An Inquiry into the Nature andCauses of the Wealth of

Nations

by Adam Smith

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Contents

INTRODUCTION AND PLAN OF THE WORK. 1

BOOK I 7CHAPTER I . . . . . . . . . . . . . . . . . . . . . 8CHAPTER II . . . . . . . . . . . . . . . . . . . . . 24CHAPTER III . . . . . . . . . . . . . . . . . . . . 31CHAPTER IV . . . . . . . . . . . . . . . . . . . . 40CHAPTER V . . . . . . . . . . . . . . . . . . . . . 52CHAPTER VI . . . . . . . . . . . . . . . . . . . . 83CHAPTER VII . . . . . . . . . . . . . . . . . . . . 97CHAPTER VIII . . . . . . . . . . . . . . . . . . . 114CHAPTER IX . . . . . . . . . . . . . . . . . . . . 157

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CHAPTER X . . . . . . . . . . . . . . . . . . . . . 177CHAPTER XI . . . . . . . . . . . . . . . . . . . . 261

BOOK II 475INTRODUCTION . . . . . . . . . . . . . . . . . . 476CHAPTER I . . . . . . . . . . . . . . . . . . . . . 480CHAPTER II . . . . . . . . . . . . . . . . . . . . . 495CHAPTER III . . . . . . . . . . . . . . . . . . . . 583CHAPTER IV . . . . . . . . . . . . . . . . . . . . 620CHAPTER V . . . . . . . . . . . . . . . . . . . . . 636

BOOK III 666CHAPTER I . . . . . . . . . . . . . . . . . . . . . 667CHAPTER II . . . . . . . . . . . . . . . . . . . . . 677CHAPTER III . . . . . . . . . . . . . . . . . . . . 698CHAPTER IV . . . . . . . . . . . . . . . . . . . . 719

BOOK IV 743CHAPTER I . . . . . . . . . . . . . . . . . . . . . 745CHAPTER II . . . . . . . . . . . . . . . . . . . . . 788CHAPTER III . . . . . . . . . . . . . . . . . . . . 826CHAPTER IV . . . . . . . . . . . . . . . . . . . . 876CHAPTER V . . . . . . . . . . . . . . . . . . . . . 887CHAPTER VI . . . . . . . . . . . . . . . . . . . . 959

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CHAPTER VII . . . . . . . . . . . . . . . . . . . . 981CHAPTER VIII . . . . . . . . . . . . . . . . . . . 1146CHAPTER IX . . . . . . . . . . . . . . . . . . . . 1184APPENDIX . . . . . . . . . . . . . . . . . . . . . 1234

BOOK V 1239CHAPTER I . . . . . . . . . . . . . . . . . . . . . 1240CHAPTER II . . . . . . . . . . . . . . . . . . . . . 1470CHAPTER III . . . . . . . . . . . . . . . . . . . . 1647

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INTRODUCTION AND PLAN OF

THE WORK.

THE ANNUAL LABOUR of every nation is the fundwhich originally supplies it with all the necessaries andconveniencies of life which it annually consumes, andwhich consist always either in the immediate produce ofthat labour, or in what is purchased with that producefrom other nations.

According, therefore, as this produce, or what is pur-chased with it, bears a greater or smaller proportion tothe number of those who are to consume it, the nationwill be better or worse supplied with all the necessariesand conveniencies for which it has occasion.

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INTRODUCTION AND PLAN OF THE WORK.

But this proportion must in every nation be regulatedby two different circumstances: first, by the skill, dexter-ity, and judgment with which its labour is generally ap-plied; and, secondly, by the proportion between the num-ber of those who are employed in useful labour, and thatof those who are not so employed. Whatever be the soil,climate, or extent of territory of any particular nation, theabundance or scantiness of its annual supply must, inthat particular situation, depend upon those two circum-stances.

The abundance or scantiness of this supply, too, seemsto depend more upon the former of those two circum-stances than upon the latter. Among the savage nations ofhunters and fishers, every individual who is able to workis more or less employed in useful labour, and endeav-ours to provide, as well as he can, the necessaries andconveniencies of life, for himself, and such of his familyor tribe as are either too old, or too young, or too infirm, togo a-hunting and fishing. Such nations, however, are somiserably poor, that, from mere want, they are frequentlyreduced, or at least think themselves reduced, to the ne-cessity sometimes of directly destroying, and sometimesof abandoning their infants, their old people, and thoseafflicted with lingering diseases, to perish with hunger,

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INTRODUCTION AND PLAN OF THE WORK.

or to be devoured by wild beasts. Among civilized andthriving nations, on the contrary, though a great numberof people do not labour at all, many of whom consumethe produce of ten times, frequently of a hundred times,more labour than the greater part of those who work; yetthe 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 andindustrious, may enjoy a greater share of the necessariesand conveniencies of life than it is possible for any savageto acquire.

The causes of this improvement in the productive pow-ers of labour, and the order according to which its pro-duce is naturally distributed among the different ranksand conditions of men in the society, make the subject ofthe first book of this Inquiry.

Whatever be the actual state of the skill, dexterity, andjudgment, with which labour is applied in any nation,the abundance or scantiness of its annual supply mustdepend, during the continuance of that state, upon theproportion between the number of those who are annu-ally employed in useful labour, and that of those whoare not so employed. The number of useful and produc-tive labourers, it will hereafter appear, is everywhere in

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INTRODUCTION AND PLAN OF THE WORK.

proportion to the quantity of capital stock which is em-ployed in setting them to work, and to the particularway in which it is so employed. The second book, there-fore, treats of the nature of capital stock, of the mannerin which it is gradually accumulated, and of the differentquantities of labour which it puts into motion, accordingto the different ways in which it is employed.

Nations tolerably well advanced as to skill, dexterity,and judgment, in the application of labour, have followedvery different plans in the general conduct or direction ofit; and those plans have not all been equally favourable tothe greatness of its produce. The policy of some nationshas given extraordinary encouragement to the industryof the country; that of others to the industry of towns.Scarce any nation has dealt equally and impartially withevery sort of industry. Since the down-fall of the Romanempire, the policy of Europe has been more favourable toarts, manufactures, and commerce, the industry of towns,than to agriculture, the Industry of the country. The cir-cumstances which seem to have introduced and estab-lished this policy are explained in the third book.

Though those different plans were, perhaps, first intro-duced by the private interests and prejudices of particu-lar orders of men, without any regard to, or foresight of,

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INTRODUCTION AND PLAN OF THE WORK.

their consequences upon the general welfare of the soci-ety; yet they have given occasion to very different the-ories of political economy; of which some magnify theimportance of that industry which is carried on in towns,others of that which is carried on in the country. Thosetheories have had a considerable influence, not only uponthe opinions of men of learning, but upon the public con-duct of princes and sovereign states. I have endeavoured,in the fourth book, to explain as fully and distinctly asI can those different theories, and the principal effectswhich they have produced in different ages and nations.

To explain in what has consisted the revenue of thegreat body of the people, or what has been the nature ofthose funds, which, in different ages and nations, havesupplied their annual consumption, is the object of thesefour first books. The fifth and last book treats of the rev-enue of the sovereign, or commonwealth. In this book Ihave endeavoured to shew, first, what are the necessaryexpenses of the sovereign, or commonwealth; which ofthose expenses ought to be defrayed by the general con-tribution of the whole society, and which of them, by thatof some particular part only, or of some particular mem-bers of it: secondly, what are the different methods inwhich the whole society may be made to contribute to-

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INTRODUCTION AND PLAN OF THE WORK.

wards defraying the expenses incumbent on the wholesociety, and what are the principal advantages and in-conveniencies of each of those methods; and, thirdly andlastly, what are the reasons and causes which have in-duced almost all modern governments to mortgage somepart of this revenue, or to contract debts; and what havebeen the effects of those debts upon the real wealth, theannual produce of the land and labour of the society.

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BOOK I

OF THE CAUSES OF IMPROVEMENT IN THEPRODUCTIVE POWERS OF LABOUR, AND

OF THE ORDER ACCORDING TO WHICH ITSPRODUCE IS NATURALLY DISTRIBUTED

AMONG THE DIFFERENT RANKS OFPEOPLE

CHAPTER I

OF THE DIVISION OF LABOUR

THE greatest improvements in the productive powersof labour, and the greater part of the skill, dexter-ity, and judgment, with which it is anywhere directed, orapplied, seem to have been the effects of the division oflabour. The effects of the division of labour, in the gen-eral business of society, will be more easily understood,by considering in what manner it operates in some par-ticular manufactures. It is commonly supposed to be car-ried furthest in some very trifling ones; not perhaps thatit really is carried further in them than in others of moreimportance: but in those trifling manufactures which aredestined to supply the small wants of but a small num-ber of people, the whole number of workmen must nec-essarily be small; and those employed in every differentbranch of the work can often be collected into the sameworkhouse, and placed at once under the view of thespectator.

In those great manufactures, on the contrary, which aredestined to supply the great wants of the great body of

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the people, every different branch of the work employsso great a number of workmen, that it is impossible tocollect them all into the same workhouse. We can seldomsee more, at one time, than those employed in one sin-gle branch. Though in such manufactures, therefore, thework may really be divided into a much greater numberof parts, than in those of a more trifling nature, the di-vision is not near so obvious, and has accordingly beenmuch less observed.

To take an example, therefore, from a very trifling man-ufacture, but one in which the division of labour has beenvery often taken notice of, the trade of a pin-maker: aworkman not educated to this business (which the di-vision of labour has rendered a distinct trade), nor ac-quainted with the use of the machinery employed in it(to the invention of which the same division of labourhas probably given occasion), could scarce, perhaps, withhis utmost industry, make one pin in a day, and certainlycould not make twenty. But in the way in which this busi-ness is now carried on, not only the whole work is a pecu-liar trade, but it is divided into a number of branches, ofwhich the greater part are likewise peculiar trades. Oneman draws out the wire; another straights it; a third cutsit; a fourth points it; a fifth grinds it at the top for receiving

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the head; to make the head requires two or three distinctoperations; to put it on is a peculiar business; to whitenthe pins is another; it is even a trade by itself to put theminto the paper; and the important business of making apin is, in this manner, divided into about eighteen distinctoperations, which, in some manufactories, are all per-formed by distinct hands, though in others the same manwill sometimes perform two or three of them. I have seena small manufactory of this kind, where ten men onlywere employed, and where some of them consequentlyperformed two or three distinct operations. But thoughthey were very poor, and therefore but indifferently ac-commodated with the necessary machinery, they could,when they exerted themselves, make among them abouttwelve pounds of pins in a day. There are in a pound up-wards of four thousand pins of a middling size. Those tenpersons, therefore, could make among them upwards offorty-eight thousand pins in a day. Each person, there-fore, making a tenth part of forty-eight thousand pins,might be considered as making four thousand eight hun-dred pins in a day. But if they had all wrought separatelyand independently, and without any of them having beeneducated to this peculiar business, they certainly couldnot each of them have made twenty, perhaps not one pin

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in a day; that is, certainly, not the two hundred and forti-eth, perhaps not the four thousand eight hundredth, partof what they are at present capable of performing, in con-sequence of a proper division and combination of theirdifferent operations.

In every other art and manufacture, the effects of thedivision of labour are similar to what they are in thisvery trifling one, though, in many of them, the labourcan neither be so much subdivided, nor reduced to sogreat a simplicity of operation. The division of labour,however, so far as it can be introduced, occasions, in ev-ery art, a proportionable increase of the productive pow-ers of labour. The separation of different trades and em-ployments from one another, seems to have taken placein consequence of this advantage. This separation, too, isgenerally carried furthest in those countries which enjoythe highest degree of industry and improvement; whatis the work of one man, in a rude state of society, beinggenerally that of several in an improved one. In everyimproved society, the farmer is generally nothing but afarmer; the manufacturer, nothing but a manufacturer.The labour, too, which is necessary to produce any onecomplete manufacture, is almost always divided amonga great number of hands. How many different trades are

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employed in each branch of the linen and woollen manu-factures, from the growers of the flax and the wool, to thebleachers and smoothers of the linen, or to the dyers anddressers of the cloth! The nature of agriculture, indeed,does not admit of so many subdivisions of labour, nor ofso complete a separation of one business from another, asmanufactures. It is impossible to separate so entirely thebusiness of the grazier from that of the corn-farmer, asthe trade of the carpenter is commonly separated fromthat of the smith. The spinner is almost always a dis-tinct person from the weaver; but the ploughman, theharrower, the sower of the seed, and the reaper of thecorn, are often the same. The occasions for those differ-ent sorts of labour returning with the different seasonsof the year, it is impossible that one man should be con-stantly employed in any one of them. This impossibilityof making so complete and entire a separation of all thedifferent branches of labour employed in agriculture, isperhaps the reason why the improvement of the produc-tive powers of labour, in this art, does not always keeppace with their improvement in manufactures. The mostopulent nations, indeed, generally excel all their neigh-bours in agriculture as well as in manufactures; but theyare commonly more distinguished by their superiority in

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the latter than in the former. Their lands are in generalbetter cultivated, and having more labour and expensebestowed upon them, produce more in proportion to theextent and natural fertility of the ground. But this superi-ority of produce is seldom much more than in proportionto the superiority of labour and expense. In agriculture,the labour of the rich country is not always much moreproductive than that of the poor; or, at least, it is neverso much more productive, as it commonly is in manu-factures. The corn of the rich country, therefore, will notalways, in the same degree of goodness, come cheaperto market than that of the poor. The corn of Poland,in the same degree of goodness, is as cheap as that ofFrance, notwithstanding the superior opulence and im-provement of the latter country. The corn of France is,in the corn-provinces, fully as good, and in most yearsnearly about the same price with the corn of England,though, in opulence and improvement, France is perhapsinferior to England. The corn-lands of England, how-ever, are better cultivated than those of France, and thecorn-lands of France are said to be much better culti-vated than those of Poland. But though the poor country,notwithstanding the inferiority of its cultivation, can, insome measure, rival the rich in the cheapness and good-

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ness of its corn, it can pretend to no such competition inits manufactures, at least if those manufactures suit thesoil, climate, and situation, of the rich country. The silksof France are better and cheaper than those of England,because the silk manufacture, at least under the presenthigh duties upon the importation of raw silk, does not sowell suit the climate of England as that of France. But thehardware and the coarse woollens of England are beyondall comparison superior to those of France, and muchcheaper, too, in the same degree of goodness. In Polandthere 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, inconsequence of the division of labour, the same numberof people are capable of performing, is owing to three dif-ferent circumstances; first, to the increase of dexterity inevery particular workman; secondly, to the saving of thetime which is commonly lost in passing from one speciesof work to another; and, lastly, to the invention of a greatnumber 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 work-men, necessarily increases the quantity of the work he

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can perform; and the division of labour, by reducing ev-ery man’s business to some one simple operation, andby making this operation the sole employment of hislife, necessarily increases very much the dexterity of theworkman. A common smith, who, though accustomed tohandle the hammer, has never been used to make nails,if, upon some particular occasion, he is obliged to at-tempt it, will scarce, I am assured, be able to make abovetwo or three hundred nails in a day, and those, too, verybad ones. A smith who has been accustomed to makenails, but whose sole or principal business has not beenthat of a nailer, can seldom, with his utmost diligence,make more than eight hundred or a thousand nails in aday. I have seen several boys, under twenty years of age,who had never exercised any other trade but that of mak-ing nails, and who, when they exerted themselves, couldmake, each of them, upwards of two thousand three hun-dred nails in a day. The making of a nail, however, isby no means one of the simplest operations. The sameperson blows the bellows, stirs or mends the fire as thereis occasion, heats the iron, and forges every part of thenail: in forging the head, too, he is obliged to change histools. The different operations into which the making ofa pin, or of a metal button, is subdivided, are all of them

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much more simple, and the dexterity of the person, ofwhose life it has been the sole business to perform them,is usually much greater. The rapidity with which someof the operations of those manufactures are performed,exceeds what the human hand could, by those who hadnever seen them, be supposed capable of acquiring.

Secondly, The advantage which is gained by saving thetime commonly lost in passing from one sort of work toanother, is much greater than we should at first view beapt to imagine it. It is impossible to pass very quicklyfrom one kind of work to another, that is carried on in adifferent place, and with quite different tools. A countryweaver, who cultivates a small farm, must loose a gooddeal of time in passing from his loom to the field, andfrom the field to his loom. When the two trades can becarried on in the same workhouse, the loss of time is, nodoubt, much less. It is, even in this case, however, veryconsiderable. A man commonly saunters a little in turn-ing his hand from one sort of employment to another.When he first begins the new work, he is seldom verykeen and hearty; his mind, as they say, does not go to it,and for some time he rather trifles than applies to goodpurpose. The habit of sauntering, and of indolent care-less application, which is naturally, or rather necessarily,

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acquired by every country workman who is obliged tochange his work and his tools every half hour, and to ap-ply his hand in twenty different ways almost every dayof his life, renders him almost always slothful and lazy,and incapable of any vigorous application, even on themost pressing occasions. Independent, therefore, of hisdeficiency in point of dexterity, this cause alone must al-ways reduce considerably the quantity of work which heis capable of performing.

Thirdly, and lastly, everybody must be sensible howmuch labour is facilitated and abridged by the applica-tion of proper machinery. It is unnecessary to give any ex-ample. I shall only observe, therefore, that the inventionof all those machines by which labour is so much facili-tated and abridged, seems to have been originally owingto the division of labour. Men are much more likely to dis-cover easier and readier methods of attaining any object,when the whole attention of their minds is directed to-wards that single object, than when it is dissipated amonga great variety of things. But, in consequence of the divi-sion of labour, the whole of every man’s attention comesnaturally to be directed towards some one very simpleobject. It is naturally to be expected, therefore, that someone or other of those who are employed in each particular

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branch of labour should soon find out easier and readiermethods of performing their own particular work, when-ever the nature of it admits of such improvement. Agreat part of the machines made use of in those manu-factures in which labour is most subdivided, were orig-inally the invention of common workmen, who, beingeach of them employed in some very simple operation,naturally turned their thoughts towards finding out eas-ier and readier methods of performing it. Whoever hasbeen much accustomed to visit such manufactures, mustfrequently have been shewn very pretty machines, whichwere the inventions of such workmen, in order to facil-itate and quicken their own particular part of the work.In the first fire engines this was the current designationfor steam engines, a boy was constantly employed toopen and shut alternately the communication betweenthe boiler and the cylinder, according as the piston eitherascended or descended. One of those boys, who lovedto play with his companions, observed that, by tying astring from the handle of the valve which opened thiscommunication to another part of the machine, the valvewould open and shut without his assistance, and leavehim at liberty to divert himself with his play-fellows. Oneof the greatest improvements that has been made upon

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this machine, since it was first invented, was in this man-ner the discovery of a boy who wanted to save his ownlabour.

All the improvements in machinery, however, have byno means been the inventions of those who had occa-sion to use the machines. Many improvements have beenmade by the ingenuity of the makers of the machines,when to make them became the business of a peculiartrade; and some by that of those who are called philoso-phers, or men of speculation, whose trade it is not to doany thing, but to observe every thing, and who, uponthat account, are often capable of combining together thepowers of the most distant and dissimilar objects in theprogress of society, philosophy or speculation becomes,like every other employment, the principal or sole tradeand occupation of a particular class of citizens. Like everyother employment, too, it is subdivided into a great num-ber of different branches, each of which affords occupa-tion to a peculiar tribe or class of philosophers; and thissubdivision of employment in philosophy, as well as inevery other business, improve dexterity, and saves time.Each individual becomes more expert in his own pecu-liar branch, more work is done upon the whole, and thequantity of science is considerably increased by it.

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

Observe the accommodation of the most common ar-tificer or daylabourer in a civilized and thriving coun-try, and you will perceive that the number of people,of whose industry a part, though but a small part, hasbeen employed in procuring him this accommodation,exceeds all computation. The woollen coat, for exam-ple, which covers the day-labourer, as coarse and roughas it may appear, is the produce of the joint labour of agreat multitude of workmen. The shepherd, the sorter ofthe wool, the wool-comber or carder, the dyer, the scrib-

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bler, the spinner, the weaver, the fuller, the dresser, withmany others, must all join their different arts in order tocomplete even this homely production. How many mer-chants and carriers, besides, must have been employedin transporting the materials from some of those work-men to others who often live in a very distant part of thecountry? How much commerce and navigation in partic-ular, how many ship-builders, sailors, sail-makers, rope-makers, must have been employed in order to bring to-gether the different drugs made use of by the dyer, whichoften come from the remotest corners of the world? Whata variety of labour, too, is necessary in order to producethe tools of the meanest of those workmen! To say noth-ing of such complicated machines as the ship of the sailor,the mill of the fuller, or even the loom of the weaver, letus consider only what a variety of labour is requisite inorder to form that very simple machine, the shears withwhich the shepherd clips the wool. The miner, the builderof the furnace for smelting the ore, the feller of the tim-ber, the burner of the charcoal to be made use of in thesmelting-house, the brickmaker, the bricklayer, the work-men who attend the furnace, the millwright, the forger,the smith, must all of them join their different arts in or-der to produce them. Were we to examine, in the same

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manner, all the different parts of his dress and householdfurniture, the coarse linen shirt which he wears next hisskin, the shoes which cover his feet, the bed which helies on, and all the different parts which compose it, thekitchen-grate at which he prepares his victuals, the coalswhich he makes use of for that purpose, dug from thebowels of the earth, and brought to him, perhaps, by along sea and a long land-carriage, all the other utensilsof his kitchen, all the furniture of his table, the knivesand forks, the earthen or pewter plates upon which heserves up and divides his victuals, the different handsemployed in preparing his bread and his beer, the glasswindow which lets in the heat and the light, and keepsout the wind and the rain, with all the knowledge andart requisite for preparing that beautiful and happy in-vention, without which these northern parts of the worldcould scarce have afforded a very comfortable habitation,together with the tools of all the different workmen em-ployed in producing those different conveniencies; if weexamine, I say, all these things, and consider what a vari-ety of labour is employed about each of them, we shall besensible that, without the assistance and co-operation ofmany thousands, the very meanest person in a civilizedcountry could not be provided, even according to, what

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we very falsely imagine, the easy and simple manner inwhich he is commonly accommodated. Compared, in-deed, with the more extravagant luxury of the great, hisaccommodation must no doubt appear extremely simpleand easy; and yet it may be true, perhaps, that the ac-commodation of an European prince does not always somuch exceed that of an industrious and frugal peasant, asthe accommodation of the latter exceeds that of many anAfrican king, the absolute masters of the lives and liber-ties of ten thousand naked savages.

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CHAPTER II

OF THE PRINCIPLE WHICH GIVES OCCASIONTO THE DIVISION OF LABOUR

THIS DIVISION OF labour, from which so many ad-vantages are derived, is not originally the effect of anyhuman wisdom, which foresees and intends that generalopulence to which it gives occasion. It is the necessary,though very slow and gradual, consequence of a certainpropensity in human nature, which has in view no suchextensive utility; the propensity to truck, barter, and ex-change one thing for another.

Whether this propensity be one of those original princi-ples in human nature, of which no further account can begiven, or whether, as seems more probable, it be the nec-essary consequence of the faculties of reason and speech,it belongs not to our present subject to inquire. It is com-mon to all men, and to be found in no other race of an-imals, which seem to know neither this nor any otherspecies of contracts. Two greyhounds, in running downthe same hare, have sometimes the appearance of actingin some sort of concert. Each turns her towards his com-

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panion, or endeavours to intercept her when his compan-ion turns her towards himself. This, however, is not theeffect of any contract, but of the accidental concurrence oftheir passions in the same object at that particular time.Nobody ever saw a dog make a fair and deliberate ex-change of one bone for another with another dog. No-body ever saw one animal, by its gestures and naturalcries signify to another, this is mine, that yours; I am will-ing to give this for that. When an animal wants to obtainsomething either of a man, or of another animal, it has noother means of persuasion, but to gain the favour of thosewhose service it requires. A puppy fawns upon its dam,and a spaniel endeavours, by a thousand attractions, toengage the attention of its master who is at dinner, whenit wants to be fed by him. Man sometimes uses the samearts with his brethren, and when he has no other meansof engaging them to act according to his inclinations, en-deavours by every servile and fawning attention to ob-tain their good will. He has not time, however, to do thisupon every occasion. In civilized society he stands at alltimes in need of the co-operation and assistance of greatmultitudes, while his whole life is scarce sufficient to gainthe friendship of a few persons. In almost every otherrace of animals, each individual, when it is grown up to

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maturity, is entirely independent, and in its natural statehas occasion for the assistance of no other living creature.But man has almost constant occasion for the help of hisbrethren, and it is in vain for him to expect it from theirbenevolence only. He will be more likely to prevail if hecan interest their self-love in his favour, and shew themthat it is for their own advantage to do for him what herequires of them. Whoever offers to another a bargain ofany kind, proposes to do this. Give me that which I want,and you shall have this which you want, is the meaningof every such offer; and it is in this manner that we obtainfrom one another the far greater part of those good officeswhich we stand in need of. It is not from the benevolenceof the butcher, the brewer, or the baker that we expect ourdinner, but from their regard to their own interest. Weaddress ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, butof their advantages. Nobody but a beggar chooses to de-pend chiefly upon the benevolence of his fellow-citizens.Even a beggar does not depend upon it entirely. The char-ity of well-disposed people, indeed, supplies him withthe whole fund of his subsistence. But though this prin-ciple ultimately provides him with all the necessaries oflife which he has occasion for, it neither does nor can pro-

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vide him with them as he has occasion for them. Thegreater part of his occasional wants are supplied in thesame manner as those of other people, by treaty, by barter,and by purchase. With the money which one man giveshim he purchases food. The old clothes which anotherbestows upon him he exchanges for other clothes whichsuit him better, or for lodging, or for food, or for money,with which he can buy either food, clothes, or lodging, ashe has occasion.

As it is by treaty, by barter, and by purchase, that weobtain from one another the greater part of those mutualgood offices which we stand in need of, so it is this sametrucking disposition which originally gives occasion tothe 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 fre-quently exchanges them for cattle or for venison, with hiscompanions; and he finds at last that he can, in this man-ner, get more cattle and venison, than if he himself wentto the field to catch them. From a regard to his own inter-est, therefore, the making of bows and arrows grows tobe his chief business, and he becomes a sort of armourer.Another excels in making the frames and covers of theirlittle huts or moveable houses. He is accustomed to be

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of use in this way to his neighbours, who reward him inthe same manner with cattle and with venison, till at lasthe finds it his interest to dedicate himself entirely to thisemployment, and to become a sort of house-carpenter. Inthe same manner a third becomes a smith or a brazier;a fourth, a tanner or dresser of hides or skins, the prin-cipal part of the clothing of savages. And thus the cer-tainty of being able to exchange all that surplus part ofthe produce of his own labour, which is over and abovehis own consumption, for such parts of the produce ofother men’s labour as he may have occasion for, encour-ages every man to apply himself to a particular occupa-tion, and to cultivate and bring to perfection whatevertalent of genius he may possess for that particular speciesof business.

The difference of natural talents in different men, is, inreality, much less than we are aware of; and the very dif-ferent genius which appears to distinguish men of differ-ent professions, when grown up to maturity, is not uponmany occasions so much the cause, as the effect of thedivision of labour. The difference between the most dis-similar characters, between a philosopher and a commonstreet porter, for example, seems to arise not so muchfrom nature, as from habit, custom, and education. When

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they came in to the world, and for the first six or eightyears of their existence, they were, perhaps, very muchalike, and neither their parents nor play-fellows couldperceive any remarkable difference. About that age, orsoon after, they come to be employed in very differentoccupations. The difference of talents comes then to betaken notice of, and widens by degrees, till at last the van-ity of the philosopher is willing to acknowledge scarceany resemblance. But without the disposition to truck,barter, and exchange, every man must have procured tohimself every necessary and conveniency of life which hewanted. All must have had the same duties to perform,and the same work to do, and there could have been nosuch difference of employment as could alone give occa-sion to any great difference of talents.

As it is this disposition which forms that difference oftalents, so remarkable among men of different profes-sions, so it is this same disposition which renders thatdifference useful. Many tribes of animals, acknowledgedto be all of the same species, derive from nature a muchmore remarkable distinction of genius, than what, an-tecedent to custom and education, appears to take placeamong men. By nature a philosopher is not in genius anddisposition half so different from a street porter, as a mas-

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tiff is from a grey-hound, or a grey-hound from a spaniel,or this last from a shepherd’s dog. Those different tribesof animals, however, though all of the same species are ofscarce any use to one another. The strength of the mas-tiff is not in the least supported either by the swiftness ofthe greyhound, or by the sagacity of the spaniel, or by thedocility of the shepherd’s dog. The effects of those dif-ferent geniuses and talents, for want of the power or dis-position to barter and exchange, cannot be brought into acommon stock, and do not in the least contribute to thebetter accommodation and conveniency of the species.Each animal is still obliged to support and defend itself,separately and independently, and derives no sort of ad-vantage from that variety of talents with which nature hasdistinguished 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 thegeneral disposition to truck, barter, and exchange, beingbrought, as it were, into a common stock, where everyman may purchase whatever part of the produce of othermen’s talents he has occasion for.

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CHAPTER III

THAT THE DIVISION OF LABOUR IS LIMITEDBY THE EXTENT OF THE MARKET

AS IT IS the power of exchanging that gives occasion tothe division of labour, so the extent of this division mustalways be limited by the extent of that power, or, in otherwords, by the extent of the market. When the marketis very small, no person can have any encouragement todedicate himself entirely to one employment, for want ofthe power to exchange all that surplus part of the produceof his own labour, which is over and above his own con-sumption, for such parts of the produce of other men’slabour as he has occasion for.

There are some sorts of industry, even of the lowestkind, which can be carried on nowhere but in a greattown. A porter, for example, can find employment andsubsistence in no other place. A village is by much toonarrow a sphere for him; even an ordinary market-townis scarce large enough to afford him constant occupa-tion. In the lone houses and very small villages whichare scattered about in so desert a country as the high-lands of Scotland, every farmer must be butcher, baker,

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and brewer, for his own family. In such situations wecan scarce expect to find even a smith, a carpenter, or amason, within less than twenty miles of another of thesame trade. The scattered families that live at eight orten miles distance from the nearest of them, must learnto perform themselves a great number of little pieces ofwork, for which, in more populous countries, they wouldcall in the assistance of those workmen. Country work-men are almost everywhere obliged to apply themselvesto all the different branches of industry that have so muchaffinity to one another as to be employed about the samesort of materials. A country carpenter deals in every sortof work that is made of wood; a country smith in ev-ery sort of work that is made of iron. The former is notonly a carpenter, but a joiner, a cabinet-maker, and evena carver in wood, as well as a wheel-wright, a plough-wright, a cart and waggon-maker. The employments ofthe latter are still more various. It is impossible thereshould be such a trade as even that of a nailer in the re-mote and inland parts of the highlands of Scotland. Sucha workman at the rate of a thousand nails a-day, andthree hundred working days in the year, will make threehundred thousand nails in the year. But in such a situa-tion it would be impossible to dispose of one thousand,

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that is, of one day’s work in the year. As by means ofwater-carriage, a more extensive market is opened to ev-ery sort of industry than what land-carriage alone can af-ford it, so it is upon the sea-coast, and along the banksof navigable rivers, that industry of every kind natu-rally begins to subdivide and improve itself, and it isfrequently not till a long time after that those improve-ments extend themselves to the inland parts of the coun-try. A broad-wheeled waggon, attended by two men, anddrawn by eight horses, in about six weeks time, carriesand brings back between London and Edinburgh nearfour ton weight of goods. In about the same time a shipnavigated by six or eight men, and sailing between theports of London and Leith, frequently carries and bringsback two hundred ton weight of goods. Six or eight men,therefore, by the help of water-carriage, can carry andbring back, in the same time, the same quantity of goodsbetween London and Edinburgh as fifty broad-wheeledwaggons, attended by a hundred men, and drawn by fourhundred horses. Upon two hundred tons of goods, there-fore, carried by the cheapest land-carriage from Londonto Edinburgh, there must be charged the maintenance of ahundred men for three weeks, and both the maintenanceand what is nearly equal to maintenance the wear and

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tear of four hundred horses, as well as of fifty great wag-gons. Whereas, upon the same quantity of goods carriedby water, there is to be charged only the maintenanceof six or eight men, and the wear and tear of a ship oftwo hundred tons burthen, together with the value of thesuperior risk, or the difference of the insurance betweenland and water-carriage. Were there no other communi-cation between those two places, therefore, but by land-carriage, as no goods could be transported from the oneto the other, except such whose price was very consider-able in proportion to their weight, they could carry on buta small part of that commerce which at present subsistsbetween them, and consequently could give but a smallpart of that encouragement which they at present mutu-ally afford to each other’s industry. There could be littleor no commerce of any kind between the distant parts ofthe world. What goods could bear the expense of land-carriage between London and Calcutta? Or if there wereany so precious as to be able to support this expense, withwhat safety could they be transported through the territo-ries of so many barbarous nations? Those two cities, how-ever, at present carry on a very considerable commercewith each other, and by mutually affording a market, givea good deal of encouragement to each other’s industry.

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Since such, therefore, are the advantages of water-carriage, it is natural that the first improvements of artand industry should be made where this conveniencyopens the whole world for a market to the produce of ev-ery sort of labour, and that they should always be muchlater in extending themselves into the inland parts of thecountry. The inland parts of the country can for a longtime have no other market for the greater part of theirgoods, but the country which lies round about them, andseparates them from the sea-coast, and the great navi-gable rivers. The extent of the market, therefore, mustfor a long time be in proportion to the riches and popu-lousness of that country, and consequently their improve-ment must always be posterior to the improvement ofthat country. In our North American colonies, the planta-tions have constantly followed either the sea-coast or thebanks of the navigable rivers, and have scarce anywhereextended themselves to any considerable distance fromboth.

The nations that, according to the best authenticatedhistory, appear to have been first civilized, were thosethat dwelt round the coast of the Mediterranean sea. Thatsea, by far the greatest inlet that is known in the world,having no tides, nor consequently any waves, except such

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as are caused by the wind only, was, by the smoothnessof its surface, as well as by the multitude of its islands,and the proximity of its neighbouring shores, extremelyfavourable to the infant navigation of the world; when,from their ignorance of the compass, men were afraidto quit the view of the coast, and from the imperfectionof the art of ship-building, to abandon themselves to theboisterous waves of the ocean. To pass beyond the pillarsof Hercules, that is, to sail out of the straits of Gibraltar,was, in the ancient world, long considered as a most won-derful and dangerous exploit of navigation. It was latebefore even the Phoenicians and Carthaginians, the mostskilful navigators and ship-builders of those old times,attempted it; and they were, for a long time, the only na-tions that did attempt it.

Of all the countries on the coast of the Mediterraneansea, Egypt seems to have been the first in which ei-ther agriculture or manufactures were cultivated and im-proved to any considerable degree. Upper Egypt ex-tends itself nowhere above a few miles from the Nile;and in Lower Egypt, that great river breaks itself intomany different canals, which, with the assistance of a lit-tle art, seem to have afforded a communication by water-carriage, not only between all the great towns, but be-

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tween all the considerable villages, and even to manyfarm-houses in the country, nearly in the same manneras the Rhine and the Maese do in Holland at present. Theextent and easiness of this inland navigation was proba-bly one of the principal causes of the early improvementof Egypt.

The improvements in agriculture and manufacturesseem likewise to have been of very great antiquity in theprovinces of Bengal, in the East Indies, and in some ofthe eastern provinces of China, though the great extentof this antiquity is not authenticated by any histories ofwhose authority we, in this part of the world, are wellassured. In Bengal, the Ganges, and several other greatrivers, form a great number of navigable canals, in thesame manner as the Nile does in Egypt. In the easternprovinces of China, too, several great rivers form, by theirdifferent branches, a multitude of canals, and, by com-municating with one another, afford an inland navigationmuch more extensive than that either of the Nile or theGanges, or, perhaps, than both of them put together. Itis remarkable, that neither the ancient Egyptians, nor theIndians, nor the Chinese, encouraged foreign commerce,but seem all to have derived their great opulence fromthis inland navigation.

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All the inland parts of Africa, and all that part of Asiawhich lies any considerable way north of the Euxine andCaspian seas, the ancient Scythia, the modern Tartary andSiberia, seem, in all ages of the world, to have been in thesame barbarous and uncivilized state in which we findthem at present. The sea of Tartary is the frozen ocean,which admits of no navigation; and though some of thegreatest rivers in the world run through that country, theyare at too great a distance from one another to carry com-merce and communication through the greater part ofit. There are in Africa none of those great inlets, suchas the Baltic and Adriatic seas in Europe, the Mediter-ranean and Euxine seas in both Europe and Asia, andthe gulfs of Arabia, Persia, India, Bengal, and Siam, inAsia, to carry maritime commerce into the interior partsof that great continent; and the great rivers of Africa areat too great a distance from one another to give occasionto any considerable inland navigation. The commerce,besides, which any nation can carry on by means of ariver which does not break itself into any great numberof branches or canals, and which runs into another terri-tory before it reaches the sea, can never be very consid-erable, because it is always in the power of the nationswho possess that other territory to obstruct the commu-

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nication between the upper country and the sea. The nav-igation of the Danube is of very little use to the differentstates of Bavaria, Austria, and Hungary, in comparison ofwhat it would be, if any of them possessed the whole ofits course, till it falls into the Black sea.

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CHAPTER IV

OF THE ORIGIN AND USE OF MONEY

WHEN THE DIVISION of labour has been once thor-oughly established, it is but a very small part of a man’swants which the produce of his own labour can supply.He supplies the far greater part of them by exchangingthat surplus part of the produce of his own labour, whichis over and above his own consumption, for such partsof the produce of other men’s labour as he has occasionfor. Every man thus lives by exchanging, or becomes, insome measure, a merchant, and the society itself grows tobe what is properly a commercial society.

But when the division of labour first began to takeplace, this power of exchanging must frequently havebeen very much clogged and embarrassed in its opera-tions. One man, we shall suppose, has more of a certaincommodity than he himself has occasion for, while an-other has less. The former, consequently, would be gladto dispose of; and the latter to purchase, a part of thissuperfluity. But if this latter should chance to have noth-ing that the former stands in need of, no exchange can be

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made between them. The butcher has more meat in hisshop than he himself can consume, and the brewer andthe baker would each of them be willing to purchase apart of it. But they have nothing to offer in exchange, ex-cept the different productions of their respective trades,and the butcher is already provided with all the breadand beer which he has immediate occasion for. No ex-change can, in this case, be made between them. He can-not be their merchant, nor they his customers; and theyare all of them thus mutually less serviceable to one an-other. In order to avoid the inconveniency of such situ-ations, every prudent man in every period of society, af-ter the first establishment of the division of labour, mustnaturally have endeavoured to manage his affairs in sucha manner, as to have at all times by him, besides thepeculiar produce of his own industry, a certain quan-tity of some one commodity or other, such as he imag-ined few people would be likely to refuse in exchangefor the produce of their industry. Many different com-modities, it is probable, were successively both thoughtof and employed for this purpose. In the rude ages ofsociety, cattle are said to have been the common instru-ment of commerce; and, though they must have been amost inconvenient one, yet, in old times, we find things

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were frequently valued according to the number of cat-tle which had been given in exchange for them. The ar-mour of Diomede, says Homer, cost only nine oxen; butthat of Glaucus cost a hundred oxen. Salt is said to bethe common instrument of commerce and exchanges inAbyssinia; a species of shells in some parts of the coastof India; dried cod at Newfoundland; tobacco in Virginia;sugar in some of our West India colonies; hides or dressedleather in some other countries; and there is at this daya village in Scotland, where it is not uncommon, I amtold, for a workman to carry nails instead of money tothe baker’s shop or the ale-house.

In all countries, however, men seem at last to havebeen determined by irresistible reasons to give the pref-erence, for this employment, to metals above every othercommodity. Metals can not only be kept with as littleloss as any other commodity, scarce any thing being lessperishable than they are, but they can likewise, withoutany loss, be divided into any number of parts, as by fu-sion those parts can easily be re-united again; a qual-ity which no other equally durable commodities possess,and which, more than any other quality, renders them fitto be the instruments of commerce and circulation. Theman who wanted to buy salt, for example, and had noth-

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ing but cattle to give in exchange for it, must have beenobliged to buy salt to the value of a whole ox, or a wholesheep, at a time. He could seldom buy less than this, be-cause what he was to give for it could seldom be dividedwithout loss; and if he had a mind to buy more, he must,for the same reasons, have been obliged to buy doubleor triple the quantity, the value, to wit, of two or threeoxen, or of two or three sheep. If, on the contrary, insteadof sheep or oxen, he had metals to give in exchange forit, he could easily proportion the quantity of the metal tothe precise quantity of the commodity which he had im-mediate occasion for.

Different metals have been made use of by different na-tions for this purpose. Iron was the common instrumentof commerce among the ancient Spartans, copper amongthe ancient Romans, and gold and silver among all richand commercial nations.

Those metals seem originally to have been made useof for this purpose in rude bars, without any stamp orcoinage. Thus we are told by Pliny (Plin. Hist Nat. lib.33, cap. 3), upon the authority of Timaeus, an ancienthistorian, that, till the time of Servius Tullius, the Ro-mans had no coined money, but made use of unstampedbars of copper, to purchase whatever they had occasion

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for. These rude bars, therefore, performed at this time thefunction of money.

The use of metals in this rude state was attended withtwo very considerable inconveniences; first, with thetrouble of weighing, and secondly, with that of assayingthem. In the precious metals, where a small difference inthe quantity makes a great difference in the value, eventhe business of weighing, with proper exactness, requiresat least very accurate weights and scales. The weighingof gold, in particular, is an operation of some nicety inthe coarser metals, indeed, where a small error would beof little consequence, less accuracy would, no doubt, benecessary. Yet we should find it excessively troublesomeif every time a poor man had occasion either to buy orsell a farthing’s worth of goods, he was obliged to weighthe farthing. The operation of assaying is still more dif-ficult, still more tedious; and, unless a part of the metalis fairly melted in the crucible, with proper dissolvents,any conclusion that can be drawn from it is extremelyuncertain. Before the institution of coined money, how-ever, unless they went through this tedious and difficultoperation, people must always have been liable to thegrossest frauds and impositions; and instead of a poundweight of pure silver, or pure copper, might receive, in ex-

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change for their goods, an adulterated composition of thecoarsest and cheapest materials, which had, however, intheir outward appearance, been made to resemble thosemetals. To prevent such abuses, to facilitate exchanges,and thereby to encourage all sorts of industry and com-merce, it has been found necessary, in all countries thathave made any considerable advances towards improve-ment, to affix a public stamp upon certain quantities ofsuch particular metals, as were in those countries com-monly made use of to purchase goods. Hence the originof coined money, and of those public offices called mints;institutions exactly of the same nature with those of theaulnagers and stamp-masters of woollen and linen cloth.All of them are equally meant to ascertain, by means ofa public stamp, the quantity and uniform goodness ofthose different commodities when brought to market.

The first public stamps of this kind that were affixed tothe current metals, seem in many cases to have been in-tended to ascertain, what it was both most difficult andmost important to ascertain, the goodness or fineness ofthe metal, and to have resembled the sterling mark whichis at present affixed to plate and bars of silver, or the Span-ish mark which is sometimes affixed to ingots of gold,and which, being struck only upon one side of the piece,

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and not covering the whole surface, ascertains the fine-ness, but not the weight of the metal. Abraham weighs toEphron the four hundred shekels of silver which he hadagreed to pay for the field of Machpelah. They are said,however, to be the current money of the merchant, andyet are received by weight, and not by tale, in the samemanner as ingots of gold and bars of silver are at present.The revenues of the ancient Saxon kings of England aresaid to have been paid, not in money, but in kind, that is,in victuals and provisions of all sorts. William the Con-queror introduced the custom of paying them in money.This money, however, was for a long time, received at theexchequer, by weight, and not by tale.

The inconveniency and difficulty of weighing thosemetals with exactness, gave occasion to the institution ofcoins, of which the stamp, covering entirely both sides ofthe piece, and sometimes the edges too, was supposedto ascertain not only the fineness, but the weight of themetal. Such coins, therefore, were received by tale, as atpresent, without the trouble of weighing.

The denominations of those coins seem originally tohave expressed the weight or quantity of metal containedin them. In the time of Servius Tullius, who first coinedmoney at Rome, the Roman as or pondo contained a Ro-

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man pound of good copper. It was divided, in the samemanner as our Troyes pound, into twelve ounces, eachof which contained a real ounce of good copper. TheEnglish pound sterling, in the time of Edward I. con-tained a pound, Tower weight, of silver of a known fine-ness. The Tower pound seems to have been somethingmore than the Roman pound, and something less thanthe Troyes pound. This last was not introduced into themint of England till the 18th of Henry the VIII. The Frenchlivre contained, in the time of Charlemagne, a pound,Troyes weight, of silver of a known fineness. The fairof Troyes in Champaign was at that time frequented byall the nations of Europe, and the weights and measuresof so famous a market were generally known and es-teemed. The Scots money pound contained, from thetime of Alexander the First to that of Robert Bruce, apound of silver of the same weight and fineness with theEnglish pound sterling. English, French, and Scots pen-nies, too, contained all of them originally a real penny-weight of silver, the twentieth part of an ounce, and thetwo hundred-and-fortieth part of a pound. The shilling,too, seems originally to have been the denomination of aweight. “When wheat is at twelve shillings the quarter,”says an ancient statute of Henry III. “then wastel bread

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of a farthing shall weigh eleven shillings and fourpence”.The proportion, however, between the shilling, and ei-ther the penny on the one hand, or the pound on theother, seems not to have been so constant and uniformas that between the penny and the pound. During thefirst race of the kings of France, the French sou or shillingappears upon different occasions to have contained five,twelve, twenty, and forty pennies. Among the ancientSaxons, a shilling appears at one time to have containedonly five pennies, and it is not improbable that it mayhave been as variable among them as among their neigh-bours, the ancient Franks. From the time of Charlemagneamong the French, and from that of William the Con-queror among the English, the proportion between thepound, the shilling, and the penny, seems to have beenuniformly the same as at present, though the value ofeach has been very different; for in every country of theworld, I believe, the avarice and injustice of princes andsovereign states, abusing the confidence of their subjects,have by degrees diminished the real quantity of metal,which had been originally contained in their coins. TheRoman as, in the latter ages of the republic, was reducedto the twenty-fourth part of its original value, and, in-stead of weighing a pound, came to weigh only half an

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ounce. The English pound and penny contain at presentabout a third only; the Scots pound and penny about athirty-sixth; and the French pound and penny about asixty-sixth part of their original value. By means of thoseoperations, the princes and sovereign states which per-formed them were enabled, in appearance, to pay theirdebts and fulfil their engagements with a smaller quan-tity of silver than would otherwise have been requisite. Itwas indeed in appearance only; for their creditors werereally defrauded of a part of what was due to them. Allother debtors in the state were allowed the same privi-lege, and might pay with the same nominal sum of thenew and debased coin whatever they had borrowed inthe old. Such operations, therefore, have always provedfavourable to the debtor, and ruinous to the creditor, andhave sometimes produced a greater and more universalrevolution in the fortunes of private persons, than couldhave been occasioned by a very great public calamity.

It is in this manner that money has become, in all civ-ilized nations, the universal instrument of commerce, bythe intervention of which goods of all kinds are boughtand sold, or exchanged for one another.

What are the rules which men naturally observe, in ex-changing them either for money, or for one another, I shall

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now proceed to examine. These rules determine whatmay be called the relative or exchangeable value of goods.

The word VALUE, it is to be observed, has two dif-ferent meanings, and sometimes expresses the utility ofsome particular object, and sometimes the power of pur-chasing other goods which the possession of that objectconveys. The one may be called ‘value in use;’ the other,‘value in exchange.’ The things which have the great-est value in use have frequently little or no value in ex-change; and, on the contrary, those which have the great-est value in exchange have frequently little or no value inuse. Nothing is more useful than water; but it will pur-chase scarce any thing; scarce any thing can be had inexchange for it. A diamond, on the contrary, has scarceany value in use; but a very great quantity of other goodsmay frequently be had in exchange for it.

In order to investigate the principles which regulate theexchangeable value of commodities, I shall endeavour toshew,

First, what is the real measure of this exchangeablevalue; or wherein consists the real price of all commodi-ties.

Secondly, what are the different parts of which this real

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price is composed or made up.And, lastly, what are the different circumstances which

sometimes raise some or all of these different parts ofprice above, and sometimes sink them below, their nat-ural or ordinary rate; or, what are the causes which some-times hinder the market price, that is, the actual price ofcommodities, from coinciding exactly with what may becalled their natural price.

I shall endeavour to explain, as fully and distinctly asI can, those three subjects in the three following chapters,for which I must very earnestly entreat both the patienceand attention of the reader: his patience, in order to exam-ine a detail which may, perhaps, in some places, appearunnecessarily tedious; and his attention, in order to un-derstand what may perhaps, after the fullest explicationwhich I am capable of giving it, appear still in some de-gree obscure. I am always willing to run some hazard ofbeing tedious, in order to be sure that I am perspicuous;and, after taking the utmost pains that I can to be perspic-uous, some obscurity may still appear to remain upon asubject, in its own nature extremely abstracted.

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CHAPTER V

OF THE REAL AND NOMINAL PRICE OFCOMMODITIES, OR OF THEIR PRICE INLABOUR, AND THEIR PRICE IN MONEY

EVERY MAN IS rich or poor according to the degree inwhich he can afford to enjoy the necessaries, convenien-cies, and amusements of human life. But after the divi-sion of labour has once thoroughly taken place, it is but avery small part of these with which a man’s own labourcan supply him. The far greater part of them he must de-rive from the labour of other people, and he must be richor poor according to the quantity of that labour which hecan command, or which he can afford to purchase. Thevalue of any commodity, therefore, to the person whopossesses it, and who means not to use or consume it him-self, but to exchange it for other commodities, is equal tothe quantity of labour which it enables him to purchaseor command. Labour therefore, is the real measure of theexchangeable value of all commodities.

The real price of every thing, what every thing reallycosts to the man who wants to acquire it, is the toil and

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trouble of acquiring it. What every thing is really worthto the man who has acquired it and who wants to dis-pose of it, or exchange it for something else, is the toiland trouble which it can save to himself, and which it canimpose upon other people. What is bought with money,or with goods, is purchased by labour, as much as whatwe acquire by the toil of our own body. That money, orthose goods, indeed, save us this toil. They contain thevalue of a certain quantity of labour, which we exchangefor what is supposed at the time to contain the value ofan equal quantity. Labour was the first price, the origi-nal purchase money that was paid for all things. It wasnot by gold or by silver, but by labour, that all the wealthof the world was originally purchased; and its value, tothose who possess it, and who want to exchange it forsome new productions, is precisely equal to the quantityof labour which it can enable them to purchase or com-mand.

Wealth, as Mr Hobbes says, is power. But the personwho either acquires, or succeeds to a great fortune, doesnot necessarily acquire or succeed to any political power,either civil or military. His fortune may, perhaps, affordhim the means of acquiring both; but the mere posses-sion of that fortune does not necessarily convey to him

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either. The power which that possession immediatelyand directly conveys to him, is the power of purchasing acertain command over all the labour, or over all the pro-duce of labour which is then in the market. His fortuneis greater or less, precisely in proportion to the extent ofthis power, or to the quantity either of other men’s labour,or, what is the same thing, of the produce of other men’slabour, which it enables him to purchase or command.The exchangeable value of every thing must always beprecisely equal to the extent of this power which it con-veys to its owner.

But though labour be the real measure of the exchange-able value of all commodities, it is not that by which theirvalue is commonly estimated. It is often difficult to ascer-tain the proportion between two different quantities oflabour. The time spent in two different sorts of work willnot always alone determine this proportion. The differentdegrees of hardship endured, and of ingenuity exercised,must likewise be taken into account. There may be morelabour in an hour’s hard work, than in two hours easybusiness; or in an hour’s application to a trade which itcost ten years labour to learn, than in a month’s indus-try, at an ordinary and obvious employment. But it is noteasy to find any accurate measure either of hardship or

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ingenuity. In exchanging, indeed, the different produc-tions of different sorts of labour for one another, some al-lowance is commonly made for both. It is adjusted, how-ever, not by any accurate measure, but by the higglingand bargaining of the market, according to that sort ofrough equality which, though not exact, is sufficient forcarrying on the business of common life.

Every commodity, besides, is more frequently ex-changed for, and thereby compared with, other com-modities, than with labour. It is more natural, there-fore, to estimate its exchangeable value by the quantity ofsome other commodity, than by that of the labour whichit can produce. The greater part of people, too, under-stand better what is meant by a quantity of a particularcommodity, than by a quantity of labour. The one is aplain palpable object; the other an abstract notion, whichthough it can be made sufficiently intelligible, is not alto-gether so natural and obvious.

But when barter ceases, and money has become thecommon instrument of commerce, every particular com-modity is more frequently exchanged for money than forany other commodity. The butcher seldom carries hisbeef or his mutton to the baker or the brewer, in orderto exchange them for bread or for beer; but he carries

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them to the market, where he exchanges them for money,and afterwards exchanges that money for bread and forbeer. The quantity of money which he gets for them reg-ulates, too, the quantity of bread and beer which he canafterwards purchase. It is more natural and obvious tohim, therefore, to estimate their value by the quantityof money, the commodity for which he immediately ex-changes them, than by that of bread and beer, the com-modities for which he can exchange them only by the in-tervention of another commodity; and rather to say thathis butcher’s meat is worth three-pence or fourpence a-pound, than that it is worth three or four pounds of bread,or three or four quarts of small beer. Hence it comes topass, that the exchangeable value of every commodity ismore frequently estimated by the quantity of money, thanby the quantity either of labour or of any other commod-ity which can be had in exchange for it.

Gold and silver, however, like every other commod-ity, vary in their value; are sometimes cheaper and some-times dearer, sometimes of easier and sometimes of moredifficult purchase. The quantity of labour which any par-ticular quantity of them can purchase or command, orthe quantity of other goods which it will exchange for,depends always upon the fertility or barrenness of the

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mines which happen to be known about the time whensuch exchanges are made. The discovery of the abundantmines of America, reduced, in the sixteenth century, thevalue of gold and silver in Europe to about a third of whatit had been before. As it cost less labour to bring thosemetals from the mine to the market, so, when they werebrought thither, they could purchase or command lesslabour; and this revolution in their value, though perhapsthe greatest, is by no means the only one of which historygives some account. But as a measure of quantity, suchas the natural foot, fathom, or handful, which is continu-ally varying in its own quantity, can never be an accuratemeasure of the quantity of other things; so a commod-ity which is itself continually varying in its own value,can never be an accurate measure of the value of othercommodities. Equal quantities of labour, at all times andplaces, may be said to be of equal value to the labourer.In his ordinary state of health, strength, and spirits; inthe ordinary degree of his skill and dexterity, he must al-ways lay down the same portion of his ease, his liberty,and his happiness. The price which he pays must al-ways be the same, whatever may be the quantity of goodswhich he receives in return for it. Of these, indeed, it maysometimes purchase a greater and sometimes a smaller

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quantity; but it is their value which varies, not that of thelabour which purchases them. At all times and places,that is dear which it is difficult to come at, or which itcosts much labour to acquire; and that cheap which is tobe had easily, or with very little labour. Labour alone,therefore, never varying in its own value, is alone the ul-timate and real standard by which the value of all com-modities can at all times and places be estimated andcompared. It is their real price; money is their nominalprice only.

But though equal quantities of labour are always ofequal value to the labourer, yet to the person who em-ploys him they appear sometimes to be of greater, andsometimes of smaller value. He purchases them some-times with a greater, and sometimes with a smaller quan-tity of goods, and to him the price of labour seems to varylike that of all other things. It appears to him dear in theone case, and cheap in the other. In reality, however, itis the goods which are cheap in the one case, and dear inthe other.

In this popular sense, therefore, labour, like commodi-ties, may be said to have a real and a nominal price. Itsreal price may be said to consist in the quantity of the nec-essaries and conveniencies of life which are given for it;

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its nominal price, in the quantity of money. The laboureris rich or poor, is well or ill rewarded, in proportion to thereal, not to the nominal price of his labour.

The distinction between the real and the nominal priceof commodities and labour is not a matter of mere specu-lation, but may sometimes be of considerable use in prac-tice. The same real price is always of the same value; buton account of the variations in the value of gold and sil-ver, the same nominal price is sometimes of very differ-ent values. When a landed estate, therefore, is sold witha reservation of a perpetual rent, if it is intended that thisrent should always be of the same value, it is of impor-tance to the family in whose favour it is reserved, that itshould not consist in a particular sum of money. Its valuewould in this case be liable to variations of two differentkinds: first, to those which arise from the different quan-tities of gold and silver which are contained at differenttimes in coin of the same denomination; and, secondly, tothose which arise from the different values of equal quan-tities of gold and silver at different times.

Princes and sovereign states have frequently fanciedthat they had a temporary interest to diminish the quan-tity of pure metal contained in their coins; but they sel-dom have fancied that they had any to augment it. The

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quantity of metal contained in the coins, I believe of allnations, has accordingly been almost continually dimin-ishing, and hardly ever augmenting. Such variations,therefore, tend almost always to diminish the value of amoney rent.

The discovery of the mines of America diminished thevalue of gold and silver in Europe. This diminution, itis commonly supposed, though I apprehend without anycertain proof, is still going on gradually, and is likely tocontinue to do so for a long time. Upon this supposition,therefore, such variations are more likely to diminish thanto augment the value of a money rent, even though itshould be stipulated to be paid, not in such a quantityof coined money of such a denomination (in so manypounds sterling, for example), but in so many ounces, ei-ther of pure silver, or of silver of a certain standard.

The rents which have been reserved in corn, have pre-served their value much better than those which havebeen reserved in money, even where the denominationof the coin has not been altered. By the 18th of Elizabeth,it was enacted, that a third of the rent of all college leasesshould be reserved in corn, to be paid either in kind, or ac-cording to the current prices at the nearest public market.The money arising from this corn rent, though originally

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but a third of the whole, is, in the present times, accordingto Dr. Blackstone, commonly near double of what arisesfrom the other two-thirds. The old money rents of col-leges must, according to this account, have sunk almostto a fourth part of their ancient value, or are worth littlemore than a fourth part of the corn which they were for-merly worth. But since the reign of Philip and Mary, thedenomination of the English coin has undergone little orno alteration, and the same number of pounds, shillings,and pence, have contained very nearly the same quantityof pure silver. This degradation, therefore, in the valueof the money rents of colleges, has arisen altogether fromthe degradation in the price of silver.

When the degradation in the value of silver is com-bined with the diminution of the quantity of it containedin the coin of the same denomination, the loss is fre-quently still greater. In Scotland, where the denomina-tion of the coin has undergone much greater alterationsthan it ever did in England, and in France, where it hasundergone still greater than it ever did in Scotland, someancient rents, originally of considerable value, have, inthis manner, been reduced almost to nothing.

Equal quantities of labour will, at distant times, be pur-chased more nearly with equal quantities of corn, the sub-

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sistence of the labourer, than with equal quantities of goldand silver, or, perhaps, of any other commodity. Equalquantities of corn, therefore, will, at distant times, bemore nearly of the same real value, or enable the posses-sor to purchase or command more nearly the same quan-tity of the labour of other people. They will do this, Isay, more nearly than equal quantities of almost any othercommodity; for even equal quantities of corn will not doit exactly. The subsistence of the labourer, or the real priceof labour, as I shall endeavour to shew hereafter, is verydifferent upon different occasions; more liberal in a so-ciety advancing to opulence, than in one that is standingstill, and in one that is standing still, than in one that is go-ing backwards. Every other commodity, however, will, atany particular time, purchase a greater or smaller quan-tity of labour, in proportion to the quantity of subsistencewhich it can purchase at that time. A rent, therefore, re-served in corn, is liable only to the variations in the quan-tity of labour which a certain quantity of corn can pur-chase. But a rent reserved in any other commodity is li-able, not only to the variations in the quantity of labourwhich any particular quantity of corn can purchase, butto the variations in the quantity of corn which can be pur-chased by any particular quantity of that commodity.

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Though the real value of a corn rent, it is to be ob-served, however, varies much less from century to cen-tury than that of a money rent, it varies much more fromyear to year. The money price of labour, as I shall endeav-our to shew hereafter, does not fluctuate from year to yearwith the money price of corn, but seems to be everywhereaccommodated, not to the temporary or occasional, butto the average or ordinary price of that necessary of life.The average or ordinary price of corn, again is regulated,as I shall likewise endeavour to shew hereafter, by thevalue of silver, by the richness or barrenness of the mineswhich supply the market with that metal, or by the quan-tity of labour which must be employed, and consequentlyof corn which must be consumed, in order to bring anyparticular quantity of silver from the mine to the market.But the value of silver, though it sometimes varies greatlyfrom century to century, seldom varies much from yearto year, but frequently continues the same, or very nearlythe same, for half a century or a century together. Theordinary or average money price of corn, therefore, may,during so long a period, continue the same, or very nearlythe same, too, and along with it the money price of labour,provided, at least, the society continues, in other respects,in the same, or nearly in the same, condition. In the mean

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time, the temporary and occasional price of corn may fre-quently be double one year of what it had been the yearbefore, or fluctuate, for example, from five-and-twenty tofifty shillings the quarter. But when corn is at the latterprice, not only the nominal, but the real value of a cornrent, will be double of what it is when at the former, orwill command double the quantity either of labour, or ofthe greater part of other commodities; the money price oflabour, and along with it that of most other things, con-tinuing the same during all these fluctuations.

Labour, therefore, it appears evidently, is the only uni-versal, as well as the only accurate, measure of value, orthe only standard by which we can compare the values ofdifferent commodities, at all times, and at all places. Wecannot estimate, it is allowed, the real value of differentcommodities from century to century by the quantities ofsilver which were given for them. We cannot estimate itfrom year to year by the quantities of corn. By the quan-tities of labour, we can, with the greatest accuracy, esti-mate it, both from century to century, and from year toyear. From century to century, corn is a better measurethan silver, because, from century to century, equal quan-tities of corn will command the same quantity of labourmore nearly than equal quantities of silver. From year to

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year, on the contrary, silver is a better measure than corn,because equal quantities of it will more nearly commandthe same quantity of labour.

But though, in establishing perpetual rents, or even inletting very long leases, it may be of use to distinguishbetween real and nominal price; it is of none in buyingand selling, the more common and ordinary transactionsof human life.

At the same time and place, the real and the nominalprice of all commodities are exactly in proportion to oneanother. The more or less money you get for any com-modity, in the London market, for example, the more orless labour it will at that time and place enable you topurchase or command. At the same time and place, there-fore, money is the exact measure of the real exchangeablevalue of all commodities. It is so, however, at the sametime and place only.

Though at distant places there is no regular proportionbetween the real and the money price of commodities, yetthe merchant who carries goods from the one to the other,has nothing to consider but the money price, or the dif-ference between the quantity of silver for which he buysthem, and that for which he is likely to sell them. Half

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an ounce of silver at Canton in China may command agreater quantity both of labour and of the necessaries andconveniencies of life, than an ounce at London. A com-modity, therefore, which sells for half an ounce of silverat Canton, may there be really dearer, of more real impor-tance to the man who possesses it there, than a commod-ity which sells for an ounce at London is to the man whopossesses it at London. If a London merchant, however,can buy at Canton, for half an ounce of silver, a commod-ity which he can afterwards sell at London for an ounce,he gains a hundred per cent. by the bargain, just as muchas if an ounce of silver was at London exactly of the samevalue as at Canton. It is of no importance to him that halfan ounce of silver at Canton would have given him thecommand of more labour, and of a greater quantity of thenecessaries and conveniencies of life than an ounce cando at London. An ounce at London will always give himthe command of double the quantity of all these, whichhalf an ounce could have done there, and this is preciselywhat he wants.

As it is the nominal or money price of goods, there-fore, which finally determines the prudence or impru-dence of all purchases and sales, and thereby regulatesalmost the whole business of common life in which price

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is concerned, we cannot wonder that it should have beenso much more attended to than the real price.

In such a work as this, however, it may sometimes beof use to compare the different real values of a particu-lar commodity at different times and places, or the dif-ferent degrees of power over the labour of other peoplewhich it may, upon different occasions, have given tothose who possessed it. We must in this case compare,not so much the different quantities of silver for which itwas commonly sold, as the different quantities or labourwhich those different quantities of silver could have pur-chased. But the current prices of labour, at distant timesand places, can scarce ever be known with any degree ofexactness. Those of corn, though they have in few placesbeen regularly recorded, are in general better known, andhave been more frequently taken notice of by historiansand other writers. We must generally, therefore, contentourselves with them, not as being always exactly in thesame proportion as the current prices of labour, but asbeing the nearest approximation which can commonly behad to that proportion. I shall hereafter have occasion tomake several comparisons of this kind.

In the progress of industry, commercial nations havefound it convenient to coin several different metals into

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money; gold for larger payments, silver for purchases ofmoderate value, and copper, or some other coarse metal,for those of still smaller consideration, They have always,however, considered one of those metals as more pecu-liarly the measure of value than any of the other two; andthis preference seems generally to have been given to themetal which they happen first to make use of as the in-strument of commerce. Having once begun to use it astheir standard, which they must have done when theyhad no other money, they have generally continued to doso even when the necessity was not the same.

The Romans are said to have had nothing but coppermoney till within five years before the first Punic war(Pliny, lib. xxxiii. cap. 3), when they first began to coinsilver. Copper, therefore, appears to have continued al-ways the measure of value in that republic. At Rome allaccounts appear to have been kept, and the value of allestates to have been computed, either in asses or in ses-tertii. The as was always the denomination of a coppercoin. The word sestertius signifies two asses and a half.Though the sestertius, therefore, was originally a silvercoin, its value was estimated in copper. At Rome, onewho owed a great deal of money was said to have a greatdeal of other people’s copper.

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The northern nations who established themselvesupon the ruins of the Roman empire, seem to have hadsilver money from the first beginning of their settlements,and not to have known either gold or copper coins forseveral ages thereafter. There were silver coins in Eng-land in the time of the Saxons; but there was little goldcoined till the time of Edward III nor any copper till thatof James I. of Great Britain. In England, therefore, and forthe same reason, I believe, in all other modern nations ofEurope, all accounts are kept, and the value of all goodsand of all estates is general