think on is always which will et dont le travail ne rapporte be the most advantageous.' aucun avantage qu'au bout d'un Mandeville,' Essay on Charity and certain nombre d'annees. La vie Charily Schools' in Fable of the d'un homme n'est calculee qu'a Bees, pt. i. 2nd ed., p. 343; cp. dix ou douze annees; et comme Remark A, p. 45. on en perd plusieurs a apprendre 1 'Le fils d'un laboureur, a 1'age un metier, dont la plupart dede sept ou douze ans, commence mandent en Angleterre sept a aider son pere, soit a garder les annees d'apprentissage, un troupeaux, soit a remuer la terre, laboureur ne voudrait jamais en soit a d'autres ouvrages de la cam- faire apprendre aucun a son fils pagne. qui ne demandent point si les gens de metier ne gagnaient d'art ni d'habilete. bien plus que les laboureurs.
Si son pere lui faisait apprendre Ceux done, qui emploient des un metier, ilperdrait a son absence artisans ou gens de metier, pendant tout le temps de son doivent necessairement payer apprentissage, et serait encore leur travail plus haut que celui oblige de payer son entretien et d'un laboureur ou manoeuvre; et les frais de son apprentissage ce travail sera necessairement pendant plusieurs annees: voila cher a proportion du temps qu'on done un fils a charge a son pere perd a 1'apprendre et de la CHEAPNESS OR PLENTY 175 arts which require more extensive knowledge than is to be got during the time of an apprenticeship. A blacksmith and weaver may learn their business well enough without any previous knowledge of mathematics, but a watchmaker must be acquainted with several sciences in order to undertake his business well, such as arithmetic, geometry, and astronomy with regard to the equation of time, and their wages must be high in order to compensate the additional expense1. In general, this is the case in all the liberal arts, because after they have spent a long time in their education, it is ten to one if ever they make anything by it. Their wages therefore must be higher in proportion to the expense they have been at, the risk of not living long enough, and the risk of not having dexterity enough to manage their business. Among the lawyers there is not one among twenty that attains such knowledge and dexterity in his business as enables him to get back the expenses of his education, and many of them never make the price of their gown, as we say. The fees of lawyers are so far from being extravagant, as they are generally thought, that they are rather low in proportion. It is the eminence of the profession, and not the money made by it, that is the temptation for applying to it, and the dignity of that rank is to be considered as a part of what is made by it'-.
depense et du risque qu'il faut of the Bees, pt. ii. Dialogue vi.
pour s'y perfectionner.' Cantillon, p. 423.
1 \V.ofN.\3\i. i. ch. x. pt. i.vol. i. pp. no, in. Cf. ' It is the hopes pp. 106, 107. Cf. ' Scarcity en- either of gain or reputation, of hances the price of things much large revenuesand great dignities, oftener than the usefulness of that promote learning; and when them. Hence it is evident why we say that any calling, art, or those arts and sciences will always science is not encouraged, we be the most lucrative that cannot mean no more by it than that the be attained to but in great length masters or professors of it are not of time, by tedious study and close sufficiently rewarded for their application.' Mandeville, Fable pains either with honour or 176 PART II: POLICE In the same manner we shall find that the price of gold and silver is not extravagant, if we consider it in this view, for in a gold or silver mine there is a great chance of missing it altogether. If we suppose an equal number of men employed in raising corn and digging silver, the former will make more than the latter, because perhaps of forty or fifty employed in a mine, only twenty make anything at all. Some of the rest may indeed make fortunes, but every corn man succeeds in his under takings, so that upon the whole there is more made this way than the other. It is the ideal acquisition which is the principal temptation in a mine.
A man then has the natural price of his labour, when it is sufficient to maintain him during the time of labour, to defray the expense of education, and to compensate the risk of not living long enough, and of not succeeding in the business. When a man has this, there is sufficient encouragement to the labourer, and the commodity will be cultivated in proportion to the demand l.
The market price of goods is regulated by quite other circumstances. When a buyer comes to the market, he never asks of the seller what expenses he has been at in producing them. The regulation of the market price of goods depends on the three following articles: — First, the demand, or need for the commod^. There is no demand for a thing of little use; it is not a rational object of desire.
Secondly, the abundance or scarcity of the commodity in proportion to the need of it. If the commodity be scarce, the price is raised, but if the quantity be more than is sufficient to supply the demand, the price falls. Thus it is that diamonds and other precious stones profit.' Mandeville, Fable of the by the words ' and sold at its Bees, pt. ii. Dialogue vi. p. 414. natural price.' Cf. W. of N. bk.
1 There is evidently a hiatus i. ch. vii. 4th paragraph, vol. i.
here, which may be supplied p. 57.
CHEAPNESS OR PLENTY 177 are dear, while iron, which is much more useful, is so many times cheaper, though this l depends principally on the last cause, viz.: — Thirdly, the riches or poverty of those who demand. When there is not enough produced to serve everybody, the fortune of the bidders is the only regulation of the price. The story which is told of the merchant and the carrier in the deserts of Arabia is an evidence of this. The merchant gave 10,000 ducats for a certain quantity of water. His fortune here regulated the price, for if he had not had them, he could not have given them, and if his fortune had been less, the water would have been cheaper. When the commodity is scarce, the seller must be content with that degree of wealth which they have who buy it. The case is much the same as in an auction. If two persons have an equal fond ness for a book, he whose fortune is largest will carry it. Hence things that are very rare go always to rich countries. The King of France only could purchase that large diamond of so many thousand pounds value 2. Upon this principle, everything is dearer or cheaper according as it is the purchase of a higher or lower set of people. Utensils of gold are comeatable only by persons in certain circumstances. Those of silver fall to another set of people, and their prices are regulated by what the majority can give. The prices of corn and beer are regulated by what all the world can give, and on this account the wages of the day-labourer have a great influence upon the price of corn. When the price of corn rises, wages rise also, and vice versa 3; when the quantity of corn falls short, as in 1 I.e. the proportion between credit of the purchase at a time the value of precious stones and of virtual bankruptcy to him- iron. self in conjunction with Law.
2 The ' Regent ' diamond, pur- Me'tnoires, ed. Cheruel et Regnier, chased for the King in 1717 for torn. xiv. pp. 12-14.
two million livres, according 3 W. of N. bk. i. ch. viii. to Saint-Simon, who takes the vol. i. p. 90.
178 PART II: POLICE a sea-voyage, it always occasions a famine, and then the price becomes enormous. Corn then becomes the pur chase of a higher set of people, and the lower must live on turnips and potatoes.
Thus we have considered the two prices, the natural and the market price, which every commodity is supposed to have. We observed before that however seemingly independent they appear to be, they are necessarily con nected. This will appear from the following considera tions. If the market price of any commodity is very great, and the labour very highly rewarded, the market is prodigiously crowded with it, greater quantities of it are produced, and it can be sold to the inferior ranks of people. If for every ten diamonds there were ten thousand, they would become the purchase of everybody, because they would become very cheap, and would sink to their natural price. Again, when the market is over stocked, and there is not enough got for the labour of the manufacture, nobody will bind to it, they cannot have a subsistence by it, because the market price falls then below the natural price. It is alleged that as the price of corn sinkfs], the wages of the labourer should sink, as he is then better rewarded. It is true that if provisions were long cheap, as more people would flock to this labour where the wages are high, through this concurrence of labour, the wages would come down, but we find that when the price of corn is doubled, the wages continue the same as before, because the labourers have no other way to turn themselves. The same is the case with menial servants \ From the above we may observe that whatever police tends to raise the market price above the natural, tends to diminish public opulence. Dearness and scarcity are in effect the same thing. When commodities are in abun dance, they can be sold to the inferior ranks of people, who 1 W.ofN. bk. i. ch. viii. vol. i. pp. 90, 91. The reporter has evidently carried condensation to excess at this point.
CHEAPNESS OR PLENTY 179 can afford to give less for them, but not if they are scarce. So far, therefore, as goods are a conveniency to the society, the society lives less happy when only the few can possess them. Whatever therefore keeps goods above their natural price for a permanency, diminishes [a] nation's opulence. Such are First, all taxes upon industry, upon leather, and upon shoes, which people grudge most, upon salt, beer, or whatever is the strong drink of the country, for no country wants l some kind of it. Man is an anxious animal, and must have his care swept off by something that can exhilarate the spirits. It is alleged that this tax upon beer is an artificial security against drunkenness, but if we attend to it, [we will find] that it by no means prevents it. In countries where strong liquors are cheap, as in France and Spain, the people are generally sober, but in northern countries, where they are dear, they do not get drunk with beer, but \vith spirituous liquors; nobody presses his friend to a glass of beer, unless he choose it 2.
Secondly, monopolies also destroy public opulence. The price of the monopolized goods is raised above what is sufficient for encouraging the labour. When only a certain person or persons have the liberty of importing a commodity, there is less of it imported than would otherwise be; the price of it is therefore higher, and fewer people supported by it. It is the concurrence of different labourers which always brings down the price. In mono polies, such as the Hudson's Bay and East India companies, the people engaged in them make the price what they please.
Thirdly, exclusive privileges of corporations have the same effect. The butchers and bakers raise the price of their goods as they please, because none but their 1 I. e. of course, ' lacks ' or ' is without.'
2 W. of N. bk. iv. ch. iii. pt. ii. vol. ii. pp. 66-68.
l8o PART II: POLICE own corporation is allowed to sell in the market, and therefore their meat must be taken, whether good or not. On this account there is always required a magistrate to fix the prices. For any free commodity, such as broad cloth, there is no occasion for this, but it is necessary with bakers, who may agree among them selves to make the quantity and price what they please. Even a magistrate is not a good enough expedient for this, as he must always settle the price at the outside, else the remedy must be worse than the disease, for nobody would apply to these businesses, and a famine would ensue. On this account bakers and brewers have always profitable trades l.
As what raises the market price above the natural one diminishes public opulence, so what brings it down below it has the same effect.
It is only upon manufactures to be exported that this can usually be done by any law or regulation, such as the bounty allowed by the government upon coarse linen, by which it becomes exportable, when under twelve pence a yard 2. The public paying a great part of the price, it can be sold cheaper to foreigners than what is sufficient for encouraging the labour. In the same manner, by the bounty of five shillings upon the quarter of corn when sold under forty3 shillings, as the public pays an eighth part of the price, it can be sold just so much cheaper at a foreign market. By this bounty the commodity is rendered more comeatable, and a greater quantity of it produced, but then it breaks what may be called the natural balance of industry. The disposition to apply to 1 See on the assize of bread, In W. of N. bk. iv. ch. viii. vol.
W. of N. bk. i. ch. x. ad fin.; vol. ii. p. 227, the statute 29 Geo. II, i. pp. 150, 151. See also bk. i. cap. 15, is referred to and the value ch. vii. vol. i. pp. 64-66. correctly given.
* This should read, 'upon 5 A mistake for forty-eight, i coarse linen exported, when W. & M. cap. 12. W, of N. bk.
under eighteen pence a yard.' i. ch. xi. vol. i. p. 208.
CHEAPNESS OR PLENTY l8l the production of that commodity is not proportioned to the natural cause of the demand, but to both that and the annexed bounty. It1 has not only this effect with regard to the particular commodity, but likewise people are called from other productions which are less encouraged, and thus the balance of industry is broken.
Again, after the ages of hunting and fishing, in which provisions were the immediate produce of their labour, when manufactures were introduced, nothing could be produced without a great deal of time. It was a long time before the weaver could carry to the market the cloth which he bought in flax. Every trade therefore requires a stock of food, clothes, and lodging to carry it on -'. Suppose then, as is really the case in every country, that there is in store a stock of food, clothes, and lodging, the number of people that are employed must be in proportion to it 3. If the price of one commodity is sunk below its natural price, while another is above it, there is a smaller quantity of the stored stock left to support the whole. On account of the natural connexion of all trades in the stock, by allowing bounties to one4 you take away the stock from the rest. This has been the real consequence of the corn bounty.
The price of corn being sunk, the rent of the farms sinks also, yet the bounty upon corn, which was laid on at the time of the taxes 5, was intended to raise the rent, and had the effect for some time, because the tenants were assured of a price for their corn, both at home and abroad. But though the effects of the bounty encourag- 1 I.e. the bounty. MS. reads 6 'The Government of King 'but.' William...was in no condition 2 W. of N. bk. ii. Introduction, to refuse anything to the country vol. i. p. 273. gentlemen, from whom it was at 3 W. of N. Introduction, vol. i. that very time soliciting the first pp. 2, 3. establishment of the annual 4 MS. reads 'me,' evidently land-tax.' W. ofN. bk. i. ch. xi. a copyist's error. vol. i. p. 208.
182 PART II: POLICE ing agriculture brought down the price of corn, yet it raised the grass farms, for the more corn the less grass. The price of grass being raised, butchers' meat, in con sequence of its dependence upon it, must be raised also, so that if the price of corn is diminished, the price of other commodities is necessarily raised. The price of corn has indeed fallen from forty-two to thirty-five1, but the price of hay has risen from twenty-five to near fifty shillings. As the price of hay has risen, horses are not so easily kept, and therefore the price of carriage has risen also. But whatever increases the price of carriage diminishes plenty in the market2. Upon the whole, therefore, it is by far the best police to leave things to their natural course, and allow no bounties, nor impose taxes on commodities.
Thus we have shown what circumstances regulate the price of commodities, which was the first thing proposed.
[§ 8. Of Money as the Measure of Value and Medium of Exchange] We come now to the second particular, to consider money, first as the measure of value and then as the medium of permutation or exchange. When people deal 1 Red wheat is quoted at 335. shows that by stimulating the — 355. in the London Chronicle foreign demand it must have on Jan. 28, 1763, and at 335.— rather tended to raise it. He even 365. on Oct. 20 and 27, Nov. 3 and speaks of the ' very moderate 10, 1763. The other weekly prices supposition ' that the bounty may during the academical session have kept the price 45. per of 1762-1763, and October to quarter higher than it would December, 1763, are somewhat otherwise have been. Having lower. done this, he proceeds to argue 2 In W. of N. bk. i. ch. xi. vol. that every alteration in the i. pp. 208-210, and bk. iv. ch. v. price of corn must be nominal vol. ii. pp. 81-84, Adam Smith and not real. He has there- rejects the theory that the bounty fore no need for the argument had lowered the home price, and in the text above as to hay.
CHEAPNESS OR PLENTY 183 in many species of goods, one of them must be considered as the measure of value. Suppose there were only three commodities, sheep, corn, and oxen, we can easily re member them comparatively, but if we have a hundred different commodities, there are ninety-nine values of each arising from a comparison with each of the rest. As these cannot easily be remembered, men naturally fall upon one of them to be a common standard with which they compare all the rest. This will naturally at first be the commodity with which they are best acquainted. Accordingly we find that black cattle and sheep were the standard in Homer's time. The armour of one of his heroes was worth nine oxen, and that of another worth an hundred1. Black cattle was the common standard in ancient Greece. In Italy, and particularly in Tuscany, everything was compared with sheep, as this was their principal com modity. This is what may be called the natural measure of value. In like manner there \vere natural measures of quantity, such as fathoms, cubits, inches, taken from the proportion of the human body, once in use with every nation. But by a little observation they found that one man's arm was longer or shorter than another's, and that one was not to be compared with the other, and therefore wise men who attended to these things would endeavour to fix upon some more accurate measure, that equal quantities might be of equal values. This method became absolutely necessary when people came to deal in many commodities, and in great quantities of them. Though an inch was altogether inconsiderable when their dealings were confined to a few yards, more accuracy was required 1 Glaucus and Diomedes, Iliad, lib. v. cap. v. § i; Martin-Leake, vi. 236; W. of N. bk. i. ch. iv. Historical Account of English vol. i. p. 24. The quotation is Money, 2nd ed. 1745, p. 4; and a stock one, occurring in Pliny, (with a mistake as to the num- H. N. lib. xxxiii. cap. iii; Pufen- bers) E. Chambers, Cyclopaedia, dorf, De in re naturae et gentium, 2nd ed. 1738, s. v. ' Money.'
184 PART II I POLICE when they came to deal in some thousands. We find, in countries where their dealings are small, the remains of this inaccuracy. The cast of the balance is nothing thought of in their coarse commodities.
Since, then, there must of necessity be a common standard of which equal quantities should be of equal values, metals in general seemed best to answer this purpose, and of these the value of gold and silver could best be ascertained. The temper of steel cannot be precisely known, but what degree of alloy is in gold and silver can be exactly found out. Gold and silver were therefore fixed upon as the most exact standard to com pare goods with, and were therefore considered as the most proper measure of value.
In consequence of gold and silver becoming the measure of value, it came also to be the instrument of commerce. It soon became necessary that goods should be carried to market, and they could never be cleverly1 exchanged unless the measure of value was also the instrument of commerce. In the age of shepherds it might be no great inconvenience that cattle should be the medium of exchange, as the expense of maintaining them was nothing, the whole country being considered as one great common; but when lands came to be divided, and the division of labour introduced, this custom would be productive of very considerable in conveniences. The butcher and shoemaker might at times have no use for one another's commodities. The farmer very often cannot maintain upon his ground a cow more than he has. It would be a very great hard- 1 The second meaning for conversation; and applied to ' clever ' given by Johnson anything a man likes, without (Dictionary, 1755) is 'just, fit, a settled meaning.' See the proper, commodious.' He says: quotations in Murray, New ' This is a low word, scarcely Englis/i Dictionary. ever used but in burlesque or CHEAPNESS OR PLENTY 185 ship on a Glasgow merchant to give him a cow for one of his commodities. To remedy this, those materials which were before considered as the measure of value, came also to be the instrument of exchange. Gold and silver had all advantages. They can be kept without expense, they do not waste, and they are very portable. Gold and silver, however, do not derive their whole utility from being the medium of exchange; though they never had been used as money, they are more valuable than any other metals. They have a superior beauty, are capable of a finer polish, and are more proper for making any instrument, except those with an edge. For all these reasons, gold and silver came to be the proper measure of value, and the instrument of exchange; but in order to render them more proper for these purposes, it was necessary that both their weight and their fineness should be ascertained. At first their balances were not very accurate, and therefore frauds wrere easily committed. However, this was remedied by degrees; but common business would not allow of the experiments which are necessary to fix precisely the degree of fineness. Though with a great quantity of alloy, they are to appearance good. It was necessary therefore, to facilitate exchange, that they should fall upon some expedient to ascertain with accuracy both weight and fineness. Coinage most effectually secures both these. The public, finding how much it would tend to facilitate commerce, put a stamp upon certain pieces that whoever saw them might have the public faith that they were of a certain weight and fineness; and this would be what was at first marked upon the coin, as being of most importance!.
1 Aristotle, Politics, 1257 a 38- and silver coins, and have there- 41, quoted in Pufendorf, De iure fore been regarded as qualities naturae et gentium, lib. v. cap. i. necessary for a good measure of § 12. On the properties which value and medium of exchange, have been observed in gold see Grotius, DC hire belli et pacts, 186 PART ii: POLICE Accordingly, the coins of every country appear to have borne l the names of the weights corresponding to them 2, and they contained the denomination they expressed. The British pound sterling- seems originally to have been a pound weight of pure silver 3.
As gold could be easily exchanged into silver, the latter came always to be the standard or measure of value. As there cannot be two standards, and in the greater part of purchases silver is necessary, we never say a man is worth so many guineas, but always pounds 4.
It is to be observed that the measure of quantity has always increased, while that of value has decreased. The British pound has now decreased to less than a third of its original value, which was sixty-three shillings, while the measure of quantity has considerably increased. The reason is that the interest of the government requires this. It is the interest of the baker and the brewer to make the measure of quantity as little as possible; and therefore there are inspectors appointed who, when it is brought down, always settle it a little farther up. All our measures, which were taken from the Roman foot, fathom, and inch,