CHAP. VI.

given for the profits of the undertaker of the work, who hazards his stock in this adventure. The value which the workmen add to the materials, therefore, resolves itself in this case

OF THE COMPONENT PART OF THE PRICE OF into two parts, of which the one pays their

COMMODITIES.

wages, the other the profits of their employer upon the whole stock of materials and wages In that early and rude state of society which which he advanced. He could have no inteprecedes both the accumulation of stock and rest to employ them, unless he expected from the appropriation of land, the proportion be- the sale of their work something more than tween the quantities of labour necessary for what was sufficient to replace his stock to acquiring different objects, seems to be the him; and he could have no interest to employ only circumstance which can afford any rule a great stock rather than a small one, unless for exchanging them for one another. If his profits were to bear some proportion to among a nation of hunters, for example, it the extent of his stock. usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days or two hours labour, should be however, altogether different, are regulated worth double of what is usually the produce of one day's or one hour's labour.

If the one species of labour should be more severe than the other, some allowance will naturally be made for this superior hardship; and the produce of one hour's labour in the one way may frequently exchange for that of two hour's labour in the other.

The profits of stock, it may perhaps be thought, are only a different name for the wages of a particular sort of labour, the labour of inspection and direction. They are,

by quite different principles, and bear no proportion to the quantity, the hardship, or the ingenuity of this supposed labour of inspection and direction. They are regulated altogether by the value of the stock employed, and are greater or smaller in proportion to the extent of this stock. Let us suppose, for example, that in some particular place, where Or if the one species of labour requires an the common annual profits of manufacturing ncommon degree of dexterity and ingenuity, stock are ten per cent. there are two different the esteem which men have for such talents, manufactures, in each of which twenty workwill naturally give a value to their produce, men are employed, at the rate of fifteen superior to what would be due to the time pounds a year each, or at the expense of three employed about it. Such talents can seldom hundred a-year in each manufactory. Let be acquired but in consequence of long appli- us suppose, too, that the coarse materials cation, and the superior value of their pro-annually wrought up in the one cost only duce may frequently be no more than a rea- seven hundred pounds, while the finer matesonable compensation for the time and labour rials in the other cost seven thousand. The which must be spent in acquiring them. In capital annually employed in the one will, in the advanced state of society, allowances of this case, amount only to one thousand this kind, for superior hardship and superior pounds; whereas that employed in the other skill, are commonly made in the wages of labour; and something of the same kind must probably have taken place in its earliest and rudest period.

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

will amount to seven thousand three hundred pounds. At the rate of ten per cent. therefore, the undertaker of the one will expect a yearly profit of about one hundred pounds only; while that of the other will expect about seven hundred and thirty pounds. But though their profits are so very different, their labour of inspection and direction may be either altogether or very nearly the same. In many great works, almost the whole labour of this kind is committed to some principal As soon as stock has accumulated in the clerk. His wages properly express the value hands of particular persons, some of them will of this labour of inspection and direction. naturally employ it in setting to work indust- Though in settling them some regard is had rious people, whom they will supply with ma commonly, not only to his labour and skill, terials and subsistence, in order to make a but to the trust which is reposed in him, yet profit by the sale of their work, or by what they never bear any regular proportion to the their labour adds to the value of the materials. capital of which he oversees the management; In exchanging the complete manufacture and the owner of this capital, though he is either for money, for labour, or for other thus discharged of almost all labour, still exgoods, over and above what may be sufficient pects that his profit should bear a regular proto pay the price of the materials, and the portion to his capital. In the price of comwages of the workmen, something must be modities, therefore, the profits of stock con

stitute a component part altogether different | advances both the rent of this land, and the from the wages of labour, and regulated by wages of this labour. Though the price of the quite different principles.

In this state of things, the whole produce of labour does not always belong to the labourer. He must in most cases share it with the owner of the stock which employs him. Neither is the quantity of labour commonly employed in acquiring or producing any commodity, the only circumstance which can regulate the quantity which it ought commonly to purchase, command or exchange for. An additional quantity, it is evident, must be due for the profits of the stock which advaneed the wages and furnished the materials of that labour.

corn, therefore, may pay the price as well as the maintenance of the horse, the whole price still resolves itself, either immediately or ultimately, into the same three parts of rent, labour, and profit.

In the price of flour or meal, we must add to the price of the corn, the profits of the miller, and the wages of his servants; in the price of bread, the profits of the baker, and the wages of his servants; and in the price of both, the labour of transporting the corn from the house of the farmer to that of the miller, and from that of the miller to that of the baker, together with the profits of those who advance the wages of that labour.

The price of flax resolves itself into the same three parts as that of corn. In the price of linen we must add to this price the wages of the flax-dresser, of the spinner, of the weaver, of the bleacher, &c. together with the profits of their respective employers.

As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gather- As any particular commodity comes to be ⚫ing them, come, even to him, to have an ad-more manufactured, that part of the price ditional price fixed upon them. He must which resolves itself into wages and profit, then pay for the licence to gather them, and comes to be greater in proportion to that which must give up to the landlord a portion of resolves itself into rent. In the progress of what his labour either collects or produces. the manufacture, not only the number of proThis portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land, and in the price of the greater part of commodities, makes a third component part.

The real value of all the different component parts of price, it must be observed, is measured by the quantity of labour which they can, each of them, purchase or command. Labour measures the value, not only of that part of price which resolves itself into labour, but of that which resolves itself into rent, and of that which resolves itself into profit.

In every society, the price of every commodity finally resolves itself into some one or other, or all of those three parts; and in every improved society, all the three enter, more or less, as component parts, into the price of the far greater part of commodities.

fits increase, but every subsequent profit is greater than the foregoing; because the capital from which it is derived must always be greater. The capital which employs the weavers, for example, must be greater than that which employs the spinners; because it not only replaces that capital with its profits, but pays, besides, the wages of the weavers: and the profits must always bear some proportion to the capital.

In the most improved societies, however, there are always a few commodities of which the price resolves itself into two parts only, the wages of labour, and the profits of stock; and a still smaller number, in which it consists altogether in the wages of labour. In the price of sea-fish, for example, one part pays the labour of the fisherman, and the other the profits of the capital employed in the fishIn the price of corn, for example, one part ery. Rent very seldom makes any part of it, pays the rent of the landlord, another pays the though it does sometimes, as I shall shew wages or maintenance of the labourers and la- hereafter. It is otherwise, at least through bouring cattle employed in producing it, and the greater part of Europe, in river fisheries the third pays the profit of the farmer. These A salmon fishery pays a rent; and rent, though three parts seem either immediately or ulti- it cannot well be called the rent of land, makes mately to make up the whole price of corn. a part of the price of a salmon, as well as A fourth part, it may perhaps be thought is wa es and profit. In some parts of Scotland, necessary for replacing the stock of the farm- a few poor people make a trade of gathering, er, or for compensating the wear and tear of along the sea-shore, those little variegated his labouring cattle, and other instruments of stones commonly known by the name of Scotch husbandry. But it must be considered, that pebbles. The price which is paid to them by the price of any instrument of husbandry, such the stone-cutter, is altogether the wages of as a labouring horse, is itself made up of the their labour; neither rent nor profit makes any same three parts; the rent of the land upon part of it. which he is reared, the labour of tending and rearing him, and the profits of the farmer, who

But the whole price of any commodity must still finally resolve itself into some one or other

or all of those three parts; as whatever part belong to different persons, they are readily of it remains after paying the rent of the land, distinguished; but when they belong to the and the price of the whole labour employed in same, they are sometimes confounded with raising, manufacturing, and bringing it to one another, at least in common language. market, must necessarily be profit to some. body.

common language. The greater part of our North American and West Indian planters are in this situation. They farm, the greater part of them, their own estates: and accordingly we seldom hear of the rent of a plantation, but frequently of its profit.

A gentleman who farms a part of his own estate, after paying the expense of cultivation, As the price or exchangeable value of every should gain both the rent of the landlord and particular commodity, taken separately, re- the profit of the farmer. He is apt to denosolves itself into some one or other, or all of minate, however, his whole gain, profit, and those three parts; so that of all the commodi- thus confounds rent with profit, at least in ties which compose the whole annual produce of the labour of every country, taken complexly, must resolve itself into the same three parts, and be parcelled out among different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. The whole of what is Common farmers seldom employ any overannually either collected or produced by the seer to direct the general operations of the labour of every society, or, what comes to the farm. They generally, too, work a good deal same thing, the whole price of it, is in this with their own hands, as ploughmen, harrowmanner originally distributed among some of ers, &c. What remains of the crop, after payits different members. Wages, profit, and ing the rent, therefore, should not only rerent, are the three original sources of all reve- place to them their stock employed in cultiva nue, as well as of all exchangeable value. All tion, together with its ordinary profits, but other revenue is ultimately derived from some pay them the wages which are due to them, one or other of these. both as labourers and overseers. Whatever Whoever derives his revenue from a fund remains, however, after paying the rent and which is his own, must draw it either from keeping up the stock, is called profit. But his labour, from his stock, or from his land. wages evidently make a part of it. The farmThe revenue derived from labour is called er, by saving these wages, must necessarily wages; that derived from stock, by the per- gain them. Wages, therefore, are in this case son who manages or employs it, is called pro- confounded with profit. fit; that derived from it by the person who An independent manufacturer, who has does not employ it himself, but lends it to an-stock enough both to purchase materials, and to other, is called the interest or the use of mo- maintain himself till he can carry his work to ney. It is the compensation which the bor- market, should gain both the wages of a jourrower pays to the lender, for the profit which neyman who works under a master, and the he has an opportu:.ity of making by the use profit which that master makes by the sale of of the money. Part of that profit naturally that journeyman's work. His whole gains, belongs to the borrower, who runs the risk however, are commonly called profit, and and takes the trouble of employing it, and part wages are, in this case, too, confounded with to the lender, who affords him the opportuni- profit. ty of making this profit. The interest of money is always a derivative revenue, which, if it is not paid from the profit which is made by the use of the money, must be paid from some other source of revenue, unless perhaps the borrower is a spendthrift, who contracts a second debt in order to pay the interest of the first. The revenue which proceeds altogether from land, is called rent, and belongs to the landlord. The revenue of the farmer is derived partly from his labour, and partly from As in a civilized country there are but few his stock. To him, land is only the instru- commodities of which the exchangeable value ment which enables him to earn the wages of arises from labour only, rent and profit conthis labour, and to make the profits of this tributing largely to that of the far greater stock. All taxes, and all the revenue which part of them, so the annual produce of its lais founded upon them, all salaries, pensions, bour will always be sufficient to purchase or and annuities of every kind, are ultimately de-command a much greater quantity of labour rived from some one or other of those three than what was employed in raising, preparing, original sources of revenue, and are paid eith- and bringing that produce to market. If the er immediately or mediately from the wages society were annually to employ all the labour of labour, the profits of stock, or the rent of which it can annually purchase, as the quanland. tity of labour would increase greatly every When those three different sorts of revenue year, so the produce of every succeeding yeu

A gardener who cultivates his own garden with his own hands, unites in his own person the three different characters, of landlord, farmer, and labourer. His produce, therefore, should pay him the rent of the first, the profit of the second, and the wages of the third. The whole, however, is commonly considered as the earnings of his labour. Both rent and profit are, in this case, confounded with wages.

would be of vastly greater value than that of himself, in the same manner, his own subsistthe foregoing. But there is no country in ence, which is generally suitable to the profit which the whole annual produce is employed in which he may reasonably expect from the sale maintaining the industrious. The idle every- of his goods. Unless they yield him this where consume a great part of it; and, ac-profit, therefore, they do not repay him what cording to the different proportions in which they may very properly be said to have really it is annually divided between those two dif- cost him. ferent orders of people, its ordinary or average value must either annually increase or diminish, or continue the same from one year to another.

CHAP. VII.

OF THE NATURAL AND MARKET PRICE OF COM-
MODITIES.

THERE is in every society or neighbourhood an ordinary or average rate, both of wages and profit, in every different employment of labour and stock. This rate is naturally regulated, as I shall shew hereafter, partly by the general circumstances of the society, their riches or poverty, their advancing, stationary, or declining condition, and partly by the particular nature of each employment.

Though the price, therefore, which leaves him this profit, is not always the lowest at which a dealer may sometimes sell his goods, it is the lowest at which he is likely to sell them for any considerable time; at least where there is perfect liberty, or where he may change his trade as often as he pleases.

The actual price at which any commodity is commonly sold, is called its market price. It may either be above, or below, or exactly the same with its natural price.

The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity, or the whole value of the rent, labour, and profit, which must be paid in order to bring it thither. Such people may be called the effectual demanders, and their demand the effectual demand; since it may be sufficient to effectuate the bringing of the commodity to market. It is different from the absolute

A very poor man may be said, in some sense, to have a demand for a coach and six; he might like to have it; but his demand is not an effectual demand, as the com modity can never be brought to market in order to satisfy it.

There is likewise in every society or neigh-demand. bourhood an ordinary or average rate of rent, which is regulated, too, as I shall shew hereafter, partly by the general circumstances of the society or neighbourhood in which the land is situated, and partly by the natural or improved fertility of the land.

When the quantity of any commodity which These ordinary or average rates may be is brought to market falls short of the effeccalled the natural rates of wages, profit and tual demand, all those who are willing to pay rent, at the time and place in which they the whole value of the rent, wages, and profit, commonly prevail. which must be paid in order to bring it thithWhen the price of any commodity is neither, cannot be supplied with the quantity which er more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price.

they want. Rather than want it altogether, some of them will be willing to give more. A competition will immediately begin among them, and the market price will rise more or less above the natural price, according as either the greatness of the deficiency, or the wealth and wanton luxury of the competitors, happen to animate more or less the eagerness of the competition. Among competitors of equal wealth and luxury, the same deficiency will generally occasion a more or less eager competition, according as the acquisition of the commodity happens to be of more or less importance to them. Hence the exorbitant price of the necessaries of life during the blockade of a town, or in a famine.

The commodity is then sold precisely for what it is worth, or for what it really costs the person who brings it to market; for though, in common language, what is called the prime cost of any commodity does not comprehend the profit of the person who is to sell it again, yet, if he sells it at a price which does not allow him the ordinary rate of profit in his neighbourhood, he is evidently a loser by the trade; since, by employing his stock When the quantity brought to market exin some other way, he might have made that ceeds the effectual demand, it cannot be all profit. His profit, besides, is his revenue, sold to those who are willing to pay the whole the proper fund of his subsistence. As, value of the rent, wages, and profit, which while he is preparing and bringing the goods to market, he advances to his workmen their wages, or their subsistence; so he advances to

must be paid in order to bring it thither. Some part must be sold to those who are willing to pay less, and the low price which

they give for it must reduce the price of the | ferent accidents may sometimes keep them whole. The market price will sink more or suspended a good deal above it, and someless below the natural price, according as the times force them down even somewhat below greatness of the excess increases more or less it. But whatever may be the obstacles which the competition of the sellers, or according as hinder them from settling in this centre of reit happens to be more or less important to pose and continuance, they are constantly them to get immediately rid of the commo- tending towards it. dity. The same excess in the importation of perishable, will occasion a much greater competition than in that of durable commodities; in the importation of oranges, for example, than in that of old iron.

The whole quantity of industry annually employed in order to bring any commodity to market, naturally suits itself in this manner to the effectual demand. It naturally aims at bringing always that precise quantity thither which may be sufficient to supply, and no more than supply, that demand.

When the quantity brought to market is just sufficient to supply the effectual demand, and no more, the market price naturally But, in some employments, the same quancomes to be either exactly, or as nearly as tity of industry will, in different years, procan be judged of, the same with the natural duce very different quantities of commodities; price. The whole quantity upon hand can while, in others, it will produce always the be disposed of for this price, and cannot be same, or very nearly the same. The same disposed of for more. The competition of number of labourers in husbandry will, in the different dealers obliges them all to ac- different years, produce very different quancept of this price, but does not oblige them tities of corn, wine, oil, hops, &c. But the to accept of less. same number of spinners or weavers will every The quantity of every commodity brought year produce the same, or very nearly the to market naturally suits itself to the effectual same, quantity of linen and woollen cloth. It demand. It is the interest of all those who is only the average produce of the one species employ their land, labour, or stock, in bring-of industry which can be suited, in any reing any commodity to market, that the quan- spect, to the effectual demand; and as its actity never should exceed the effectual demand; and it is the interest of all other people that it never should fall short of that demand.

If at any time it exceeds the effectual demand, some of the component parts of its price must be paid below their natural rate. If it is rent, the interest of the landlords will immediately prompt them to withdraw a part of their land; and if it is wages or profit, the interest of the labourers in the one case, and of their employers in the other, will prompt them to withdraw a part of their labour or stock, from this employment. The quantity brought to market will soon be no more than sufficient to supply the effectual demand. All the different parts of its price will rise to their natural rate, and the whole price to its natural price.

tual produce is frequently much greater, and frequently much less, than its average produce, the quantity of the commodities brought to market will sometimes exceed a good deal, and sometimes fall short a good deal, of the effectual demand. Even though that demand, therefore, should continue always the same, their market price will be liable to great fluctuations, will sometimes fall a good deal below, and sometimes rise a good deal above, their natural price. In the other species of industry, the produce of equal quantities of labour being always the same, or very nearly the same, it can be more exactly suited to the effectual demand. While that demand continues the same, therefore, the market price of the commodities is likely to do so too, and to be either altogether, or as nearly as can be If, on the contrary, the quantity brought to judged of, the same with the natural price. market should at any time fall short of the ef- That the price of linen and woollen cloth is fectual demand, some of the component parts liable neither to such frequent, nor to such of its price must rise above their natural rate. great variations, as the price of corn, every If it is rent, the interest of all other landlords man's experience will inform him. The price will naturally prompt them to prepare more of the one species of commodities varies only land for the raising of this commodity; if it with the variations in the deniand; that of is wages or profit, the interest of all other la- the other varies not only with the variations bourers and dealers will soon prompt them to in the demand, but with the much greater, employ more labour and stock in preparing and more frequent, variations in the quantity and bringing it to market. The quantity of what is brought to market, in order to supbrought thither will soon be sufficient to supply that demand.

ply the effectual demand. All the different The occasional and temporary fluctuations parts of its price will soon sink to their na- in the market price of any commodity fall tural rate, and the whole price to its natural chiefly upon those parts of its price which reprice. solve themselves into wages and profit. That

The natural price, therefore, is, as it were, part which resolves itself into rent is less afthe central price, to which the prices of all fected by them. A rent certain in money is commodities are continually gravitating. Dif-not in the least affected by them, either in its