other hand, if the credit decline, so that the 
 same sum will purchase a larger amount of debentures, the extinc- 
 tion of the debt will be effected in a shorter period. So that the 
 lower public credit falls, the more powerful is the operation of a 
 sinking-fund to revive it; and that fund grows less efficient, exactly 
 in proportion as it becomes less requisite. 
 
 To the establishment of such a fund, has the long-continued public 
 credit of Great Britain been attributed, and her ability still to go or. 
 borrowing, in spite of a debt of more than 800 millions sterling. (1; 
 
 (1) In a note, here subjoined, the author stated the amount of the British na- 
 tional debt, in the year 1815, on the authority of a speech made in parliament 
 in February, of that year, by the chancellor of the exchequer, Mr. Vansittart. 
 We now have it in our power, in place of the note in question, to furnish the 
 reader with an exact statement of the British national debt, from its commence- 
 ment, at the revolution of 1688, to the 5th of January, 1832. The abstract we 
 give is extracted from the Tables to Part II. of *' Pebrer on the Taxation, Debt, 
 Capital, Resources, &c. of the whole British Empire," a work which we before 
 had occasion to refer to, and of the highest statistical authority. 
 
 Pounds slerlintr. 
 
 National debt at the revolution, 1688, 664,263~ 
 
 Increase during the reign of William and Mary, .... 15,730,439 
 
 Debt at accession of Anne, 1702, 16,394,702 
 
 Increase during reign of Anne, - 37,750,661 
 
 Debt at accession of George I., 1714, 54,145,363 
 
 Decrease during reign of George I., ........ 2,053,128 
 
CHAP. DC ON CONSUMPTI 
 
 ^^gj^- Ui| ' ^ w Fl^-^^^^' 
 
 And doubtless this it is, that has made Smith declare sinking-funds. 
 which were contrived expressly to reduce national debt, the main 
 instruments of their increase. Had not governments the happy 
 knack of abusing resources of every kind, they would soon grow 
 too rich and powerful. 
 
 A sinking-fund is a complete delusion, whenever a government 
 continues borrowing on one hand, as much as it redeems on the 
 other ; and & fortiori, when it borrows more than it redeems, as 
 England has constantly done, since the year 1793 to the present 
 time. Whencesoever the amount of the sinking-fund be derived, 
 whether it be merely the product of a fresh tax, or that product, 
 augmented by the interest on the extinguished debt, if the govern- 
 ment borrow a million for every million of debt that it pays off, it 
 creates an annual charge of precisely the same amount as that ex- 
 tinguished : it is precisely the same thing, as lending to itself the 
 million devoted to the purpose of redemption. Indeed, the latter 
 course would save the expense of the operation. This position has 
 been fully established in an excellent work, by professor Hamilton," 
 which is quite conclusive upon the subject. The enormous burthens 
 
 * On the National Debt of Great Britain. 8vo., Edinburgh, 1813. 
 
 Debt at accession of George II., 1727, 52,092,235 
 
 Decrease during the peace, 5,137,612 
 
 Debt at commencement of Spanish war, 1739, .... 46,954,623 
 Increase during the war, 31,338,689 
 
 Debt at end of Spanish war, 1748, 78,293,312 
 
 Decrease during the peace, ----------- 3,721,472 
 
 Debt at commencement of war, 1755, 74,571,840 
 
 Increase during the war, ------- 72,111,004 
 
 Debt at conclusion of the peace, 1762, 146,682,844 
 
 Decrease during the peace, 10,739,793 
 
 Debt at commencement of American war, 1776, .... 135,943,051 
 
 Increase during the war, 102,541,819 
 
 Debt at conclusion of American war, 1783, 238,484,870 
 
 Decrease during the peace, - 4,751,261 
 
 Debt at commencement of French revolutionary war, 1793, 233,733,609 
 Increase during the war, 295,105,668 
 
 Debt at peace of Amiens, 1st February, 1801, 528,839.277 
 
 Increase during the second war, 335,983,164 
 
 Debt at peace of Paris, 1st February, 1816, 864,822,441 
 
 Decrease since the poace, ----- 82,155,207 
 
 Debt on 5th January, 1832, - - 782,667,234 
 
 Equal to 3,756,802,723 dollars. 
 
 AMERICAN EDITOR 
 
 At 
 
ISO ON CONSUMPTION. BOOK III 
 
 of the people of England, the scandalous abuse its government has 
 made of the power of borrowing, and her substitution of paper-mo- 
 ney in place of specie, will have produced some benefit at least; 
 inasmuch as they have assisted the solution of many problems, 
 highly interesting to the happiness of nations, and given warning to 
 all future generations, to beware of the like excesses. 
 
 It must be evident, that the grand requisite to the efficiency of 
 a sinking-fund is, the punctual and inviolable application of the sums 
 appropriated to the purpose of redemption. Yet this has never been 
 rigidly adhered to, even in England, where consistency arid good 
 faith to the creditors are a point of honour with the government 
 80 that English writers put no faith in the extinction of the debt by 
 the operation of the sinking-fund : nay, Smith makes no scruple of 
 declaring, that national debts have never been extinguished except 
 by national bankruptcy. 
 
 It has been sometimes a matter of speculation, to inquire into the 
 effect of a national bankruptcy upon the relative condition of indi- 
 viduals, and the internal economy of the nation. In ordinary cases, 
 when a government commits an act of bankruptcy, it adds to the 
 revenues of the tax-payers the whole amount that it discontinues 
 paying to the public creditors. Nay, it goes somewhat further : for 
 it remits likewise the charges of collection and management of the 
 revenue and the debt.- A nation burthened with 100 millions of 
 annual interest on its debt, whereon the charges above mentioned 
 should amount to 30 per cent.* more, might by a bankruptcy remit 
 to the tax-payers 130 millions, while it stript its creditors of 100 mil- 
 lions only. 
 
 In England the effect would be more complicated; because she 
 does not pay the dividends on her debt wholly out of the annual 
 proceeds of taxation ; at least, not at the moment of my writing ; but 
 annually borrows a sum nearly equal to the interest of her debtf 
 Were she to commit an act of bankruptcy, the annual loans of 40 
 millions sterling, more or less, would be withdrawn from unproduc- 
 tive consumption by the public creditors, and be applicable to the 
 purposes of re-prod uctive consumption: for it may fairly be suppos- 
 ed, that the capitalists who accumulate and lend to the state, would 
 look out for some profitable investment. In this point of view, the 
 operation would tend vastly to the increase of the national capital 
 and revenue : but the execution would be attended with very disas- 
 trous immediate consequences : for this annual amount of 40 mil- 
 lions would be withdrawn from the class of consumers, who have 
 no other means of subsistence, and would be utterly unable to make 
 
 * In England and the United States they are not nearly so high in proportion . 
 out the ratio is even higher in some states that shall be nameless. 
 
 \ Colquhoun, Wealth, Power, and Resources of the British Empire, 4to. Lon- 
 don, 1814. Stokes, Revenue and Expenditure of Great Britain, London, 1815. 
 Should a continuance of peace enable her to square her income with her annual 
 expenditure, inclusive of the interest of her debt, it would still afford no relief, 
 out merely arrest the farther progress of the evil. 
 
CHAP. IX. ON CONSUMPTION. 407 
 
 good their losses in any other way, for want of both personal indus 
 try, and of the command of capital. 
 
 A bankruptcy would probably obviate the necessity of fresh loans ; 
 but would not release an atom of the former taxation, where the 
 interest of the debt is habitually paid, not with the proceeds of tax- 
 ation, but with new loans. Thus, the burthens of the people would 
 not be alleviated,* nor the charges of production reduced: conse- 
 quently there would be no sensible reduction in the price of commo- 
 dities ; nor would British products find a readier market either at 
 home or abroad. 
 
 The classes liable to taxation would be diminished in numerical 
 strength, by the whole of the suppressed stockholders ; and taxation 
 less productive, although not lower in ratio. The 40 millions of 
 revenue, withdrawn from the public creditors, would pay taxes only 
 upon the annual profit or revenue, they might yield in the character 
 of productive capital. The ruin of the public creditors would be 
 attended with abundance of collateral distress ; with private failures 
 and insolvency without end ; with the loss of employment to al) 
 their tradesmen and servants, and the utter destitution of all theii 
 dependants. 
 
 On the other hand, if she persevere in borrowing to pay the inter- 
 est of the former loans, that interest and with it taxation also, must 
 go on increasing to infinity. It is impossible to avoid a precipice, 
 when one follows a road that leads nowhere else. 
 
 The potentates of Asia, and all sovereigns, who have no hopes of 
 establishing a credit, have recourse to the accumulation of treasure 
 Treasure is the reserve of past, whereas a loan is the anticipation oi 
 future revenue. They are both serviceable expedients in case of 
 emergency. 
 
 ~ A treasure does not always contribute to the political security of 
 its possessors. It rather invites attack, and very seldom is faithfully 
 applied to the purpose for which it was destined. The accumula- 
 tion of Charles V. of France fell into the hands of his brother, the 
 duke of Anjou ; those which pope Paul II. destined to oppose the 
 Turkish arms, and drive them out of Europe, supplied the extrava- 
 gancies of Sixtus IV. and his nephews. The treasures amassed by- 
 Henry IV., for the humiliation of the house of Austria, were lavish- 
 ed upon the favourites of the queen-mother : and, at a later period, 
 we have seen the political power of Prussia brought into imminent 
 hazard by those very savings, which were destined by Frederick 
 III. to its consolidation. 
 
 The command of a large sum is a dangerous temptation to a 
 national administration. Though accumulated at their expense, the 
 people rarely, if ever profit by it: yet in point of fact, all value, and 
 consequently, all wealth, originates with the people. 
 
 * Economy in the national expenditure is the only thing that can mitigate the 
 pressure of taxation upon the British nation ; yet were economy enforced, how 
 is that system of corruption to be upheld, through which the interest of the min- 
 ister of the day regularly prevails over that of the nation ' 
 
438 
 
 APPENDIX. 
 
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