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Title: An Inquiry into the Nature and Causes of the Wealth of Nations

Author: Adam Smith

Release Date: April, 2002 [EBook #3300]
[This file was last updated on September 4, 2004]

Edition: 11

Language: English

Character set encoding: ISO-8859-1

*** START OF THIS PROJECT GUTENBERG EBOOK WEALTH OF NATIONS ***

This etext was produced by Colin Muir

AN INQUIRY INTO THE NATURE AND CAUSES OF
THE WEALTH OF NATIONS.

by Adam Smith

INTRODUCTION AND PLAN OF THE WORK.

The annual labour of every nation is the fund which originally
supplies it with all the necessaries and conveniencies of life which
it annually consumes, and which consist always either in the immediate
produce of that labour, or in what is purchased with that produce from
other nations.

According, therefore, as this produce, or what is purchased with it,
bears a greater or smaller proportion to the number of those who are
to consume it, the nation will be better or worse supplied with all
the necessaries and conveniencies for which it has occasion.

But this proportion must in every nation be regulated by two different
circumstances: first, by the skill, dexterity, and judgment with which
its labour is generally applied; and, secondly, by the proportion
between the number of those who are employed in useful labour, and
that of those who are not so employed. Whatever be the soil, climate,
or extent of territory of any particular nation, the abundance or
scantiness of its annual supply must, in that particular situation,
depend upon those two circumstances.

The abundance or scantiness of this supply, too, seems to depend more
upon the former of those two circumstances than upon the latter. Among
the savage nations of hunters and fishers, every individual who is
able to work is more or less employed in useful labour, and endeavours
to provide, as well as he can, the necessaries and conveniencies of
life, for himself, and such of his family or tribe as are either too
old, or too young, or too infirm, to go a-hunting and fishing. Such
nations, however, are so miserably poor, that, from mere want, they
are frequently reduced, or at least think themselves reduced, to the
necessity sometimes of directly destroying, and sometimes of
abandoning their infants, their old people, and those afflicted with
lingering diseases, to perish with hunger, or to be devoured by wild
beasts. Among civilized and thriving nations, on the contrary, though
a great number of people do not labour at all, many of whom consume
the produce of ten times, frequently of a hundred times, more labour
than the greater part of those who work; yet the produce of the whole
labour of the society is so great, that all are often abundantly
supplied; and a workman, even of the lowest and poorest order, if he
is frugal and industrious, may enjoy a greater share of the
necessaries and conveniencies of life than it is possible for any
savage to acquire.

The causes of this improvement in the productive powers of labour, and
the order according to which its produce is naturally distributed
among the different ranks and conditions of men in the society, make
the subject of the first book of this Inquiry.

Whatever be the actual state of the skill, dexterity, and judgment,
with which labour is applied in any nation, the abundance or
scantiness of its annual supply must depend, during the continuance of
that state, upon the proportion between the number of those who are
annually employed in useful labour, and that of those who are not so
employed. The number of useful and productive labourers, it will
hereafter appear, is everywhere in proportion to the quantity of
capital stock which is employed in setting them to work, and to the
particular way in which it is so employed. The second book, therefore,
treats of the nature of capital stock, of the manner in which it is
gradually accumulated, and of the different quantities of labour which
it puts into motion, according to the different ways in which it is
employed.

Nations tolerably well advanced as to skill, dexterity, and judgment,
in the application of labour, have followed very different plans in
the general conduct or direction of it; and those plans have not all
been equally favourable to the greatness of its produce. The policy of
some nations has given extraordinary encouragement to the industry of
the country; that of others to the industry of towns. Scarce any
nation has dealt equally and impartially with every sort of industry.
Since the down-fall of the Roman empire, the policy of Europe has been
more favourable to arts, manufactures, and commerce, the industry of
towns, than to agriculture, the Industry of the country. The
circumstances which seem to have introduced and established this
policy are explained in the third book.

Though those different plans were, perhaps, first introduced by the
private interests and prejudices of particular orders of men, without
any regard to, or foresight of, their consequences upon the general
welfare of the society; yet they have given occasion to very different
theories of political economy; of which some magnify the importance of
that industry which is carried on in towns, others of that which is
carried on in the country. Those theories have had a considerable
influence, not only upon the opinions of men of learning, but upon the
public conduct of princes and sovereign states. I have endeavoured, in
the fourth book, to explain as fully and distinctly as I can those
different theories, and the principal effects which they have produced
in different ages and nations.

To explain in what has consisted the revenue of the great body of the
people, or what has been the nature of those funds, which, in
different ages and nations, have supplied their annual consumption, is
the object of these four first books. The fifth and last book treats
of the revenue of the sovereign, or commonwealth. In this book I have
endeavoured to shew, first, what are the necessary expenses of the
sovereign, or commonwealth; which of those expenses ought to be
defrayed by the general contribution of the whole society, and which
of them, by that of some particular part only, or of some particular
members of it: secondly, what are the different methods in which the
whole society may be made to contribute towards defraying the expenses
incumbent on the whole society, and what are the principal advantages
and inconveniencies of each of those methods; and, thirdly and lastly,
what are the reasons and causes which have induced almost all modern
governments to mortgage some part of this revenue, or to contract
debts; and what have been the effects of those debts upon the real
wealth, the annual produce of the land and labour of the society.

BOOK I.

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

CHAPTER I.

OF THE DIVISION OF LABOUR.

The greatest improvements in the productive powers of labour, and the
greater part of the skill, dexterity, and judgment, with which it is
anywhere directed, or applied, seem to have been the effects of the
division of labour. The effects of the division of labour, in the
general business of society, will be more easily understood, by
considering in what manner it operates in some particular
manufactures. It is commonly supposed to be carried furthest in some
very trifling ones; not perhaps that it really is carried further in
them than in others of more importance: but in those trifling
manufactures which are destined to supply the small wants of but a
small number of people, the whole number of workmen must necessarily
be small; and those employed in every different branch of the work can
often be collected into the same workhouse, and placed at once under
the view of the spectator.

In those great manufactures, on the contrary, which are destined to
supply the great wants of the great body of the people, every
different branch of the work employs so great a number of workmen,
that it is impossible to collect them all into the same workhouse. We
can seldom see more, at one time, than those employed in one single
branch. Though in such manufactures, therefore, the work may really be
divided into a much greater number of parts, than in those of a more
trifling nature, the division is not near so obvious, and has
accordingly been much less observed.

To take an example, therefore, from a very trifling manufacture, but
one in which the division of labour has been very often taken notice
of, the trade of a pin-maker: a workman not educated to this business
(which the division of labour has rendered a distinct trade, nor
acquainted with the use of the machinery employed in it (to the
invention of which the same division of labour has probably given
occasion), could scarce, perhaps, with his utmost industry, make one
pin in a day, and certainly could not make twenty. But in the way in
which this business is now carried on, not only the whole work is a
peculiar trade, but it is divided into a number of branches, of which
the greater part are likewise peculiar trades. One man draws out the
wire; another straights it; a third cuts it; a fourth points it; a
fifth grinds it at the top for receiving the head; to make the head
requires two or three distinct operations; to put it on is a peculiar
business; to whiten the pins is another; it is even a trade by itself
to put them into the paper; and the important business of making a pin
is, in this manner, divided into about eighteen distinct operations,
which, in some manufactories, are all performed by distinct hands,
though in others the same man will sometimes perform two or three of
them. I have seen a small manufactory of this kind, where ten men only
were employed, and where some of them consequently performed two or
three distinct operations. But though they were very poor, and
therefore but indifferently accommodated with the necessary machinery,
they could, when they exerted themselves, make among them about twelve
pounds of pins in a day. There are in a pound upwards of four thousand
pins of a middling size. Those ten persons, therefore, could make
among them upwards of forty-eight thousand pins in a day. Each person,
therefore, making a tenth part of forty-eight thousand pins, might be
considered as making four thousand eight hundred pins in a day. But if
they had all wrought separately and independently, and without any of
them having been educated to this peculiar business, they certainly
could not each of them have made twenty, perhaps not one pin in a day;
that is, certainly, not the two hundred and fortieth, perhaps not the
four thousand eight hundredth, part of what they are at present
capable of performing, in consequence of a proper division and
combination of their different operations.

In every other art and manufacture, the effects of the division of
labour are similar to what they are in this very trifling one, though,
in many of them, the labour can neither be so much subdivided, nor
reduced to so great a simplicity of operation. The division of labour,
however, so far as it can be introduced, occasions, in every art, a
proportionable increase of the productive powers of labour. The
separation of different trades and employments from one another, seems
to have taken place in consequence of this advantage. This separation,
too, is generally carried furthest in those countries which enjoy the
highest degree of industry and improvement; what is the work of one
man, in a rude state of society, being generally that of several in an
improved one. In every improved society, the farmer is generally
nothing but a farmer; the manufacturer, nothing but a manufacturer.
The labour, too, which is necessary to produce any one complete
manufacture, is almost always divided among a great number of hands.
How many different trades are employed in each branch of the linen and
woollen manufactures, from the growers of the flax and the wool, to
the bleachers and smoothers of the linen, or to the dyers and dressers
of the cloth! The nature of agriculture, indeed, does not admit of so
many subdivisions of labour, nor of so complete a separation of one
business from another, as manufactures. It is impossible to separate
so entirely the business of the grazier from that of the corn-farmer,
as the trade of the carpenter is commonly separated from that of the
smith. The spinner is almost always a distinct person from the,
weaver; but the ploughman, the harrower, the sower of the seed, and
the reaper of the corn, are often the same. The occasions for those
different sorts of labour returning with the different seasons of the
year, it is impossible that one man should be constantly employed in
any one of them. This impossibility of making so complete and entire a
separation of all the different branches of labour employed in
agriculture, is perhaps the reason why the improvement of the
productive powers of labour, in this art, does not always keep pace
with their improvement in manufactures. The most opulent nations,
indeed, generally excel all their neighbours in agriculture as well as
in manufactures; but they are commonly more distinguished by their
superiority in the latter than in the former. Their lands are in
general better cultivated, and having more labour and expense bestowed
upon them, produce more in proportion to the extent and natural
fertility of the ground. But this superiority of produce is seldom
much more than in proportion to the superiority of labour and expense.
In agriculture, the labour of the rich country is not always much more
productive than that of the poor; or, at least, it is never so much
more productive, as it commonly is in manufactures. The corn of the
rich country, therefore, will not always, in the same degree of
goodness, come cheaper to market than that of the poor. The corn of
Poland, in the same degree of goodness, is as cheap as that of France,
notwithstanding the superior opulence and improvement of the latter
country. The corn of France is, in the corn-provinces, fully as good,
and in most years nearly about the same price with the corn of
England, though, in opulence and improvement, France is perhaps
inferior to England. The corn-lands of England, however, are better
cultivated than those of France, and the corn-lands of France are said
to be much better cultivated than those of Poland. But though the poor
country, notwithstanding the inferiority of its cultivation, can, in
some measure, rival the rich in the cheapness and goodness of its
corn, it can pretend to no such competition in its manufactures, at
least if those manufactures suit the soil, climate, and situation, of
the rich country. The silks of France are better and cheaper than
those of England, because the silk manufacture, at least under the
present high duties upon the importation of raw silk, does not so well
suit the climate of England as that of France. But the hardware and
the coarse woollens of England are beyond all comparison superior to
those of France, and much cheaper, too, in the same degree of
goodness. In Poland there are said to be scarce any manufactures of
any kind, a few of those coarser household manufactures excepted,
without which no country can well subsist.

This great increase in the quantity of work, which, in consequence of
the division of labour, the same number of people are capable of
performing, is owing to three different circumstances; first, to the
increase of dexterity in every particular workman; secondly, to the
saving of the time which is commonly lost in passing from one species
of work to another; and, lastly, to the invention of a great number of
machines which facilitate and abridge labour, and enable one man to do
the work of many.

First, the improvement of the dexterity of the workmen, necessarily
increases the quantity of the work he can perform; and the division of
labour, by reducing every man's business to some one simple operation,
and by making this operation the sole employment of his life,
necessarily increases very much the dexterity of the workman. A common
smith, who, though accustomed to handle the hammer, has never been
used to make nails, if, upon some particular occasion, he is obliged
to attempt it, will scarce, I am assured, be able to make above two or
three hundred nails in a day, and those, too, very bad ones. A smith
who has been accustomed to make nails, but whose sole or principal
business has not been that of a nailer, can seldom, with his utmost
diligence, make more than eight hundred or a thousand nails in a day.
I have seen several boys, under twenty years of age, who had never
exercised any other trade but that of making nails, and who, when they
exerted themselves, could make, each of them, upwards of two thousand
three hundred nails in a day. The making of a nail, however, is by no
means one of the simplest operations. The same person blows the
bellows, stirs or mends the fire as there is occasion, heats the iron,
and forges every part of the nail: in forging the head, too, he is
obliged to change his tools. The different operations into which the
making of a pin, or of a metal button, is subdivided, are all of them
much more simple, and the dexterity of the person, of whose life it
has been the sole business to perform them, is usually much greater.
The rapidity with which some of the operations of those manufactures
are performed, exceeds what the human hand could, by those who had
never seen them, he supposed capable of acquiring.

Secondly, The advantage which is gained by saving the time commonly
lost in passing from one sort of work to another, is much greater than
we should at first view be apt to imagine it. It is impossible to pass
very quickly from one kind of work to another, that is carried on in a
different place, and with quite different tools. A country weaver, who
cultivates a small farm, must loose a good deal of time in passing
from his loom to the field, and from the field to his loom. When the
two trades can be carried on in the same workhouse, the loss of time
is, no doubt, much less. It is, even in this case, however, very
considerable. A man commonly saunters a little in turning his hand
from one sort of employment to another. When he first begins the new
work, he is seldom very keen and hearty; his mind, as they say, does
not go to it, and for some time he rather trifles than applies to good
purpose. The habit of sauntering, and of indolent careless
application, which is naturally, or rather necessarily, acquired by
every country workman who is obliged to change his work and his tools
every half hour, and to apply his hand in twenty different ways almost
every day of his life, renders him almost always slothful and lazy,
and incapable of any vigorous application, even on the most pressing
occasions. Independent, therefore, of his deficiency in point of
dexterity, this cause alone must always reduce considerably the
quantity of work which he is capable of performing.

Thirdly, and lastly, everybody must be sensible how much labour is
facilitated and abridged by the application of proper machinery. It is
unnecessary to give any example. I shall only observe, therefore, that
the invention of all those machines by which labour is so much
facilitated and abridged, seems to have been originally owing to the
division of labour. Men are much more likely to discover easier and
readier methods of attaining any object, when the whole attention of
their minds is directed towards that single object, than when it is
dissipated among a great variety of things. But, in consequence of the
division of labour, the whole of every man's attention comes naturally
to be directed towards some one very simple object. It is naturally to
be expected, therefore, that some one or other of those who are
employed in each particular branch of labour should soon find out
easier and readier methods of performing their own particular work,
whenever the nature of it admits of such improvement. A great part of
the machines made use of in those manufactures in which labour is most
subdivided, were originally the invention of common workmen, who,
being each of them employed in some very simple operation, naturally
turned their thoughts towards finding out easier and readier methods
of performing it. Whoever has been much accustomed to visit such
manufactures, must frequently have been shewn very pretty machines,
which were the inventions of such workmen, in order to facilitate and
quicken their own particular part of the work. In the first fire
engines {this was the current designation for steam engines}, a boy
was constantly employed to open and shut alternately the communication
between the boiler and the cylinder, according as the piston either
ascended or descended. One of those boys, who loved to play with his
companions, observed that, by tying a string from the handle of the
valve which opened this communication to another part of the machine,
the valve would open and shut without his assistance, and leave him at
liberty to divert himself with his play-fellows. One of the greatest
improvements that has been made upon this machine, since it was first
invented, was in this manner the discovery of a boy who wanted to save
his own labour.

All the improvements in machinery, however, have by no means been the
inventions of those who had occasion to use the machines. Many
improvements have been made by the ingenuity of the makers of the
machines, when to make them became the business of a peculiar trade;
and some by that of those who are called philosophers, or men of
speculation, whose trade it is not to do any thing, but to observe
every thing, and who, upon that account, are often capable of
combining together the powers of the most distant and dissimilar
objects in the progress of society, philosophy or speculation becomes,
like every other employment, the principal or sole trade and
occupation of a particular class of citizens. Like every other
employment, too, it is subdivided into a great number of different
branches, each of which affords occupation to a peculiar tribe or
class of philosophers; and this subdivision of employment in
philosophy, as well as in every other business, improve dexterity, and
saves time. Each individual becomes more expert in his own peculiar
branch, more work is done upon the whole, and the quantity of science
is considerably increased by it.

It is the great multiplication of the productions of all the different
arts, in consequence of the division of labour, which occasions, in a
well-governed society, that universal opulence which extends itself to
the lowest ranks of the people. Every workman has a great quantity of
his own work to dispose of beyond what he himself has occasion for;
and every other workman being exactly in the same situation, he is
enabled to exchange a great quantity of his own goods for a great
quantity or, what comes to the same thing, for the price of a great
quantity of theirs. He supplies them abundantly with what they have
occasion for, and they accommodate him as amply with what he has
occasion for, and a general plenty diffuses itself through all the
different ranks of the society.

Observe the accommodation of the most common artificer or daylabourer
in a civilized and thriving country, and you will perceive that the
number of people, of whose industry a part, though but a small part,
has been employed in procuring him this accommodation, exceeds all
computation. The woollen coat, for example, which covers the
day-labourer, as coarse and rough as it may appear, is the produce of
the joint labour of a great multitude of workmen. The shepherd, the
sorter of the wool, the wool-comber or carder, the dyer, the
scribbler, the spinner, the weaver, the fuller, the dresser, with many
others, must all join their different arts in order to complete even
this homely production. How many merchants and carriers, besides, must
have been employed in transporting the materials from some of those
workmen to others who often live in a very distant part of the
country? How much commerce and navigation in particular, how many
ship-builders, sailors, sail-makers, rope-makers, must have been
employed in order to bring together the different drugs made use of by
the dyer, which often come from the remotest corners of the world?
What a variety of labour, too, is necessary in order to produce the
tools of the meanest of those workmen! To say nothing of such
complicated machines as the ship of the sailor, the mill of the
fuller, or even the loom of the weaver, let us consider only what a
variety of labour is requisite in order to form that very simple
machine, the shears with which the shepherd clips the wool. The miner,
the builder of the furnace for smelting the ore the feller of the
timber, the burner of the charcoal to be made use of in the
smelting-house, the brickmaker, the bricklayer, the workmen who attend
the furnace, the millwright, the forger, the smith, must all of them
join their different arts in order to produce them. Were we to
examine, in the same manner, all the different parts of his dress and
household furniture, the coarse linen shirt which he wears next his
skin, the shoes which cover his feet, the bed which he lies on, and
all the different parts which compose it, the kitchen-grate at which
he prepares his victuals, the coals which he makes use of for that
purpose, dug from the bowels of the earth, and brought to him,
perhaps, by a long sea and a long land-carriage, all the other
utensils of his kitchen, all the furniture of his table, the knives
and forks, the earthen or pewter plates upon which he serves up and
divides his victuals, the different hands employed in preparing his
bread and his beer, the glass window which lets in the heat and the
light, and keeps out the wind and the rain, with all the knowledge and
art requisite for preparing that beautiful and happy invention,
without which these northern parts of the world could scarce have
afforded a very comfortable habitation, together with the tools of all
the different workmen employed in producing those different
conveniencies; if we examine, I say, all these things, and consider
what a variety of labour is employed about each of them, we shall be
sensible that, without the assistance and co-operation of many
thousands, the very meanest person in a civilized country could not be
provided, even according to, what we very falsely imagine, the easy
and simple manner in which he is commonly accommodated. Compared,
indeed, with the more extravagant luxury of the great, his
accommodation must no doubt appear extremely simple and easy; and yet
it may be true, perhaps, that the accommodation of an European prince
does not always so much exceed that of an industrious and frugal
peasant, as the accommodation of the latter exceeds that of many an
African king, the absolute masters of the lives and liberties of ten
thousand naked savages.

CHAPTER II.

OF THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOUR.

This division of labour, from which so many advantages are derived, is
not originally the effect of any human wisdom, which foresees and
intends that general opulence to which it gives occasion. It is the
necessary, though very slow and gradual, consequence of a certain
propensity in human nature, which has in view no such extensive
utility; the propensity to truck, barter, and exchange one thing for
another.

Whether this propensity be one of those original principles in human
nature, of which no further account can be given, or whether, as seems
more probable, it be the necessary consequence of the faculties of
reason and speech, it belongs not to our present subject to inquire.
It is common to all men, and to be found in no other race of animals,
which seem to know neither this nor any other species of contracts.
Two greyhounds, in running down the same hare, have sometimes the
appearance of acting in some sort of concert. Each turns her towards
his companion, or endeavours to intercept her when his companion turns
her towards himself. This, however, is not the effect of any contract,
but of the accidental concurrence of their passions in the same object
at that particular time. Nobody ever saw a dog make a fair and
deliberate exchange of one bone for another with another dog. Nobody
ever saw one animal, by its gestures and natural cries signify to
another, this is mine, that yours; I am willing to give this for that.
When an animal wants to obtain something either of a man, or of
another animal, it has no other means of persuasion, but to gain the
favour of those whose service it requires. A puppy fawns upon its dam,
and a spaniel endeavours, by a thousand attractions, to engage the
attention of its master who is at dinner, when it wants to be fed by
him. Man sometimes uses the same arts with his brethren, and when he
has no other means of engaging them to act according to his
inclinations, endeavours by every servile and fawning attention to
obtain their good will. He has not time, however, to do this upon
every occasion. In civilized society he stands at all times in need of
the co-operation and assistance of great multitudes, while his whole
life is scarce sufficient to gain the friendship of a few persons. In
almost every other race of animals, each individual, when it is grown
up to maturity, is entirely independent, and in its natural state has
occasion for the assistance of no other living creature. But man has
almost constant occasion for the help of his brethren, and it is in
vain for him to expect it from their benevolence only. He will be more
likely to prevail if he can interest their self-love in his favour,
and shew them that it is for their own advantage to do for him what he
requires of them. Whoever offers to another a bargain of any kind,
proposes to do this. Give me that which I want, and you shall have
this which you want, is the meaning of every such offer; and it is in
this manner that we obtain from one another the far greater part of
those good offices which we stand in need of. It is not from the
benevolence of the butcher the brewer, or the baker that we expect our
dinner, but from their regard to their own interest. We address
ourselves, not to their humanity, but to their self-love, and never
talk to them of our own necessities, but of their advantages. Nobody
but a beggar chooses to depend chiefly upon the benevolence of his
fellow-citizens. Even a beggar does not depend upon it entirely. The
charity of well-disposed people, indeed, supplies him with the whole
fund of his subsistence. But though this principle ultimately provides
him with all the necessaries of life which he has occasion for, it
neither does nor can provide him with them as he has occasion for
them. The greater part of his occasional wants are supplied in the
same manner as those of other people, by treaty, by barter, and by
purchase. With the money which one man gives him he purchases food.
The old clothes which another bestows upon him he exchanges for other
clothes which suit him better, or for lodging, or for food, or for
money, with which he can buy either food, clothes, or lodging, as he
has occasion.

As it is by treaty, by barter, and by purchase, that we obtain from
one another the greater part of those mutual good offices which we
stand in need of, so it is this same trucking disposition which
originally gives occasion to the division of labour. In a tribe of
hunters or shepherds, a particular person makes bows and arrows, for
example, with more readiness and dexterity than any other. He
frequently exchanges them for cattle or for venison, with his
companions; and he finds at last that he can, in this manner, get more
cattle and venison, than if he himself went to the field to catch
them. From a regard to his own interest, therefore, the making of bows
and arrows grows to be his chief business, and he becomes a sort of
armourer. Another excels in making the frames and covers of their
little huts or moveable houses. He is accustomed to be of use in this
way to his neighbours, who reward him in the same manner with cattle
and with venison, till at last he finds it his interest to dedicate
himself entirely to this employment, and to become a sort of
house-carpenter. In the same manner a third becomes a smith or a
brazier; a fourth, a tanner or dresser of hides or skins, the
principal part of the clothing of savages. And thus the certainty of
being able to exchange all that surplus part of the produce of his own
labour, which is over and above his own consumption, for such parts of
the produce of other men's labour as he may have occasion for,
encourages every man to apply himself to a particular occupation, and
to cultivate and bring to perfection whatever talent of genius he may
possess for that particular species of business.

The difference of natural talents in different men, is, in reality,
much less than we are aware of; and the very different genius which
appears to distinguish men of different professions, when grown up to
maturity, is not upon many occasions so much the cause, as the effect
of the division of labour. The difference between the most dissimilar
characters, between a philosopher and a common street porter, for
example, seems to arise not so much from nature, as from habit,
custom, and education. When they came in to the world, and for the
first six or eight years of their existence, they were, perhaps, very
much alike, and neither their parents nor play-fellows could perceive
any remarkable difference. About that age, or soon after, they come to
be employed in very different occupations. The difference of talents
comes then to be taken notice of, and widens by degrees, till at last
the vanity of the philosopher is willing to acknowledge scarce any
resemblance. But without the disposition to truck, barter, and
exchange, every man must have procured to himself every necessary and
conveniency of life which he wanted. All must have had the same duties
to perform, and the same work to do, and there could have been no such
difference of employment as could alone give occasion to any great
difference of talents.

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

CHAPTER III.

THAT THE DIVISION OF LABOUR IS LIMITED BY THE EXTENT OF THE MARKET.

As it is the power of exchanging that gives occasion to the division
of labour, so the extent of this division must always be limited by
the extent of that power, or, in other words, by the extent of the
market. When the market is very small, no person can have any
encouragement to dedicate himself entirely to one employment, for want
of the power to exchange all that surplus part of the produce of his
own labour, which is over and above his own consumption, for such
parts of the produce of other men's labour as he has occasion for.

There are some sorts of industry, even of the lowest kind, which can
be carried on nowhere but in a great town. A porter, for example, can
find employment and subsistence in no other place. A village is by
much too narrow a sphere for him; even an ordinary market-town is
scarce large enough to afford him constant occupation. In the lone
houses and very small villages which are scattered about in so desert
a country as the highlands of Scotland, every farmer must be butcher,
baker, and brewer, for his own family. In such situations we can
scarce expect to find even a smith, a carpenter, or a mason, within
less than twenty miles of another of the same trade. The scattered
families that live at eight or ten miles distance from the nearest of
them, must learn to perform themselves a great number of little pieces
of work, for which, in more populous countries, they would call in the
assistance of those workmen. Country workmen are almost everywhere
obliged to apply themselves to all the different branches of industry
that have so much affinity to one another as to be employed about the
same sort of materials. A country carpenter deals in every sort of
work that is made of wood; a country smith in every sort of work that
is made of iron. The former is not only a carpenter, but a joiner, a
cabinet-maker, and even a carver in wood, as well as a wheel-wright, a
plough-wright, a cart and waggon-maker. The employments of the latter
are still more various. It is impossible there should be such a trade
as even that of a nailer in the remote and inland parts of the
highlands of Scotland. Such a workman at the rate of a thousand nails
a-day, and three hundred working days in the year, will make three
hundred thousand nails in the year. But in such a situation it would
be impossible to dispose of one thousand, that is, of one day's work
in the year. As by means of water-carriage, a more extensive market is
opened to every sort of industry than what land-carriage alone can
afford it, so it is upon the sea-coast, and along the banks of
navigable rivers, that industry of every kind naturally begins to
subdivide and improve itself, and it is frequently not till a long
time after that those improvements extend themselves to the inland
parts of the country. A broad-wheeled waggon, attended by two men, and
drawn by eight horses, in about six weeks time, carries and brings
back between London and Edinburgh near four ton weight of goods. In
about the same time a ship navigated by six or eight men, and sailing
between the ports of London and Leith, frequently carries and brings
back two hundred ton weight of goods. Six or eight men, therefore, by
the help of water-carriage, can carry and bring back, in the same
time, the same quantity of goods between London and Edinburgh as fifty
broad-wheeled waggons, attended by a hundred men, and drawn by four
hundred horses. Upon two hundred tons of goods, therefore, carried by
the cheapest land-carriage from London to Edinburgh, there must be
charged the maintenance of a hundred men for three weeks, and both the
maintenance and what is nearly equal to maintenance the wear and tear
of four hundred horses, as well as of fifty great waggons. Whereas,
upon the same quantity of goods carried by water, there is to be
charged only the maintenance of six or eight men, and the wear and
tear of a ship of two hundred tons burthen, together with the value of
the superior risk, or the difference of the insurance between land and
water-carriage. Were there no other communication between those two
places, therefore, but by land-carriage, as no goods could be
transported from the one to the other, except such whose price was
very considerable in proportion to their weight, they could carry on
but a small part of that commerce which at present subsists between
them, and consequently could give but a small part of that
encouragement which they at present mutually afford to each other's
industry. There could be little or no commerce of any kind between the
distant parts of the world. What goods could bear the expense of
land-carriage between London and Calcutta? Or if there were any so
precious as to be able to support this expense, with what safety could
they be transported through the territories of so many barbarous
nations? Those two cities, however, at present carry on a very
considerable commerce with each other, and by mutually affording a
market, give a good deal of encouragement to each other's industry.

Since such, therefore, are the advantages of water-carriage, it is
natural that the first improvements of art and industry should be made
where this conveniency opens the whole world for a market to the
produce of every sort of labour, and that they should always be much
later in extending themselves into the inland parts of the country.
The inland parts of the country can for a long time have no other
market for the greater part of their goods, but the country which lies
round about them, and separates them from the sea-coast, and the great
navigable rivers. The extent of the market, therefore, must for a long
time be in proportion to the riches and populousness of that country,
and consequently their improvement must always be posterior to the
improvement of that country. In our North American colonies, the
plantations have constantly followed either the sea-coast or the banks
of the navigable rivers, and have scarce anywhere extended themselves
to any considerable distance from both.

The nations that, according to the best authenticated history, appear
to have been first civilized, were those that dwelt round the coast of
the Mediterranean sea. That sea, by far the greatest inlet that is
known in the world, having no tides, nor consequently any waves,
except such as are caused by the wind only, was, by the smoothness of
its surface, as well as by the multitude of its islands, and the
proximity of its neighbouring shores, extremely favourable to the
infant navigation of the world; when, from their ignorance of the
compass, men were afraid to quit the view of the coast, and from the
imperfection of the art of ship-building, to abandon themselves to the
boisterous waves of the ocean. To pass beyond the pillars of Hercules,
that is, to sail out of the straits of Gibraltar, was, in the ancient
world, long considered as a most wonderful and dangerous exploit of
navigation. It was late before even the Phoenicians and Carthaginians,
the most skilful navigators and ship-builders of those old times,
attempted it; and they were, for a long time, the only nations that
did attempt it.

Of all the countries on the coast of the Mediterranean sea, Egypt
seems to have been the first in which either agriculture or
manufactures were cultivated and improved to any considerable degree.
Upper Egypt extends itself nowhere above a few miles from the Nile;
and in Lower Egypt, that great river breaks itself into many different
canals, which, with the assistance of a little art, seem to have
afforded a communication by water-carriage, not only between all the
great towns, but between all the considerable villages, and even to
many farm-houses in the country, nearly in the same manner as the
Rhine and the Maese do in Holland at present. The extent and easiness
of this inland navigation was probably one of the principal causes of
the early improvement of Egypt.

The improvements in agriculture and manufactures seem likewise to have
been of very great antiquity in the provinces of Bengal, in the East
Indies, and in some of the eastern provinces of China, though the
great extent of this antiquity is not authenticated by any histories
of whose authority we, in this part of the world, are well assured. In
Bengal, the Ganges, and several other great rivers, form a great
number of navigable canals, in the same manner as the Nile does in
Egypt. In the eastern provinces of China, too, several great rivers
form, by their different branches, a multitude of canals, and, by
communicating with one another, afford an inland navigation much more
extensive than that either of the Nile or the Ganges, or, perhaps,
than both of them put together. It is remarkable, that neither the
ancient Egyptians, nor the Indians, nor the Chinese, encouraged
foreign commerce, but seem all to have derived their great opulence
from this inland navigation.

All the inland parts of Africa, and all that part of Asia which lies
any considerable way north of the Euxine and Caspian seas, the ancient
Scythia, the modern Tartary and Siberia, seem, in all ages of the
world, to have been in the same barbarous and uncivilized state in
which we find them at present. The sea of Tartary is the frozen ocean,
which admits of no navigation; and though some of the greatest rivers
in the world run through that country, they are at too great a
distance from one another to carry commerce and communication through
the greater part of it. There are in Africa none of those great
inlets, such as the Baltic and Adriatic seas in Europe, the
Mediterranean and Euxine seas in both Europe and Asia, and the gulfs
of Arabia, Persia, India, Bengal, and Siam, in Asia, to carry maritime
commerce into the interior parts of that great continent; and the
great rivers of Africa are at too great a distance from one another to
give occasion to any considerable inland navigation. The commerce,
besides, which any nation can carry on by means of a river which does
not break itself into any great number of branches or canals, and
which runs into another territory before it reaches the sea, can never
be very considerable, because it is always in the power of the nations
who possess that other territory to obstruct the communication between
the upper country and the sea. The navigation of the Danube is of very
little use to the different states of Bavaria, Austria, and Hungary,
in comparison of what it would be, if any of them possessed the whole
of its course, till it falls into the Black sea.

CHAPTER IV.

OF THE ORIGIN AND USE OF MONEY.

When the division of labour has been once thoroughly established, it
is but a very small part of a man's wants which the produce of his own
labour can supply. He supplies the far greater part of them by
exchanging that surplus part of the produce of his own labour, which
is over and above his own consumption, for such parts of the produce
of other men's labour as he has occasion for. Every man thus lives by
exchanging, or becomes, in some measure, a merchant, and the society
itself grows to be what is properly a commercial society.

But when the division of labour first began to take place, this power
of exchanging must frequently have been very much clogged and
embarrassed in its operations. One man, we shall suppose, has more of
a certain commodity than he himself has occasion for, while another
has less. The former, consequently, would be glad to dispose of; and
the latter to purchase, a part of this superfluity. But if this latter
should chance to have nothing that the former stands in need of, no
exchange can be made between them. The butcher has more meat in his
shop than he himself can consume, and the brewer and the baker would
each of them be willing to purchase a part of it. But they have
nothing to offer in exchange, except the different productions of
their respective trades, and the butcher is already provided with all
the bread and beer which he has immediate occasion for. No exchange
can, in this case, be made between them. He cannot be their merchant,
nor they his customers; and they are all of them thus mutually less
serviceable to one another. In order to avoid the inconveniency of
such situations, every prudent man in every period of society, after
the first establishment of the division of labour, must naturally have
endeavoured to manage his affairs in such a manner, as to have at all
times by him, besides the peculiar produce of his own industry, a
certain quantity of some one commodity or other, such as he imagined
few people would be likely to refuse in exchange for the produce of
their industry. Many different commodities, it is probable, were
successively both thought of and employed for this purpose. In the
rude ages of society, cattle are said to have been the common
instrument of commerce; and, though they must have been a most
inconvenient one, yet, in old times, we find things were frequently
valued according to the number of cattle which had been given in
exchange for them. The armour of Diomede, says Homer, cost only nine
oxen; but that of Glaucus cost a hundred oxen. Salt is said to be the
common instrument of commerce and exchanges in Abyssinia; a species of
shells in some parts of the coast of India; dried cod at Newfoundland;
tobacco in Virginia; sugar in some of our West India colonies; hides
or dressed leather in some other countries; and there is at this day a
village In Scotland, where it is not uncommon, I am told, for a
workman to carry nails instead of money to the baker's shop or the
ale-house.

In all countries, however, men seem at last to have been determined by
irresistible reasons to give the preference, for this employment, to
metals above every other commodity. Metals can not only be kept with
as little loss as any other commodity, scarce any thing being less
perishable than they are, but they can likewise, without any loss, be
divided into any number of parts, as by fusion those parts can easily
be re-united again; a quality which no other equally durable
commodities possess, and which, more than any other quality, renders
them fit to be the instruments of commerce and circulation. The man
who wanted to buy salt, for example, and had nothing but cattle to
give in exchange for it, must have been obliged to buy salt to the
value of a whole ox, or a whole sheep, at a time. He could seldom buy
less than this, because what he was to give for it could seldom be
divided without loss; and if he had a mind to buy more, he must, for
the same reasons, have been obliged to buy double or triple the
quantity, the value, to wit, of two or three oxen, or of two or three
sheep. If, on the contrary, instead of sheep or oxen, he had metals to
give in exchange for it, he could easily proportion the quantity of
the metal to the precise quantity of the commodity which he had
immediate occasion for.

Different metals have been made use of by different nations for this
purpose. Iron was the common instrument of commerce among the ancient
Spartans, copper among the ancient Romans, and gold and silver among
all rich and commercial nations.

Those metals seem originally to have been made use of for this purpose
in rude bars, without any stamp or coinage. Thus we are told by Pliny
(Plin. Hist Nat. lib. 33, cap. 3), upon the authority of Timaeus, an
ancient historian, that, till the time of Servius Tullius, the Romans
had no coined money, but made use of unstamped bars of copper, to
purchase whatever they had occasion for. These rude bars, therefore,
performed at this time the function of money.

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

The first public stamps of this kind that were affixed to the current
metals, seem in many cases to have been intended to ascertain, what it
was both most difficult and most important to ascertain, the goodness
or fineness of the metal, and to have resembled the sterling mark
which is at present affixed to plate and bars of silver, or the
Spanish mark which is sometimes affixed to ingots of gold, and which,
being struck only upon one side of the piece, and not covering the
whole surface, ascertains the fineness, but not the weight of the
metal. Abraham weighs to Ephron the four hundred shekels of silver
which he had agreed to pay for the field of Machpelah. They are said,
however, to be the current money of the merchant, and yet are received
by weight, and not by tale, in the same manner as ingots of gold and
bars of silver are at present. The revenues of the ancient Saxon kings
of England are said to have been paid, not in money, but in kind, that
is, in victuals and provisions of all sorts. William the Conqueror
introduced the custom of paying them in money. This money, however,
was for a long time, received at the exchequer, by weight, and not by
tale,

The inconveniency and difficulty of weighing those metals with
exactness, gave occasion to the institution of coins, of which the
stamp, covering entirely both sides of the piece, and sometimes the
edges too, was supposed to ascertain not only the fineness, but the
weight of the metal. Such coins, therefore, were received by tale, as
at present, without the trouble of weighing.

The denominations of those coins seem originally to have expressed the
weight or quantity of metal contained in them. In the time of Servius
Tullius, who first coined money at Rome, the Roman as or pondo
contained a Roman pound of good copper. It was divided, in the same
manner as our Troyes pound, into twelve ounces, each of which
contained a real ounce of good copper. The English pound sterling, in
the time of Edward I. contained a pound, Tower weight, of silver of a
known fineness. The Tower pound seems to have been something more than
the Roman pound, and something less than the Troyes pound. This last
was not introduced into the mint of England till the 18th of Henry the
VIII. The French livre contained, in the time of Charlemagne, a pound,
Troyes weight, of silver of a known fineness. The fair of Troyes in
Champaign was at that time frequented by all the nations of Europe,
and the weights and measures of so famous a market were generally
known and esteemed. The Scots money pound contained, from the time of
Alexander the First to that of Robert Bruce, a pound of silver of the
same weight and fineness with the English pound sterling. English,
French, and Scots pennies, too, contained all of them originally a
real penny-weight of silver, the twentieth part of an ounce, and the
two hundred-and-fortieth part of a pound. The shilling, too, seems
originally to have been the denomination of a weight. "When wheat is
at twelve shillings the quarter," says an ancient statute of Henry
III. "then wastel bread of a farthing shall weigh eleven shillings and
fourpence". The proportion, however, between the shilling, and either
the penny on the one hand, or the pound on the other, seems not to
have been so constant and uniform as that between the penny and the
pound. During the first race of the kings of France, the French sou or
shilling appears upon different occasions to have contained five,
twelve, twenty, and forty pennies. Among the ancient Saxons, a
shilling appears at one time to have contained only five pennies, and
it is not improbable that it may have been as variable among them as
among their neighbours, the ancient Franks. From the time of
Charlemagne among the French, and from that of William the Conqueror
among the English, the proportion between the pound, the shilling, and
the penny, seems to have been uniformly the same as at present, though
the value of each has been very different; for in every country of the
world, I believe, the avarice and injustice of princes and sovereign
states, abusing the confidence of their subjects, have by degrees
diminished the real quantity of metal, which had been originally
contained in their coins. The Roman as, in the latter ages of the
republic, was reduced to the twenty-fourth part of its original value,
and, instead of weighing a pound, came to weigh only half an ounce.
The English pound and penny contain at present about a third only; the
Scots pound and penny about a thirty-sixth; and the French pound and
penny about a sixty-sixth part of their original value. By means of
those operations, the princes and sovereign states which performed
them were enabled, in appearance, to pay their debts and fulfil their
engagements with a smaller quantity of silver than would otherwise
have been requisite. It was indeed in appearance only; for their
creditors were really defrauded of a part of what was due to them. All
other debtors in the state were allowed the same privilege, and might
pay with the same nominal sum of the new and debased coin whatever
they had borrowed in the old. Such operations, therefore, have always
proved favourable to the debtor, and ruinous to the creditor, and have
sometimes produced a greater and more universal revolution in the
fortunes of private persons, than could have been occasioned by a very
great public calamity.

It is in this manner that money has become, in all civilized nations,
the universal instrument of commerce, by the intervention of which
goods of all kinds are bought and sold, or exchanged for one another.

What are the rules which men naturally observe, in exchanging them
either for money, or for one another, I shall now proceed to examine.
These rules determine what may be called the relative or exchangeable
value of goods.

The word VALUE, it is to be observed, has two different meanings, and
sometimes expresses the utility of some particular object, and
sometimes the power of purchasing other goods which the possession of
that object conveys. The one may be called 'value in use;' the other,
'value in exchange.' The things which have the greatest value in use
have frequently little or no value in exchange; and, on the contrary,
those which have the greatest value in exchange have frequently little
or no value in use. Nothing is more useful than water; but it will
purchase scarce any thing; scarce any thing can be had in exchange for
it. A diamond, on the contrary, has scarce any value in use; but a
very great quantity of other goods may frequently be had in exchange
for it.

In order to investigate the principles which regulate the exchangeable
value of commodities, I shall endeavour to shew,

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

Secondly, what are the different parts of which this real price is
composed or made up.

And, lastly, what are the different circumstances which sometimes
raise some or all of these different parts of price above, and
sometimes sink them below, their natural or ordinary rate; or, what
are the causes which sometimes hinder the market price, that is, the
actual price of commodities, from coinciding exactly with what may be
called their natural price.

I shall endeavour to explain, as fully and distinctly as I can, those
three subjects in the three following chapters, for which I must very
earnestly entreat both the patience and attention of the reader: his
patience, in order to examine a detail which may, perhaps, in some
places, appear unnecessarily tedious; and his attention, in order to
understand what may perhaps, after the fullest explication which I am
capable of giving it, appear still in some degree obscure. I am always
willing to run some hazard of being tedious, in order to be sure that
I am perspicuous;

Hail our new overlord!

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