r, according to the proper, makes it as much more than 20, according to the improper, all the effects which follow from what is called the rise above, or fall below par, in the one case, follow from the same things, but called by different names, in the other, on this, therefore, I have no occasion to enlarge, when the currencies of two countries are metallic, a change in their relative value beyond the fluctuations which are limited by the expense of transmitting the metals, and continually corrected by their transmission, can only happen by a change in the relative quantity of the metal they contain the being checks, as we have already seen, which prevent any considerable difference between the value of a metallic currency and that of the metal which it contains, there is, however, another case, namely, that of a paper money, not convertible into the metallic, this requires to be considered by itself, let us resume the former supposition, that the pound sterling contains as much of the precious metal as 10 guilders and let us suppose that a paper money, not payable in the metals, is issued in England in such quantity, that a pound in that money is reduced 90 percent, below the value of the metal contained in a pound sterling it is easy to see that a bill for 100 a pound sterling, in this case, j s of the same value, exactly, as a bill for 100 a pound sterling when the currency was degraded by losing 20 percent, of its metal, a bill for 100 a pound, in both cases is equal not to 100 times 10 guilders, but 100 times 8 guilders, the reason is, that the bill will in England buy only as much of the metal as is contained in 100 times 8 guilders, it will exchange, therefore, of course, only for a bill of 800 guilders, the facts may be expressed in the form of a general rule, a bill drawn upon any country is equal in value, when it arrives in that country, to all the precious metal which the money for which it is drawn can purchase in the market, a bill for 100 a pound, for example, is equal to all the metal which it can purchase, whether it is the same quantity which would be purchased by 100 a pound, sterling, or less, to whatever amount the portion which it can purchase is less than what could be purchased by 100 a pound, of the coins, to that amount the paper money is degraded below what would be the value of the coins, if they circulated in its dead, the exchange, therefore, against any country, can never exceed the amount of two sums the difference between the value of the degraded and the undergraded currency, or the difference between the nominal amount of the currency and the quantity of the precious metal which it can purchase, for the first item and the expense of sending the metal, when purchased, as the second, it thus appears how perfectly unfounded is the opinion of those, and some political economists of great eminence are included in the number, who conceived that the real, not merely the nominal, exchange, may exceed the expense of transmitting the precious metals, they say, that when by some particular cause a great absorption of the precious metals has taken place, creating a scarcity, in consequence of which goods must be sent from the country where it is scarce to bring it back from the countries where it abounds, bills drawn by the country in which it is scarce upon the countries where it abounds, may bear a premium equal to the cost of sending goods which may fetch in the foreign market the value of the bill and this, in certain cases, may greatly exceed the cost of sending the precious metals, if the facts are traced, the answer will be seen to be conclusive, what is the true account of the trade in commodities when the exchange is at par, if that is understood, the difference which takes place when the exchange is not at par will be easily explained, when the exchange between two countries, call them A and B, is at par, it is implied that the exports and imports of both are equal, that each receives from the other as much as it sends, in this case the goods which A sends to B must be so much cheaper in A than they can be made in B, that they can there be sold with all the addition required on account of the cost of carriage, in like manner the goods which B sends to A must be so much cheaper in B, that the cost of carriage is covered by the price which they fetch in A, this cost of carriage, it is obvious, does not affect the exchange any more than an item in the cost of production, next let us observe what happens when the state of the exchange is disturbed, let us suppose that a demand is suddenly created in A, for the means of making payments in B, payments greatly beyond the value of the former exportations, the demand for bills on B is consequently increased beyond the supply, and the price rises, the question is, what is the limit to that rise in the price of bills, at first, it is evident, the rise of price is limited to the cost of sending the precious metal, as the metal, however, departs, the value of it rises, if the currency is paper, and its value stationary, the gold will rise, and rise equally, both in currency and commodities, the final question, then, is, what is the limit to the rise in the value of gold, before the premium on the bills commenced, goods in A were so cheap, that a portion of them could be sent to B, and sold, with all the addition of the cost of carriage, and of course with the ordinary profits of stock, the whole of the premium on the bills, therefore, is an addition to the ordinary profits of stock, if it be taken for England, and B for the continent of Europe, the case will be, that English goods, when the exchange is at par, go abroad, and are sold at a price which includes both profits and cost of carriage when the premium on bills rises only so high as to equal the cost of sending bullion, it is to that extent an additional profit on the sending of goods, it is evident that, in proportion as this premium should rise, it would not only enhance the motive to increase the exportation of the goods which could be exported with a profit before the rise of the bills, but that it would render many other kinds of goods exportable, which before could not be exported, thus, when the exchange was at par, there were certain kinds of goods in England, which, after paying cost of carriage, could be sold abroad with a profit there were certain other kinds which, on account of their high price in England, could not be thus exported some might thus be 1%, too high to be exported, others 2%, too high, others 3%, and so on, it is obvious that a premium of 1%, on bills would enable the first kind to be exported a premium of 2%, would enable the second and a premium of 1%, would enable two or three kinds to be exported, which could not have been exported before, as the counter-operation would be of the same kind and the same power, viz. to prevent the importation of foreign goods into England, exportation would be exceedingly increased, importation nearly prevented, the two operations together would be so powerful, that any great deviation from the real power of exchange could never be of long duration, to the amount of the cost of sending the precious metal, permanent circumstances may give it a permanent duration, if England, for example, sent every year a larger mount of the precious metal to India, and received it from Hamburg, the exchange would be to the extent of the cost of sending the metals, permanently favourable with Hamburg, unfavourable with India, if bills of exchange were always drawn for so much weight of gold the case would be simple, suppose a bill in London drawn upon Paris for 100 ounces of gold, no man would pay for that bill more gold beyond the 100 ounces than the cost of sending the 100 ounces, he might purchase the 100 ounces at one time with 398 pound of currency, at another with 410 a pound of currency, but that would be entirely owing to changes in the relative value of the currency and the gold, these changes, it is said, may in certain circumstances, take place from a rise in the value of the gold, the currency remaining of the same value, this implies that gold can become more valuable in one country than in the neighbouring countries in England, for example, than on the continent, but this it cannot do without increasing the exports in England, and diminishing, almost to nothing, the imports, suppose the rise in the value of gold to be 1 percent, 2 percent, or to amount to 10 percent, at this last rate the goods which could be sent abroad with the ordinary profit, could be now sent abroad with 10 percent, more than the ordinary profit, while all the other kinds of goods, those 1 percent, those 2 percent, those 3 percent, 4 percent, 5 percent, and so on, too dear to have been sent before, would now all be sent at the same time that the counter operation would be equally strong to prevent foreign goods from being imported, these are the necessary effects of a high value of gold in one country as compared with other countries and they are evidently such as to render it impossible that a high value of the precious metal in one country, compared with the neighboring countries, can ever in a state of freedom be of long duration, section 17, bounties and prohibitions, under this title i include all encouragements and discouragements of whatsoever sort, the object of which is, to make more or less of production or exchange to flow in certain channels, than would go into them of its own accord, the argument, on this subject, i trust, will be clear and conclusive, without a multiplicity of words, if it should appear, that production and exchange fall into the most profitable channels, when they are left free to themselves it will necessarily follow that as often as they are diverted from those channels, by external inter-positions of any sort, so often the industry of the country is made to employ itself less advantageously, that production and exchange do, when left to themselves, fall into the most profitable channels, is clear by a very short demonstration, the cases of production and of exchange require to be considered separately for, in the case of production, there is hardly any difference of opinion, if a country had no commercial intercourse with other countries, and employed the whole of its productive powers exclusively for the supply of its own consumption, nothing could be more obviously absurd, than to give premiums for the production of one set of commodities, and oppose obstructions of any sort to the production of another I mean in the view of political economy, or on account of production, for if any country opposes obstructions to certain commodities, as spirituous liquors, because the use of them is hurtful, this regards morality, and has for its end to regulate, not production, but consumption, wherever it is not intended to limit consumption, it seems admitted, even in practice, that the demand will always regulate the supply, in the manner in which the benefit of the community is best consulted, the most stupid governments have not thought of giving a premium for the making of shoes, or imposing a preventive tax upon the production of stockings, in order to enrich the country by making a greater quantity of shoes, and a less quantity of stockings, with a view to the internal supply, it seems to be understood that just as many shoes, and just as many stockings, should be made, as there is a demand for, if a different policy were pursued if a premium were bestowed upon the production of shoes, a tax or other birth and imposed upon there, production of stockings, the effect would only be, that shoes would be afforded to the people cheaper, and stockings dearer than they otherwise would be, that the people would be better supplied with shoes, worse supplied with stockings, than they would have been, if things had been left to their natural course, that is, if the people had been left to consult freely their own convenience in other words, if the greatest quantity of benefit from their labor had been allowed to be obtained, all that regulation of industry, therefore the object of which has been to increase the quantity of one sort of commodities, lessen the quantity of another, has been directed to the purpose of regulating the exchange of commodities with foreign countries of increasing or diminishing, most commonly diminishing, the quantity of certain commodities which would be received from abroad, now it is certain, as has been already abundantly proved, that no commodity which can be made at home will ever be imported from a foreign country, unless it can be obtained by importation with a smaller quantity of labor, that is, cost, than it could be produced with at home, that it is desirable to have commodities produced with as smaller cost of labor as possible, seems to be not only certain, but admitted, this is the object of all the improvements that are aimed at in production, by the division and distribution of labor, by refined methods of culture applied to the land, by the invention of more potent and skillful machines, it seems, indeed, to be a self-vident proposition, that whatever the quantity which a nation possesses of the means of production, the more productive they can possibly he rendered, so much the better for this is neither more nor less than saying, that to have all the objects we desire, and to have them with little trouble, is good for mankind, not only is it certain, that in a state of freedom no commodity which can be made at home will ever be imported, unless it can be imported with a less quantity or cost of labor than it could be produced with at home but whatever is the country from which it can be obtained with the smallest cost of labor, to that country recourse will be had for obtaining it, and whatever the commodity by the exportation of which it can be obtained with the smallest quantity of home labor, that is the commodity which will be exported in exchange, this results so obviously from the laws of trade, as not to require explanation, it is no more than saying, that the merchants, if left to themselves, will always buy in the cheapest market, and sell in the dearest, it seems, therefore, to be fully established, that the business of production and exchange, if left to choose its own channels, is sure to choose those which are most advantageous to the community, it is sure to choose those channels, in which the commodities which the community desires to obtain, are obtained with the smallest cost, to obtain the commodities which man desires, and to obtain them with the smallest cost, is the whole of the good which the business of production and exchange, considered simply as such, is calculated to yield, in whatever degree, therefore, the business of production and exchange is forced out of the channels into which it would go of its own accord, to that degree the advantages arising from production and exchange are sacrificed or, at any rate, postponed to something else, if there is any case in which they ought to be postponed to something else, that is a question of politics, and not of political economy, there is no subject upon which the policy of the restrictive and prohibitive system has been maintained with greater obstinacy, and with a greater quantity of sophistry, than that of the trade in corn, the can, however, be no doubt, that corn never will be imported, unless when it can be obtained from abroad with a smaller quantity of labour than it can be produced with at home, all the good, therefore, which is obtained from the importation of any commodity, capable of being produced at home, is obtained from the importation of corn, why should that advantage and advantage which, in the case of corn, owing to the diversities of soil and extent of population, is liable to be much greater than in the case of any other commodity, be denied to the community, the reasons upon which the advocates for a restriction of the corn trade chiefly support themselves, are to neither is of any value, the first is, that unless the nation derive its corn from its own soil, it may, by the enmity of its neighbours, be deprived of its foreign supply, and may hence be reduced to the greatest distress, this argument implies an ignorance both of history, and of principle, of history, because, in point of fact, those countries which have depended the most upon foreign countries for their supply of corn, have enjoyed, beyond all other countries, the advantage of a steady and invariable market for grain, of principle, because it follows unavoidably, if what, in one country, is a favourable, is in other countries an unfavourable season, that nothing but obtaining a great part of its supply from various countries can save a nation from all the extensive and distressing fluctuations WLHCH the variety of seasons is calculated to produce, nor is the policy involved in this argument better than the political economy, its sacrifice is a real good, to escape the chance of a chimerical evil, an evil so much the less to be apprehended, that the country from which another derives its supply of corn is scarcely less dependent upon that other country for event to its produce, than the purchasing country is for its supply, it will not be pretended that a glut of corn in any country, from the loss of a great market, with that declension of price, that ruin of the farmers, and that depression of rents, which are its unavoidable consequences, is an immaterial evil, the second reason upon which the advocates of the corn monopoly support themselves is, that if the merchants and manufacturers enjoy in certain cases the monopoly of the home supply, the farmers and landlords are subject to injustice, if a similar monopoly is not bestowed upon them, in the first place, it may be observed, that if this argument is good for the growers of corn it is good for every other species of producers whatsoever if, because a tax is imposed upon the importation of woolens, a tax ought to be imposed upon the importation of corn, a tax ought also to be imposed upon the importation of everything which the country can produce the country ought, in short, to have no foreign commerce, except in those articles alone which it has not the means of producing, this is a reduction to absurdity, which appears conclusive, the argument more over supposes that an extraordinary gain is obtained by the manufacturer, in consequence of his supposed protection and that a correspondent evil is sustained by the corn grower, unless he is favored by a similar tax, the ignorance of principle is peculiarly visible in those suppositions, in neither of which is there a shadow of truth, the man who embarks his capital in the woolen, or any other manufacturer, with the produce of which that of the foreign manufacturers is not allowed to come into competition, does not, on that account, derive a greater profit from his capital, his profit is no greater than that of the man whose capital is embarked in trades open to the competition of all the world, all that happens is, that a greater number of capitalists find employment in that branch of manufacture that a portion, in short, of the capitalists of the country employ themselves in producing that particular species of manufacture, who would otherwise be employed in producing some other species, probably in producing something for the foreign market, with which that commodity, if imported from the foreign manufacturer, might be bought, as the man who has embarked his capital in the trade which is called protected, derives no additional profit from the protection so the grower of corn sustains not any peculiar loss or inconvenience, nothing, therefore, can be conceived more groundless than his demand of a compensation on that account, the market for corn is not diminished because a tax is laid upon the importation of woolens nor would that market be enlarged if the tax were taken off his business, therefore, is not in the least degree affected by it, it would be inconsistent with the plan of a work, confined to the exposition of general principles, to lay open all the fallacies which lurk in the arguments for restraining the trade in corn, one or two, however, of the sources of deception cannot be left altogether unnoticed, the landlord endeavors to represent his own case, and that of the manufacturer, as perfectly similar though, in the circumstances which concern this argument, they are not only different, but opposite, the landlord also endeavors to mix up his own case with that of the farmer and upon the success of that endeavor almost all the plausibility of his pretensions depends, that no pretensions are more unfounded, may be seen by a very short process of reasoning, the farmer, as a producer, requires, like every other producer, that all his outgoings be returned to him with the due profit upon the capital which he employs, the surplus which the land yields, over and above this return and profit, is what he pays to his landlord and his interest is not affected by the quantity of that surplus, whether it be great or small, his interest, however, is very much affected by wages because, in proportion as wages are low, his profits, like all other profits, are high, wages cannot be low, if corn is dear, the interest, therefore, the permanent interest, of the class of farmers, consists in having corn cheap, this or that individual in the class may, that is, during the currency of a lease, have an interest in high prices and the reason of the exception shows the truth of the general rule, the individual, who, during the currency of a lease, has an interest in high prices, is, by his lease, converted to a certain extent, into a receiver of rent, during the continuance of his lease, if prices rise, he gets, not only his due return of profits as a farmer, but something more, namely, a portion of what is truly rent, and which, but for his lease, would have gone to the landlord, this, then, is the grand distinction, the receivers of rent are benefited by a high price of corn, the producers of corn, as such, are not benefited by it, but the reverse, the case of the farmer corresponds with that of the manufacturer, not with that of the landlord, the farmer is a producer and capitalist, the manufacturer is a producer and capitalist and they have both received all that belongs to them, when their capital is replaced with its profits, the landlord is not a producer, nor a capitalist, he is the owner of certain productive powers in the soils and all which the soil produces belongs to him, after paying the capital which is necessary to put those productive powers in operation, it thus appears that the case of the landlord is peculiar that a high price of corn is profitable to him, because, the higher the price, the smaller proportion of the projects will suffice to replace, with its profits, the capital of the farmer and all the rest belongs to himself, to the farmer, however, and to all the rest of the community, it is an evil, both as it tends to diminish profits, and as it enhances the charge to consumers, section 18 colonies, among the expedients which have been made use of, to force into particular channels a greater quantity of the means of production, than would have flowed into them of their own accord colonies are a subject of sufficient importance to require a particular consideration, the only point of colonial policy, which it is here necessary to consider, is that of trade with the colonies, and the question is whether any peculiar advantage may be derived from it, with respect to colonies, as with respect to foreign countries, the proposition will, doubtless, be admitted as true, that whatever advantage is derived from trading with them, consists in what is received from them, not in what is sent, because that, if not followed by a return, would be altogether loss, the return from them is either money or commodities, the reader is by this time fully aware that a country derives no advantage from receiving money, more than from receiving any other species of commodity, it is also plain that where the colony has not mined three of the precious metal, it cannot, under the monopoly of the mother country, have money, or anything else, beside its own productions, to send, it is needless to consider the case of free trade with a colony, because that falls under the case of trade with any foreign country, the monopoly, which a mother country may reserve to herself, of the trade with her colonies, is of two sorts, first of all, she may trade with her colonies by means of an exclusive company, in this case, the colony has no purchase to whom she is allowed to sell anything, but the exclusive company, and no other seller from whom she is allowed to buy anything, the company, therefore, can make her buy, as dear as it pleases, the goods which the mother country sends to her, and sell, as cheap as it pleases, the goods which she sends to the mother country, in other words, the colony may, in these circumstances, be obliged to give for the produce of a certain quantity of the labour of the mother country, a much greater quantity of goods than the mother country could obtain, with the same quantity, from any other country, or from the colony in a state of freedom, the cases of a trade in these circumstances are two, the first, where the colony receives from the mother country, luxuries, comforts, the other, where she receives necessaries either the necessaries of life, or the necessaries of industry, as iron, etc. in that case in which the colony receives luxuries and comforts only from the mother country, there is a limit to the degree in which the mother country is enabled to profit by the labour of the colony, the colony may decline receiving such luxuries or comforts, if obliged to sacrifice for them too greater quantity of the produce of her labour, and may think it better to employ that great proportion of her labour, in providing such luxuries and comforts as she herself is capable of producing. If, however, the colony is dependent for necessaries upon the mother country, the exclusive company exercises over the colony a power altogether despotic, it may compel her to give the whole produce of her labour, for no more of the necessaries in question than what is just sufficient to enable the population of the colony to live, if it is the necessaries of life which the colony receives, the conclusion is obvious, if it is commodities, such as iron, and instruments of iron, without which her labour cannot be productively employed, the result is precisely the same, she may be made to pay for these articles so much of the whole produce of her labour, that nothing but what is necessary to keep the population alive may remain, it would be the interest of the mother country, not to lessen the population because, with the population, the produce would be lessened, and hence the quantity of commodities which the mother country could receive, instead, however, off trading with her colonies by means of an exclusive company, the mother country may leave the trade open to all her own merchants, only prohibiting the colony from trading with the merchants of any other country, in this case, the competition of the merchants in the mother country reduces the price of all the articles received by the colony, as low as they can be afforded in other words, as low as in the mother country itself, allowance being made for the expense of carrying them, if it be said that the colonies afford a market i reply, that the capital, which supplies commodities for that market, would still prepare commodities, if the colonies were annihilated and those commodities would still find consumers, the labour and capital of a country cannot prepare more than the country w will be willing to consume, every individual has a desire to consume, either productively or unproductively, whatever he receives, every country, therefore, contains within itself a market for all that it can produce, this will be made still more evident when the subject of consumption the cause and measure of markets, comes under consideration, there is, therefore, no advantage whatsoever derived under freedom of competition, from that part of the trade with the colony which consists in supplying it with goods, since no more is gained by it, than such ordinary profits of stockers would have been gained if no such trade had existed, it is nevertheless true that the colony may lose by such a traffic, if the goods which she is thus compelled to purchase of the mother country she might purchase cheaper in other countries, if there be any peculiar advantage, therefore, to the mother country, it must be derived from the cheapness of the goods with which the colony supplies her, it is evident, that if the quantity of goods, sugar, for example, which the colony sends to the mother country, is so great as to glut the mother country that is, to supply its demand beyond the measure of other countries, and make the price of them in the mother country lower than it is in other countries, the mother country profits by compelling the colony to bring its goods exclusively to her market, since she would have to pay for them as high as other countries, if the people of the colony were at liberty to sell wherever they could obtain the greatest price, this advantage, if drawn by the mother country, would be drawn at the expense of the colony, in free trade boatly parties gain, in the advantage produced by forcing whatever is gained by the one party is lost by the other, the mother country, in compelling the colony to sell goods cheaper to her than she might sell them to other countries, merely imposes upon her a tribute not direct, indeed, but not the less real because it is disguised, if any advantage is derived from restraining, any otherwise than by an exclusive company, the trade with the colonies, it must consist in forcing the colonies to sell to none but the mother country, not enforcing them to buy from none but the mother country, a great improvement, therefore, in colonial policy would be to throw open the supply of the colonies, permitting them to purchase the goods which they want, wherever they could find the most favorable market, only restraining them in the sale of their goods allowing them to buy wherever they pleased, permitting them to sell to none but the mother country, it is at the same time to be observed, that if the merchants of the mother country have freedom to export the goods which are derived from the colonies, the price of these goods will be raised in their own country to the level of the price in other countries, the competition of the merchants will, also, raise the price of the goods to a correspondent height in the colonies and thus the benefit to the mother country is lost, treaties of commerce are sometimes concluded, for the purpose of limiting the freedom of trade, one country can be limited to another in but two ways either in its purchases, or its sales, suppose that Great Britain binds some other country to purchase certain commodities exclusively from her Great Britain can derive no advantage from such a treaty, the competition of her merchants will make them sell those commodities as cheap to the merchants of that country, as to their own countrymen, their stock is not more profitably employed than it would be if no such trade existed, there are cases in which a country may gain by binding another country to sell to none but itself, if one country is bound to sell no commodities whatsoever, except to another particular country this is the same case, exactly, with that of a colony bound to sell to none but the mother country, as no free country, however, is likely to bind itself to sell none of its commodities except to one other, this is not a case which we need to regard as practicable or real, one country may bind itself to sell exclusively to another particular country, not all the articles it has for foreign sale, but only some of them, these may be articles which yield nothing, even in a state of freedom, but the ordinary profits of stock as cloth, hardware, hats, sea, or they may be articles which yield something over and above the ordinary profits of stock as corn, wine, minerals, etc. which are the source of rent, one country can derive no advantage from compelling another to sell to it, exclusively, articles of the first sort if the price which the favored country pays for the goods is not sufficient to afford the ordinary profits of stock, they will not be produced, if the price which it pays is sufficient to afford the ordinary profits of stock, it would, at that price, obtain the goods, without any treaty of restriction, the case is different, where the goods yield something, as rent, or the profits of a monopoly, over and above the profits of stock, the quantity which may be sent in this case to the favored country, may sink that the price of the restricted commodity lower than it is in the neighboring countries and lower than the restricted country would, if not under restriction, be enabled to sell it in those countries, to this extent, and to this only, can one country benefit, by confining the trade of another to itself, the restriction may operate to a diminution of the profits of a monopolized commodity, or a diminution of rent, there is one mode of presenting this subject, which is apt to puzzle a mind not accustomed to trace the intricacies of this science, suppose two countries, and b, of which a is bound by treaty, or otherwise, to receive all its shoes from b, and to sell to be all its sugars, suppose, also, that they could, if left at liberty, obtain its shoes fifty percent, cheaper from some other country in that case, it may for a moment appear, that b obtains the sugars which it buys of a, with fifty percent less of its own labor, than it would if a were allowed to purchase shoes where it pleased, if b paid for the supposed sugars in shoes, it would, no doubt, pay fifty percent, more in the case of a free trade, but if there were any other article with which it could purchase those sugars, and which it could afford as cheap as any other country, it would lose nothing in the case of a free trade it would purchase the same quantity of sugar with the produce of the same quantity of labor as before only, that produce would be, not shoes, but some other article, that there would be articles which b could afford as cheap as any other country, is certain, because otherwise it could have no foreign trade, it may be said, however, that though b might have articles which it could sell as cheap as other countries, they might not be in demand in the country which produced the sugars, but if shoes only were in demand in the colonies, those other articles could purchase shoes where they were cheapest and thus obtain the same quantity of sugar, in the free, as in the restricted state of the trade. Chapter 4 Consumption Of the four sets of operations, production, distribution, exchange, and consumption, which constitute the subject of political economy, the fist three R means, no man produces for the sake of producing, and nothing farther, distribution, in the same manner, is not performed for the sake of distribution, things are distributed, as also exchanged, to some end, that end is consumption, things are produced, that they may be consumed and distribution and exchange are only the intermediate operations for bringing the things, which have been produced, into the hands of those who are to consume them, section i, of productive and unproductive consumption, of consumption, there are two species the distinctive properties of which it is of great importance to comprehend, these are, first, productive consumption toodly, unproductive consumption, one, that production may take place, a certain expenditure is required, it is necessary, that the laborer should be maintained that he should be provided with the proper instruments of his labor, and with the materials of the commodity which it is his business to produce, what is thus expended for the sake of something to be produced, is said to be consumed productively, in productive consumption, three classes of things are included, the first is, the necessaries of the laborer, under which term are included all that his wages enable him to consume, whether these can find him to get aature required for the preservation of existence, or afford him something for enjoyment, the second class of things consumed for production is machinery including tools of all sorts, the buildings necessary for the productive operations, and even the cattle, the third is the materials of which the commodity to be produced must be formed, or from which it must be derived, such is the seed from which the corn must be produced, the flax or wool of which the linen or woolen cloth must be formed, the drugs with which it must be dyed, or the coals which must be consumed in any of the necessary operations, of these three classes of things, it is only the second, the consumption of which is not completed in the course of the productive operations, the machinery and buildings, employed in production, may last for several years the necessary each however, of the laborer, and the materials, either primary or secondary, of the commodity to be produced, are all completely consumed, even of the durable machinery, the wear and tear amount to a partial consumption, too, thus it is, that men consume for the sake of production, they also consume, however, without producing, and without any view to production, the wages which a man affords to a plowman, are given for the sake of production the wages which he gives to his footmen and his groom, are not given for the sake of production, the flax which the manufacturer purchases, and converts into linen, he consumes productively the wine which he purchases, and uses at his table, is a commodity which he consumes unproductively, these instances are sufficient to illustrate what is meant when we speak of unproductive consumption, all consumption, which does not take place to the end that an income or revenue may be derived from it, is unproductive consumption, from this explanation it follows, that productive consumption is itself a means it is a means to production, unproductive consumption, on the other hand, is not a means, this species of consumption is the end, this, or the enjoyment which is involved in it, is the good which constituted the motive to all the operations by which it was preceded, from this explanation, it also follows, that by productive consumption nothing is lost no diminution is made of the property, either of the individual or of the community for if one thing is destroyed, another is by that means produced, the case is totally different with unproductive consumption, whatever is unproductively consumed, is lost, whatever is consumed in this manner, is a diminution of the property, both of the individual and of the community because, in consequence of this consumption, nothing whatever is produced, the commodity perishes in the using, and all that is derived is the good, the pleasure, the satisfaction, which the using of it yields, that which is productively consumed is always capital, this is a property of productive consumption which deserves to be particularly remarked, the truth of the proposition is manifest, a man commences the manufacture of cloth with a certain capital, part of this capital he allots for the payment of wages another part he lays out in machinery and with what remains he purchases the raw material of his cloth, and the other articles, the use of which is required in preparing it for the market, it thus appears that the whole of every capital undergoes the productive consumption, it is equally obvious that whatever is consumed productively becomes capital for if the manufacturer of cloth, whose capital we have seen to be productively consumed, should save a portion of his profits, and employ it in the different kinds of productive consumption required in his business, it would perform exactly the functions performed by his capital, and would, in truth, be in addition to that capital, the whole of what the productive powers of the country have brought into existence in the course of a year is called the gross annual produce, of this the greater part is required to replace the capital which has been consumed to restore to the capitalist what he has laid out in the wages of his laborers and the purchase of his materials, and to remunerate him for the wear and tear of his machinery, what remains of the gross produce, after replacing the capital which has been consumed, is called the net produce and is always distributed either as profits of stock or as rent, this net produces the fund from which all addition to the national capital is commonly made, if the net produces all consumed unproductively, the national capital remains unaltered, it is neither diminished nor increased, if more than the net produces consumed unproductively, it is taken from the capital and so far the capital of the nation is reduced, if less than the net produces unproductively consumed, the surplus is devoted to productive consumption and the national capital is increased, though a very accurate conception may thus be formed of the two species of consumption, and the two species of labor, productive and unproductive, it is not easy to draw the line precisely between them, almost our classifications are liable to this inconvenience, between things which deform the most widely, there is almost always an order of things which approach them by insensible gradations we divide animals into two classes, the rational and irrational, and no two ideas can be more clearly distinguished, yet beings may be found, of which it would be difficult to say to which of the two classes they belonged, in like manner, there are consumers, and laborers, who may seem, with some propriety, to be capable of being ranked either in the productive or the unproductive class, not withstanding this difficulty, it is absolutely necessary, for the purposes of human discourse, that classification should be performed, and the line drawn somewhere, this may be done, with sufficient accuracy both for science and for practice, it is chiefly necessary that the more important properties of the objects classified should be distinctly marked in the definition of the class, it is not difficult, after this, to make allowance in practice for those things which lie, as it were, upon the confines of two classes and partake, in some degree, of the properties of both. Section two. That which is annually produced is annually consumed, from what we have now ascertained of the nature of production and consumption, it will easily be seen, that the whole of what is annually produced, is annually consumed or that what is produced in one year, is consumed in the next, everything which is produced belongs to somebody, and is destined by the owners to some use, there are, however, but two sorts of use, that for immediate enjoyment, and that for ultimate profit, to use for ultimate profit, is to consume productively, to use for immediate enjoyment, is to consume unproductively, we have just observed, that what is used for ultimate profit, is laid out, as expeditiously as possible, in wages of labour, machinery, and raw material, this is a fact of primary importance and many errors of those who reason loosely in political economy, arise from the neglect of it, whatever is saved from the annual produce, in order to be converted into capital, is necessarily consumed because to make it answer the purpose of capital it must be employed in the payment of wages, in the purchase of raw material to be worked into a finished commodity or lastly, in the making of machines, affected in like manner by the payment of wages, and the working up of raw materials, with respect to that part of the annual produce which is destined for unproductive consumption, there is less frequently any mistake, as it would be attended with a lost l-a in a greater stock of articles of this class than is required for immediate use, all of them, except a few of which the quality is improved by their age, are always expeditiously consumed, or put in a course of consumption, a year is assumed in political economy as the period which includes a revolving circle of production and consumption, no period does so exactly, some articles are produced and consumed in a period much less than a year, in others the circle is greater than a year, it is necessary, for the ends of discourse, that some period should be assumed as including this circle, the period of a year is the most convenient, it corresponds with one great class of productions, those derived from the cultivation of the ground, and it is easy, when we have obtained forms of expression which correspond accurately to this assumption, to modify them in practice to the case of those commodities, the circle of whose production and consumption is either greater or less than the standard to which our general propositions are conformed, section 3, that consumption is co-dot extensive with production, it requires only a few explanations to show, that this is a direct corollary from the proposition established in the preceding section, a man produces, only because he wishes to possess, if the commodity which he produces is the commodity which he desires to possess, he stops when he has produced as much as he desires and his supply is exactly proportioned to his demand, the savage who makes his own bound arrows, does not make bows and arrows beyond what he wishes to possess, when a man produces a greater quantity of any commodity than he desires for himself, it can only be on one account namely, that he desires some other commodity, which he can obtain in exchange for the surplus of what he himself has produced, it seems hardly necessary to offer anything in support of so necessary a proposition it would be inconsistent with the known laws of human nature to suppose, that a man would take the trouble to produce any tjlme without desiring to have anything, if he desires one thing, and produces another, it is only because the thing which he desires can be obtained by means of the thing which he produces, and better obtained than if he had endeavoured to produce it himself, after labour has been divided and distributed, to any considerable extent, and each producer confines himself to some one commodity or part of a commodity, a small portion only of what he produces is used for his own consumption, the remainder he destines for the purpose of supplying him with all the other commodities which he desires and when each man confines himself to one commodity, and exchanges what he produces for what is produced by other people, it is found that each obtains more of the several things which he desires, than he would have obtained had he endeavoured to produce them all for himself, so far as a man consumes that which he produces, there is, properly speaking, neither supply nor demand, demand and supply, it is evident, are terms which have reference to exchange to a buyer and a seller, but in the case of the man who produces for himself, there is no exchange, he neither offers to buy anything, nor to sell anything, he has the property he has produced it and does not mean to part with it, if we apply, by a sort of metaphor, the terms demand and supply to this case, it is implied, in the very terms of the supposition, that the demand and supply are exactly proportioned to one another, as far then as regards the demand and supply of the market, we may leave that portion of the annual produce, which each of the owners consumes in the shape in which he produces or receives it, altogether out of the question, in speaking here of demand and supply, it is evident that we speak of aggregates, when we say of any particular nation, at any particular time, that its supply is equal to its demand, we do not mean in any one commodity, or any two commodities, we mean, that the amount of its demand in all commodities taken together, is equal to the amount of its supply in all commodities taken together, it may very well happen, notwithstanding this equality in the general sum of demands and supplies, that someone commodity or commodities may have been produced in a quantity either above or below the demand for those particular commodities, two things are necessary to constitute a demand, these are, first, a wish for the commodity, totally unequivalent to give for it, at demand means, the will to purchase, and the means of purchasing, if either is wanting, the purchase does not take place, unequivalent is the necessary foundation of all demand, it is in vain that a man wishes for commodities, if he has nothing to give for them, the equivalent which a man brings is the instrument of demand, the extent of his demand is measured by the extent of his equivalent, the demand and the equivalent are convertible terms, and the one may be substituted for the other, the equivalent may be called the demand, and the demand the equivalent, we have already seen, that every man, who produces, has a wish for other commodities, than those which he has produced, to the extent of all that he brings to market, and it is evident that whatever a man has produced and does not wish to keep for his own consumption, is a stock which he may give in exchange for other commodities, his will, therefore, to purchase, and his means of purchasing, in other words, his demand, is exactly equal to the amount of what he has produced and does not mean to consume, but it is evident, that each man contributes to the general supply the whole of what he has produced and does not mean to consume, in whatever shape any part of the annual produce has come into his hands, if he proposes to consume no part of it himself, he wishes to dispose of the whole and the whole, therefore, becomes matter of supply, if he consumes a part, he wishes to dispose of all the rest, and all the rest becomes matter of supply, as every man's demand, therefore, is equal to that part of the annual produce, or of the property generally, which he has to dispose of, and each man's supply is exactly the same thing, the supply and demand of every individual are of necessity equal, demand and supply are terms related in a peculiar manner, a commodity which is supplied, is always, at the same time, a commodity which is the instrument of demand, a commodity which is the instrument of demand, is always, at the same time, a commodity added to the stock of supply, every commodity is always at one and the same time matter of demand and matter of supply, of two men who perform an exchange, the one does not come with only a supply, the other with only a demand each of them comes with both a demand and a supply, the supply which he brings is the instrument of his demand and his demand and supply are of course exactly equal to one another, but if the demand and supply of every individual are always equal to one another, the demand and supply of all the individuals in the nation, taken aggregately, must be equal, whatever, therefore, be the amount of the annual produce, it never can exceed the amount of the annual demand, the whole of the annual produce is divided into a number of shares equal to that of the people to whom it is distributed, the whole of the demand is equal to as much of the whole of the shares as the owners do not keep for their own consumption, but the whole of the shares is equal to the whole of the produce, the demonstration, therefore, is complete, how complete so ever the demonstration may appear to be, that the demand of a nation must always be equal to its supply and thd it never can be without a market, sufficiently enlarged for the whole of its produce, this proposition is seldom well understood and is sometimes expressly contradiction, the objection is raised upon this foundation, that commodities are often found to be too abundant for demand, the matter of fact is not disputed, it will easily, however, be seen, that it affects not the certainty of the proposition which it is brought to oppose, though it be undeniable, that the demand which every man brings is equal to the supply which he brings, he may not find in the market the sort of purchaser which he wants, no man may have come desiring that sort of commodity of which he has to dispose, it is not the less necessarily true, that he came with a demand quaal to his supply for he wanted something in return for the goods which he brought, it makes no difference to say that perhaps he only wanted money for money as itself goods and, besides, no man wants money but in order to lay it out, either in articles of productive or articles of unproductive consumption, every man having a demand and a supply, both equal if any commodity be in greater quantity than the demand, some other commodity must be in less, if every man has a demand and supply both equal, the demand and supply in the aggregate are always equal, suppose, that of these two equal quantities, demand and supply, the one is divided into a certain number of parts, and the other into as many parts, all equal and that these parts correspond exactly with one another that as many parts of the demand as are for corn, just so many parts of the supply are of corn as many of the one as are for cloth, so many of the other are of cloth, and so on, it is evident, in this case, that there will be no glut of any thing, whether the amount of the annual produce is great or small, let us next suppose, that this exact adaptation to one another of the parts of demand and supply is disturbed let us suppose, the demand for all things remaining the same, that the supply of cloth is considerably increased, there will of course be a glut of cloth, because there has been no increase of demand, but to the very same amount there must of necessity be a deficiency of other things for the additional quantity of cloth, which has been made, could be made by one means only, by withdrawing capital from the production of other commodities, and thereby lessening the quantity produced, but if the quantity of any commodity is diminished, a demand equal to the greater quantity remaining, the quantity of that commodity is defective, it is, therefore, impossible, that there should ever be in any country a commodity or commodities and quantity greater than the demand, without the being, to an equal amount, some other commodity or commodities in quantity less than the demand, the effects, which are produced in practice, by the want of adaptation in the parts of demand and supply, are familiar, the commodity which happens to be in superabundance declines in price the commodity which is defective in quantity rises, this is the fluctuation of the market, which every body sufficiently understands, the loneness of the price in the article which is superabundant soon removes, by the diminution of profits, a portion of capital from that line of production, the highness of price, in the article which is scarce, invites a quantity of capital to that branch of production till profits are equalized, that is, till the demand and supply are adapted to one another, the strongest case which could be put, in favor of the supposition that produce may increase faster than consumption, would undoubtedly be that in which, every man consuming nothing but necessaries, all the test of the annual produce should be saved, this is, indeed, an impossible case, because it is inconsistent with the laws of human nature, the consequences of it, however, are capable of being traced and they serve to throw light upon the argument by which the constant equality has been demonstrated, of produce and demand, in such a case, what came to every man's share of the annual produce, baiting his own consumption of necessaries, would be devoted to production, all production would of course be directed to raw produce and a few of the coarser manufacturers because these are the articles FDR which alone there would be any demand, as every man's share of the annual produce, baiting his own consumption, would be laid out for the sake of production, it would be laid out in the articles subservient to the production of raw produce and the coarser manufacturers, but these articles are precisely raw produce and a few of the coarser manufacturers themselves, every man's demand, therefore, would consist only in these articles but the whole of the supply would consist also in the same articles, and it has been proved that the aggregate demand and aggregate supply are equal of necessity because the whole of the annual produce baiting the portion consumed by the shareholders, is brought as the instrument of demand and the whole of the annual produce, with the same abatement, is brought as supply, it appears therefore, by accumulated proof, that production can never be too rapid for demand, production is the cause, and the sole cause, of demand, it never furnishes supply, without furnishing demand, both at the same time, and both to an equal extent, Mr Blake has said that this argument, granting that new tastes and new wants spring up with the new capital, appears to him unanswerable, observations on the effects produced by the expenditure of government, during the restriction of cash payments, by W. Blake, s-quire FRS, p. 59, a pamphlet in which Mr Blake has very ably illustrated his own view of several important topics, a single reflection will, I think, to a mind as acute as that of Mr Blake, make it clear that the taste, and wants, of which he speaks, are essentially and necessarily implied in the very existence of the capital. The new capital is all to be laid out in the purchase of something, according to the plans of the owner, it is of infinite importance to observe that every creation of capital is the creation of a demand, it is surprising that this material point is so frequently overlooked, it seems to be little less than self evident, and, if admitted, it carries in itself an answer to every argument that has been, or that can be reduced in favor of the glut, what is it that we mean, when we say the demand of a nation, speaking of the aggregate, and including a definite circle of production and consumption, such as that of a year, do we, or can we, mean anything but its power of purchasing, and what is its power of purchasing, of course, the goods which come to market, what, on the other hand, is it we mean, when, speaking in like manner aggregately, and including the same circle, we say the supply of the nation. Do we, or can we mean anything but the goods which come to market, the conclusion is too obvious to need to be drawn, what produces the confusion of ideas which so often occurs in the consideration of this subject is the glut which may and does take place of particular commodities, does it follow from this, that there can be a glut of commodities in the aggregate, when it is necessarily true that there cannot be an aggregate supply without an equal aggregate demand, equal both in quantity and in value, to the argument which shows that to the same degree in which one or more commodities may be in such abundance as exceeds the demand, some other commodities must fall short of the demand, it has been replied, that the commodities which are supplied in superabundance fall in value, that this involves all the evil of the glut, and is therefore a reply to the whole of the argument which denies its existence, this is a reply in words only, attend to the ideas, and it is no reply at all, what is maintained in my argument is, that there can be no glut of commodities in the aggregate, though there may be in particular instances, the answer made to me is, that there may be a glut in particular instances, in the very words of the pretended reply, the certainty of the disputed fact is admitted, the value, it is said, of the goods which are in the state of super abundance, falls, if this is not a play upon the word, it implies the very thing which it is brought to dispute, that whenever one set of goods is supplied above the demand, another is supplied below the demand, what is it that is necessarily meant, when we say that the supply and the demand are accommodated to one another, it is this, that goods which have been produced by a certain quantity of labour, exchange for goods which have been produced by an equal quantity of labour, let this proposition be duly attended to, and all the rest is clear, thus, if a pair of shoes is produced with an equal quantity of labour as a hat, so long as a hat exchange is for a pair of shoes, so long the supply and demand are accommodated to one another, if it should so happen that shoes fell in value as compared with hats, which is the same thing as hats rising in value compared with shoes, this would imply that more shoes had been brought to market, as compared with hats, shoes would then be in more than the due abundance, why, because in them the produce of a certain quantity of labour would not exchange for the produce of an equal quantity, but for the very same reason hats would be in less than the due abundance, because the produce of a certain quantity of labour in them would exchange for the produce of more than an equal quantity in shoes, what is true of any one instance is true of any number of instances, it is therefore universally true, that as the aggregate demand and aggregate supply of a nation never can be unequal to one another, so there never can be a superabundant supply in particular instances, and hence a fall in exchangeable value below the cost of production, without a corresponding deficiency of supply, and hence a rise in exchangeable value beyond cost of production in other instances, the doctrine of the glut, therefore seems to be disproved by a chain of reasoning perfectly indissoluble, let us recapitulate the points, a glut, as it is supposed in this doctrine, namely an excess of production in the aggregate, can take place only by a continued increase of production, let us imagine that we have just come to the supposed point, when the supplely being fall, any additional production will be so much of glut, the additional production takes place, and comes to market, what is the consequence, this new product seeks an equivalent, that is to say, it is a new demand, how then is it possible to say that every new supply is a glut, when a new demand is created equal to it, it is obviously newgatory to say, that this new supply may not find purchasers, or the new demand may not find the commodities to which it is directed for this is only to say that in particular instances the may, from miscalculation, be superabundance or defect, the natural effects in such a case may be easily traced, and they afford decisive evidence, the commodities of which the additional production consists, may be naturally supposed to consist of some of the sorts which are previously in the market, by the supposition made, the goods previously in the market were accommodated to one another, no species being either in defective or super abundant supply, the addition which is made to some sorts of these goods, by the new production, would render them super abundant, if there was not a new demand created, these goods would fall in exchangeable value as compared with others, others would rise in exchangeable value as compared with them, but there is a new demand created for the owner of the new produce, as he has come into the market to sell goods of some kinds, so he has come to buy goods of some other kinds, as the supply which he brought of certain kinds of goods tended to reduce their value, so the demand which he brings for other kinds tends to increase their value, the result is, that now there are certain kinds of goods which it is less profitable than usual to produce others which it is more profitable than usual to produce, and this is an inequality which tends immediately to correct itself, this is the mode in which every addition is made to the productions of a country, and it is a mode which is evidently the same at every stage of the progress, from the greatest defect, to the greatest excess of national riches, it commonly, of course, happens, that the man who brings into the market an addition of produce endeavours to bring it in goods that are in defective supply, and to purchase goods that are in super abundant supply and the state of the market generally enables him to do so, so that an addition of produce brought into the market may just as often remedy a glut as be in any degree the cause of it, the doctrine of Mr. Malthus on the subject of the glut seems, at last, to amount to this, that if saving were to go on at a certain rate, capital would increase faster than population and that if capital did so increase, wages would become very high and profits would sustain a corresponding depression, but this, if it were all allowed, does not prove the existence of a glut it only proves another thing, namely, that there would be high wages and low profits, whether such an increase of capital, scarcely coming within the range even of a rational supposition, would be a good thing or an evil thing, it would infallibly produce its own remedy, as the power of capital to increase is diminished with the diminution of profits, Mr. Malthus further says, that the high wages thus produced will generate idleness in the class of laborers, the prediction may be disputed but, allowed to be correct, what is its import, if wages continuing the same, less work is done, this is higher pay for an equal quantity of labor, it is therefore the same thing as a rise of wages, it would merely accelerate that diminution of profits, which must in time retard and finally stop the increase of capital, in consequence of which wages would naturally fall, this, therefore, is not a different objection from the form or it is precisely the same objection, only in a different form, Mr. Malthus thus totally failing to prove a glut, even from a continued increase of capital greater than the greatest increase of population, substitutes, for arguments to prove that effect, arguments to prove certain other effects, he says, that were the annual produce thus to go on increasing, its value would be diminished, but this is merely a play upon the word, he says, I call the value of a commodity the number of days wages it is equal to, if then wages are more than doubled, though you double the amount of your commodities, and have twice as much of everything, yet you will have less value, an arbitrary change, however, in the meaning of a word proves nothing, the facts, and their relations remain the same, whatever Mr. Malthus or I may choose to call them, the facts still are merely these, that society would have the supposed amount of commodities, and all its benefits, and that wages would be very high, Mr. Malthus further says, that this rapid increase of capital would tend to diminish production, that on which the increase of production depends, is the increase of its two instruments, capital and laborers, by the very supposition which Mr. Malthus himself has made, and on which he is reasoning, both of these instruments are increasing at their most rapid possible rate, it seems therefore a most extraordinary supposition, that production should not be increasing at its most rapid possible rate, if it be true, as Mr. Malthus supposes, that the high wages supposed would diminish labor, it will be true that less work will be done, and less production affected, than if every man worked more, let us suppose that the diminution of labor goes on gradually, as wages increase, till at last each man does only half as much work as before, what then is the consequence, merely this, that if population is going on at its greatest possible rate, doubling itself in 20 years, there will not be a greater increase of production from a labor, than there would be if it doubled itself only in 40 years, and each man performed twice as much work, this would still be a more rapid rate than that at which capital increases, except in some very rare and extraordinary circumstances, but if labor were so very dear, and capital so abundant, as little as possible of production would be performed by man's labor, as much as possible by machinery and cattle, ingenuity would be racked to find the means of superseding the most costly instrument, machines would be multiplied and improved without end and a much greater proportion of the annual produce would be the result of capital, a much less the result of immediate labor, the diminution of production would not therefore be nearly in proportion to the diminution of each man's labor, the supposed effects therefore are really of no importance, otherwise it might still be questioned how far the inference is warranted, that high wages tend to diminish industry, experience seems to be largely on the opposite side, where wages are excessively low, as in Ireland, there is no industry where excessively high, as in the American United States, there is the greatest, what does Mr Malth has himself mean by the stimulus which he says is given to industry by an enlargement of the market, section four, in what manner government consumes, all consumption is either by individuals, or by the government, having treated of the consumption of individuals, it only remains that we treat of that which has government for its cause, although the consumption by government, as far as really necessary, is of the highest importance, it is not, unless very indirectly, subservient to production, that which is consumed by government, instead of being consumed as capital, and replaced by a produce, is consumed, and produces nothing, this consumption is, indeed, the cause of that protection, under which all production has taken place but if other things were not consumed in a way different from that in which things are consumed by government, there would be no produce, these are reasons for placing the expenditure of government under the head of unproductive consumption, the revenue of government must be derived from rent, from profits of stock, or from wages of labour, it is, indeed, possible for government to consume part of the capital of the country, this, however, it can only do for one year, or for a few years, each year in which it consumes any portion of the capital, it so far reduces the annual produce and, if it continues, it must desolate the country, this, therefore, cannot be regarded as a permanent source of revenue, if the revenue of government must always be derived from one or more of three sources, rent, profits, wages, the only questions which require to be answered, are, in what manner, and in what proportion, should it be taken from each, the direct method is that which most obviously suggests itself, I shall, therefore, first, consider what seems to be most important in the direct mode of deriving a revenue to government from rent, profits, and wages and, secondly, I shall consider the more remarkable of the expedience which have been employed for deriving it from them indirectly, section v, taxes on rent, it is sufficiently obvious, that the share of the rent of land, which may be taken to defray the expenses of the government, does not affect the industry of the country, the cultivation of the land depends upon the capitalist who devotes himself to that occupation, when it affords him the ordinary profits of stock, to him it is a matter of perfect indifference whether he pays the surplus, in the shape of rent, to an individual proprietor, or, in that of revenue, to a government collector, in Europe, at one period, the greater part of at least the ordinary expenses of the sovereign were defrayed by land which he held as a proprietor while the expense of his military operations was chiefly defrayed by his barons, to whom a property in certain portions of the land had been granted on that express condition, in those times, the whole expense of the government, with some trifling exception, was, therefore, defrayed from the rent of land, in the principal monarchies of Asia, almost the whole expenses of the state have in all ages been defrayed from the rent of land but in a manner somewhat different, the land was held by the immediate cultivators, generally in small portions, with a perpetual and transferable title but under an obligation of paying, annually, the government demand which might be increased at the pleasure of the sovereign and seldom amounted to less than a full rent, if a body of people were to migrate into a new country, and land had not yet become private property, there would be this reason for considering the rent of land as a source peculiarly adapted to supply the exigencies of the government that industry would not by that means sustain the smallest depression and that the expense of the government would be defrayed without imposing any burden upon any individual, the owners of capital would enjoy its profits, the class of laborers would enjoy their wages without any deduction whatsoever and every man would employ his capital, in the way which was really most advantageous, without receiving any inducement, by the mischievous operation of attacks, to remove it from a channel in which it was more, to one in which it would be less productive to the nation, there is, therefore, a peculiar advantage in reserving the rent of land as a fund for supplying the exigencies of the state, there would be this inconvenience, indeed, even in a state of things in which land had not been made private property that the rent of the land in a country of a certain extent, and peopled up to a certain degree, would exceed the amount of what government would need to expend, the surplus ought undoubtedly to be distributed among the people, in the way likely to contribute the most to their happiness and there is no way, perhaps, in which this end can be so well accomplished, as by rendering the land private property, as there is no difficulty, however, in rendering the land private property, with the rent liable for a part of the public burdens so there seems no difficulty in rendering it private property, with the rent answerable for the whole of the public burdens, it would only in this case require a greater quantity of land to be a property of equal value, practice would teach its value as accurately, under these, as under present circumstances and the business of society would, it is evident, proceed without alteration in every other respect, where land has, however, been converted into private property, without making rent in a peculiar manner answerable for the public expenses where it has been bought and sold upon such terms, and the expectations of individuals have been adjusted to that order of things, rent of land could not be taken to supply exclusively the wants of the government, without injustice, it would be partial and unequal taxation laying the burden of the state upon one set of individuals, and exempting the rest, it is a measure, therefore, never to be thought of by any government here he would regulate its proceedings by the principles of justice, that rent which is bought and sold, however the trend upon which the expectations of individuals are founded, and which, therefore, ought to be exempt from any peculiar tax, is the present rent or at least the present, with the reasonable prospect of improvement. Beyond this, no man's speculations, either in making a purchase, or in making provision for a family, are entitled to extend, suppose, now, that, in these circumstances, it were in the power of the legislature, by an act of its own, all other things remaining the same, to doubled that portion of the produce of the land which is strictly and properly rent, there would be no reason, in point of justice, why the legislature should not, and great reason, in point of expediency, why it should, avail itself of this, its own power, in behalf of the state should devote as much as might be requisite of this new fund to defray the expenses of the government, and exempt the subjects from any burden on its account, no injury would be done to the original landowner, his rent, such as he had enjoyed it, and to a great degree such even as he had expected to enjoy it, would remain the same, a great ad. Vantage would at the same time accrue to every individual in the community, by exemption from those contributions for the expense of the government to which he would otherwise have had to submit, the legislature may, without any straining of language, be said to possess that power, which I have now spoken of only as a fiction, by all those measures which increase the amount of population and the demand for food, the legislature does as certainly increase the net produce of the land, as if it had the power of doing so by a miraculous act, that it does so by a gradual progress in the real, would do so by an immediate operation in the imaginary case, makes no difference with regard to the result, the original rent, which belonged to the owner, upon which he regulated his purchase if he did purchase, and on which alone, if he had a family to provide for, his arrangements in their favor were to be framed, is easily distinguishable from any addition capable of being made to the net produce of the land, whether it be made by a slow or a sudden process, if an addition made by the sudden process might, without injustice to the owner, be appropriated to the purposes of the state, no reason can be assigned why an addition by the slow process might not be so appropriated, it is certain, that as population increases, and as capital is applied with less and less productive power to the land, a greater and a greater share of the whole, of the net produce of the country accrues as rent, while the profits of stock proportionally decrease, this continual increase, arising from the circumstances of the community, and from nothing in which the landholders themselves have any peculiar share, does seem a fund no less peculiarly fitted for appropriation to the purposes of the state, than the whole of the rent in a country where land had never been appropriated, while the original rent of the landholder, that upon which alone all his arrangements, with respect both to himself and his family, must be framed, is secured from any peculiar burden, he can have no reason to complain, should a new source of income, which cost him nothing, be appropriated to the service of the state and if so, it evidently makes no difference to the merits of the case, whether this new source is found upon the land, or found anywhere else, I do not perceive any incongruity in the ideas by which I have arrived at this conclusion, either with one another, or with any acknowledged principle of legislation though I allow difficulties in practice, which would in many cases render such taxation inexpedient, these indeed would all resolve themselves into the difficulty of distinguishing correctly between the quantum of benefit from the land, which ought to be considered as conferred upon the owner by the previous legislation, and which it would be unjust to take from him and what might be regarded as something over and above that benefit, and which, therefore, might, without any injustice to him, be reserved for the service of the state, if we assume with Mr. McCulloch that the whole of what the land can ever yield is conferred, in the case supposed, on the owner of the land, by the previous legislation, there is an end of the question for it is impossible for anyone to express a more decided opinion than I entertain, against partial taxation, against imposing birthings upon the property of any one class, more than upon the property of another class, the real question is, whether anything, beyond a certain amount of annual benefit, namely, what is at present derived, with such increases can be rationally anticipated within the number of years purchase for which the land would sell, can, in a really equitable, excluding a merely technical, mode of considering the subject, be regarded as the property of the land owner, the considerations which I have adduced seem to me to establish, that no point of utility would be violated by such a restriction df the meaning of the term as I have proposed, I utterly disallow the parallelism of the case of capital, which Mr McCulloch has adduced as if because increased profits of stock ought not to be exclusively taxed, therefore the rent, which accrues in the manner above supposed, could not be justly appropriated to the service of the state, nobody is more aware of the fundamental differences between profits of stock and rent of land than Mr Isv Qulok it is, therefore, the more surprising that he should have founded an argument on an agreement between them which does not exist, see a very masterly article on taxation in the supplement to the INSEC, Britain. p. 617, only a few lines before, in the same passage, he recognizes such a distinction between rent and profits, as in my opinion is fatal to his argument, the circumstance, he says of rent unavoidably rising in the progress of society, inclines us to think that it would be good policy for the governments of countries, such as the United States, which are possessed of large tracts of fertile and unappropriated land, to retain the property of this land in their own hands, that is, in other words, to reserve the rent for the service of the state, the case of profits is not only different, but the reverse, instead of rising in the progress of society, they decrease, land exists by the gift of nature capital is the product of human industry, land is originally not the property of any man capital always is, the profits of stock must be secured to the owner to afford a motive for its preservation and augmentation, for the preservation of the land, or the augmentation of its produce, it is not of the least importance to whom the rent is consigned, profits are in reality the fund out of which rent is always taken, and every increase of rent in the progress of society, is a deduction from profits, section v l, a tax on profits, a direct tax on profits of stock offers no question of any difficulty, it would fall entirely upon the owners of capital, and could not be shifted upon any other portion of the community, as all capitalists would be affected equally, there would be no motive to the man engaged in any one species of production, to remove his capital to any other, if he paid a certain portion of his profits derived from the business in which he was already engaged, he would pay an equal portion derived from any other business to which he could resort, there would not, therefore, in consequence of such attacks, be any shifting of capital from one species of employment to another, the same quantity of every species of goods would be produced, if there was the same demand for them, that the would, on the whole, be the same aggregate of demand, is also immediately apparent, the same capital is supposed to be employed in the business of production and if part of what accrued to the capitalist was taken from him, lessening to that extent his means of purchasing, it would be transferred to the government, whose power of purchasing would be then to the same degree increased, the would, therefore, be the same demand, and the same supply, there would also be the same quantity of money, and the same rapidity of circulation and therefore the value of money would remain the same as before, section seven. Attacks on wages, if wages are already at the lowest point to which they can be reduced that is, just sufficient to keep up the number of laborers, and no more the state of wages which seems to have been contemplated, by Mr. Ricardo, throughout his disquisitions on political economy, and which the tendency of population to increase faster than capital, undoubtedly leads us to regard as the natural state no tax can fall upon the laborer and if any tax is imposed upon wages, it is easy to trace in what way it must produce a corresponding rise of wages, if wages are as low as is consistent with the preservation of the number of laborers, take anything away from those wages, and the number of laborers must be reduced, the reduction of the number of laborers must be followed by a rise of wages, and this process must continue till wages rise sufficiently high to be consistent with the preservation of the number of laborers in other words, just as high as they were before the tax was imposed, if wages are not at this lowest rate if they are sufficiently high to afford the laborers something more than what is necessary to keep up their numbers, a surplus which may be retrenched without a diminution of their numbers, they may, to this extent, be made subject to taxation, wages, like the price of any other commodity, rise or fall, in proportion as the demand for labor rises or falls compared with the supply, in the case of wages so low as barely to keep up the number of laborers, wages must rise to the amount of any tax imposed upon them, because there is a continued diminution of the supply of laborers till this rise is effected, in the case of wages above this level, there is no necessary reduction of the number of laborers in consequence of a tax imposed upon wages, there is no alteration, therefore, in the state of supply, from this it follows, that if there is not an increase of demand for laborers, in consequence of such attacks, there can be no rise of wages and if there be no rise of wages, the tax must fall upon the laborers, the solution, therefore, of the question, whether a tax upon wages falls upon the laborer, depends upon the inquiry, whether there is, or is not, such increase of demand, an increase of demand for labor can arise from two causes only either from an increase of capital, the fund destined for the employment of labor or a difference in the proportions between the demand for the produce of fixed capital and that of immediate labor, the first of these causes needs no illustration, the operation of the second we proceed to trace, as the demand of a nation consists of a great number of demands of a great number of individuals, the case of one individual will exemplify the whole, suppose a man with a certain income to determine our ideas, let us call it one thousand a pound, per annum this is his demand, let us suppose it divided into two portions, the one of which constitutes his demand for the produce of fixed capital the other his demand for that of immediate labor, and let us suppose that these proportions are different at two different times, we have to examine what are the consequences, let us suppose that, first, he spends five hundred a pound, of this income on the produce of fixed capital five hundred a pound, on that of immediate labor, in the first case he purchases commodities only in the second case he purchases either commodities or services, but gives the same employment to labor whether he purchases the one or the other, if a man makes a basket in a day, for which you pay him a shilling, or weeds in your garden a day at a shilling's wages in both cases the demand you furnish for labor is precisely the same, the five hundred a pound, expended in the produce of immediate labor, is a demand for that number of laborers whose wages for a year amount to five hundred a pound, say for one thousand laborers, i.e. the commodities made with fixed capital, on which he spends the other five hundred a pound, are made purely with fixed capital and imaginary case, but which we may suppose, for the sake of illustration this portion of his income presents no demand for labor at all, the price of the commodities which are thus purchased is wholly made up of profits, it is the result of labor formally expended, and with the portion of labor now in the market it has nothing to do, suppose that of this five hundred a pound, one half is turned, by a change in the taste of the owner, from the purchase of commodities, the produce of fixed capital, to the purchase of the produce of immediate labor, two things happen, a demand is created for two hundred and fifty a pound, worth of mere labor, a demand is annihilated for two hundred and fifty a pound, worth of the produce of fixed capital that is to say, as much of the capital of the country as yielded two hundred and fifty a pound of profits becomes useless, this is entirely distinct from a fall in the rate of profits, such a fall may or may not accompany such a change in the two species of demand, this is a loss of capital, capital, to this extent, ceasing to be employed, ceasing to be needed, is, to any useful purpose, destroyed, along with it there is destroyed a productive power to the extent of two hundred and fifty a pound per annum, this is not compensated by any new production for by the supposition the number of laborers is not increased, every laborer that is employed, under the new application of this two hundred and fifty a pound of the supposed income, would have been employed if the new application had not taken place, if the capital had not been destroyed, under the new distribution of the one thousand a pound income, as much as awarded to the class of laborers as is taken from the class of capitalists, two hundred and fifty a pound, were formally awarded as profits, which are now awarded as wages, so far, there is no absolute loss, as much being gained by one, as lost by another, the loss arises from this, that, while no new labor is brought into employment, and no addition is made to the productive powers of labor, nor of course to its produce, a portion of capital is thrown out of employment, its productive powers are lost, and the annual produce of the country is diminished, this case is reversed when machinery is invented which performs the work of immediate labor, let us make the same supposition of the extreme cases as before, that the machine invented performs the functions of labor without the aid of labor, that the produce is purely the result of capital, let us suppose a capital of ten thousand wholly, in the first instance, employed in the payment of wages, let us suppose that this ten thousand is afterwards expended in making a machine which produces the same commodity, and the same quantity of it, in this case the whole of the laborers who received the ten thousand of wages are deprived of their old employment, the consequence is, not that they are thrown out of employment, but that they increase the supply of labor in the market and reduce wages, the laborers, in this case, do not necessarily cease to produce they produce just as much as before, the whole of the produce of the machine, therefore, is a new production, an addition to the former amount of the annual produce, compare now the two cases the case where the demand for the produce of fixed capital is diminished, and that for immediate labor is increased and the case where the demand for the produce of fixed capital is increased, and that for immediate labor is diminished, in the first there is a rise of wages, and a diminution of profits, and so far there is compensation, but there is besides this a defalcation of production to the extent of the productive powers of all the capital superseded and this is a dead loss, in the second case there is a fall of wages, and a rise of profits, so far again there is compensation, but in this case there is an increase of production to the extent of the productive powers of the whole of the fixed capital created, having thus illustrated the only case in which an increase of demand for labor can take place, without an increase in the amount of capital, which in the case before us is not supposed, we are prepared to see where an increase of demand for labor, in consequence of attacks upon wages, can, and where it cannot, exempt the laborer from the tax, the effect of attacks upon wages, elevated as in the case under supposition, is, to transfer a certain power of commanding the produce of labor and capital from the class of laborers to the government, with the amount of the tax, before it was taken from the laborers, they presented a demand for so much of the operations of fixed capital, so much of those of immediate labor, where the same amount is transferred to the government, the government presents in like manner and demand for so much of the operations of fixed capital, so much of those of immediate labor, if the proportions of the demand for thigh produce of fixed capital and immediate labor were the same in both cases, there would be no alteration in the demand for labor, in consequence of the tax, and the whole of it would fall upon the laborers, if the government presented a greater demand for the produce of immediate labor, less for that of fixed capital, than was presented by the laborers, there would so far be an increase of demand for labor, and a rise of wages, which would so far be a compensation to the laborer for the tax, at the expense, however, of profits, and with an uncompensated loss to the value of all the produce which the superseded capital would have yielded, properly speaking, however, this rise of wages is not an effect of the tax upon wages, it is the effect of a very different cause of a supposed peculiarity in the nature of the government expenditure, when we're talking, therefore, of the effect of a tax upon wages, in increasing or diminishing the demand for labor, this extraneous circumstance, which may or may not be concomitant, ought to be left out of the account, the only essential effect of a tax upon wages is to take so much from the laborer, just as a tax upon profits takes so much from the capitalist, a tax upon rent takes so much from the landlord, it is further essential to this question to observe, that the effect of the government expenditure in raising wages, by furnishing a greater demand for immediate labor, less for the produce of fixed capital, would take place equally if the tax were levied upon profits, or upon rent, if this is the effect of the expenditure of government, upon whatever source of income the tax is levied, to lay the tax upon wages is only to prevent the laborer from reaping the benefit of that rise of wages, the full benefit of which he would otherwise enjoy, in this sense, therefore, also, and, when this is included, all are included, it is evident that the tax really falls upon the laborer, the argument may be shortly stated thus, before the tax was imposed there was a certain demand for labor, this arose, in part, from the funds of the landlord, in part from those of the capitalist, and in part from those of the laborer, after the tax the two former remain the same, but the demand arising from the funds of the laborer is diminished, if this loss of demand were not compensated, the laborer would sustain two evils in consequence of the tax, he would pay the tax and his wages would fall the second of these evils he does not sustain, because the diminution of demand on the part of the laborers is compensated, the increase of demand on the part of government is exactly equal to the diminution of the demand on the part of the laborers, this prevents wages from falling, but it does no more, it yields nothing in compensation for the tax, section 8, direct taxes which are destined to fall equally upon all sources of income, assessed taxes, polled taxes, and income taxes are of this description, after what has been said, it is not difficult to see upon whom, in each instance, the burden of them falls, in as far as they are paid by the man whose income is derived from rent, or the man whose income is derived from profits of stock, the burden of them is borne by these classes, no additional demand arises from the tax and, therefore, neither can landlords raise their rents, nor capitalists the price of their commodities, in respect to the laborer, the result is different in different cases, if his wages are already at their lowest rate, no portion of such tax can fall upon him, his wages will rise, and throw his share upon the capitalist, if the wages of the laborer are sufficiently high, he will sustain his share of the birthing, the effect of these taxes upon prices may be easily ascertained, a tax upon rent would produce no alteration in the price of anything, rent is the effect of price and the effect cannot operate upon the cause, a tax upon profits would alter prices, only as a tax upon wages alters them, of the tax upon wages, there are two cases that in which it raises wages, and that in which it does not raise them, in the case in which it does not raise them, it will hardly be supposed that any alteration of prices should ensue, the capital of the country is not supposed to undergo any alteration nor, of course, the quantity of produce, with respect to the demand, a portion of the power of purchasing which belonged to the laborers, is taken from them, but the whole of what is taken from them is transferred to the government, government may send abroad the amount of the tax, if we suppose, however, that it sends it abroad in goods, it is evident, that no diminution of prices will ensue, and if it sends it abroad in bullion, the case in the long run, is the same for as the vacuity which is thus made in the bullion market, is to be supplied goods must go abroad to purchase it, the exportation of the bullion, if it diminishes the quantity of money, will produce a temporary depression of price, but the same effect would follow from the same cause on any other occasion, in the case in which wages do rise, it may also be seen, that the capital and produce of the country remain the same, the amount of demand and supply the same, and the value of money the same, the aggregate of prices, therefore, one thing being compensated by another, is the same, that change, indeed, which takes place in the relative value of certain kinds of commodities, as often as wages rise and profits fall, is necessarily produced on this occasion, those commodities, the produce of which is chiefly owing to fixed capital, and where little payment of wages is required, fall in price, as compared with those in the produce of which immediate labour is the principal instrument, and where little or nothing of fixed capital is required, the compensation, however, is complete for as much as the one of these two sets of commodities falls in price, the other rises, and the price of both taken aggregately, or the medium of the two, remains the same as before, the several species of property, which, in the ordinary and course application of language, pass under the name of income, are exceedingly different, this gives occasion to a question, whether it is equitable to levy the same rate of tax upon all incomes, the question, however, in what proportion taxes ought to fall, is rather a question of general policy, than of political economy which in regard to taxes confines itself to two questions, first, on which of the three original shares of the annual produce, rent, wages, or profits, a tax falls, and next, whether it operates unfavorably on production, as this question, however, is generally introduced into books on political economy, it is proper here to point out the way to its solution, the grand distinction of incomes, as regards this question, seems to be, the value of them, all property may, with trifling exceptions, be regarded as income, but the value of incomes depends upon two circumstances first, upon what is called their amount, as one hundred a pound, per annum, or one comma oh oh oh a pound, per annum secondly their permanence and certainty, thus the value of a man's property is ten times as great, if he has one comma oh oh oh a pound, a year, as if he has one hundred but that only if the permanence and security are equal, for if one hundred a pound, a year is secure for ever, while one thousand a pound, a year is only to endure for a few years, the one hundred a pound, a year will be the more valuable property of the two, that property is to be estimated according to one of the elements of its value, and not according to all of them, on the occasion of imposing a tax, is a proposition which ought not to be admitted except on very substantial grounds, why is a tax to be proportional to the amount, why is one thousand a pound, a year to be taxed ten times as much as one hundred a pound, a year, because the man who has it can afford it such as the presumption, this is a sort of aim at proportioning the tax to the property but, leaving out an essential element, it is an exceedingly erroneous aim, if the aim itself be recommended by reason, it must be equally recommended that it should be correct, to make it so, both elements of value should be included, let us suppose, that one man's income is one hundred a pound, the rent of land that another man's income is five hundred a pound, the salary of his office, depending not only upon his life and health, but in some degree upon the pleasure of his employers, the first will be worth thirty years purchase the last, in certain circumstances, not worth more than six, the real value of the property of these two men will, in these circumstances, be the same and upon the principle of equal birth and upon equal property, the tax upon these ought to be the same, it is true that if the tax proportional to the amount, is paid for thirty years upon the one hundred a pound, and six years upon the five hundred a pound, the amount of tax will be the same, but this, as a principle of taxation, is liable to this objection, that it excludes from consideration that to which all consideration should tend, individuals and their feelings, there is another point of view in which we must consider the question, the period of enjoyment of the man whose income is one hundred a pound, in rent, may be as short as that of the man whose income is five hundred a pound, in salary the life of the first may not be worth a greater number of years purchase than the salary of the second, in this way, undoubtedly, all incomes may be regarded as measured by the life of the individual, it may also be affirmed, that in like manner as the income of the man who draws rent passes to his descendants so the income of the man who draws salary passes to his successors, strictly speaking, the two species of income are both equally permanent, the rent flows in a permanent stream, through one generation after another, and so does the salary, it would follow, therefore, the different were taxed at one rate, salaries at another, there would be two perennial streams of income, taxed in different degrees, the one more, the other less heavily, this is true, and the only reason for such difference is, the difference of those who succeed to the incomes, in the case of income derived from land or from capital, the income passes to a man's children, to the persons most dear to him, in the case of salaries, it passes to those with whom the man has no connection, whether this reason is sufficient, requires to be considered, there can be no doubt that in regard to feelings, in regard to the happiness of the individuals, it makes a great difference, whether their incomes are to pass to their children at their deaths, or to their successors, in their offices, or their professions, on this score it would seem to be required by the principle of all good legislation, that a corresponding difference should be observed in the imposition of taxes, this, however, would be a step, it is said, towards the equalizing of fortunes, it would lessen the incomes of the descendants of the owners of permanent incomes, in order to increase those of the descendants of persons with life incomes, this is liable to the same objections as raising the scale of taxation in proportion to the scale of income taxing commodities, for example, higher to the man of one thousand a pound, than the man of one hundred a pound, a year, it would lessen the motive to make savings, by lessening the value of great accumulations, it is to be inquired whether this allegation is well founded, a tax operating fairly, ought to leave the relative condition of the different classes of contributors the same after the tax as before it, in regard to the sums required for the service of the state, this is the true principle of distribution, the difficulty lies in determining, in the case of incomes of different permanency, what does leave the relative condition the same, percent it is quite clear that the prospect for a man's children is one part of that condition, if a tax so operates upon two classes, as to reduce the condition of the children of the one class lower, as compared with the condition of the children of the other class, than it would otherwise be, it does not leave the relative condition of these two classes the same, suppose two men, each of one thousand a pound, a year, the one rent, the other salary the latter worth fifteen years purchase, suppose that to make a provision for his children, the man with the salary saves one half the man with the rent spends all, with respect to expenditure, the man with the salary stands to the other in the relative condition of a man of half the income, next let us examine how it is with the children, the annual sum of five hundred a pound, saved for fifteen years, at compound interest, would amount, say, to ten comma oh oh oh a pound, this at five percent, interest, would afford a perpetual income to the children of the man with the salary, of five hundred a pound, a year, the children of the man with the rent would have one thousand a pound, in this way, as the father's condition was that of a man with half the income, so is that of the children, it is perfectly plain, therefore, that if the one is taxed at more than one half the rate of the other, he is taxed too high, the salary we supposed to be worth fifteen years purchase, the rent is worth thirty, one half is here also the proportion, it therefore points out the rule, if one income is worth half as many years purchase as another, it ought to be half as much taxed if it is worth one third of as many years purchase, it ought to be taxed one third, and so on, it may be said, that if the class who live upon salaries are loaded with more than their due share of their berthin, the balance will adjust itself because, the situation having been rendered less desirable, fewer people will go into it, and the salaries will rise, this does not remove the objection, for, first of all, why should legislation disturb the natural proportion, in order that the force of things may restore it, in the next place, the restoration of the equilibrium in this case is a slow operation, it requires a generation to pass away before the diminution of the numbers of those who live upon salaries can raise their condition, a whole generation is therefore sacrificed, section nine, taxes on commodities either some particular commodities or all commodities equally, taxes on commodities may either affect some particular kinds, or all commodities equally, when a tax is laid on any particular commodity, not on others, the commodity rises in price, or exchangeable value and the dealer or producer is reimbursed for what he has advanced on account of the tax, if he were not reimbursed, he would not remain upon a level with others, and would discontinue his trade, as the tax is, in this case, added to the price of the goods, it falls wholly upon the consumers, when a tax, in proportion to their value, is laid upon all commodities, there is this difference that no one commodity rises in exchangeable value, as compared with another, if one yard of broad cloth was equal in value to four yards of linen, and if a duty of ten percent, on the value were laid upon each, a yard of cloth would still be equal to four yards of linen, an Advil or a duty upon all commodities would have the effect of raising prices, the members of the community would come to market, each with the same quantity of money as before, one tenth of it, however, as it came into the hands of the producers, would be transferred to the government, but it would again be immediately laid out in purchases, either by the government itself, or by those to whom the government might dispose of it, this portion, therefore, would come into the hands of the producers often a by once, after the tax was imposed, then before, before the tax was imposed, it came once into the hands of the producers, from those of the purchasers, of goods, and there it remained, after the tax was imposed, it would come into the hands of the producers in the same manner, but it would not remain it would go from them to the government, and from the government come back into the hands of the producers a second time, the producers in this manner would receive for their goods, not only the whole 10 tenths of the money of the country, as before but they would receive one tenth twice, where they received it only once before, this is the same thing exactly as if they had received eleven tenths, or as if the money of the country had been increased one tenth, the purchasing power of the money, therefore, is diminished one tenth in other words, the price of commodities has risen one tenth, upon whom the tax would, in that case, fall, is abundantly obvious, the purchasers would come with the same quantity of money as before, the purchasing power of that money, however, would be reduced one tenth, and they would be able to command one tenth less of commodities than before, the tax would of course, fall upon purchasers, as this argument has not produced, in some minds whose decisions I highly respect, the same conviction which it has in my own, I will endeavor to render it still more perspicuous, by recurrence to one of the simplest possible cases. F. let us suppose a community of ten persons, with only two species of commodities, bread, and meat, let us suppose that five of these persons have five loaves to dispose of, and that the other five have five pounds of meat, the value of a loaf the same as that of a pound of meat, let us suppose that the exchange takes place, as in a more complicated state of things, by the intervention of money and, as the simplest possible case, let us suppose that the whole of the goods is exchanged against the whole of the money in other words, that one exchange of the whole of the goods is performed by one operation of the money, if each loaf is worth ten pence, and each pound of meat the same, it is necessary, under this supposition, that the five persons having the five loaves of bread should have fifty pence, and the persons having the five pounds of meat should have fifty pence, it is obvious that the persons having the five loaves going to market with fifty pence to buy the five pounds of meat, will pay for it at the rate of ten pence per pound, and that the persons with the meat, going to market for the bread, will pay for it at the rate of ten pence the loaf, if we suppose that the production of the loaves and the meat is perpetually renewed, it is evident that the same exchanges, at the same money price, may take place forever, all this i think is abundantly clear, let us then suppose that government taxes these commodities ten percent and observe attentively what happens, when the first loaf of bread is sold for ten pence, one penny out of the ten pence received is paid by the seller to the government, and when one pound of meat is sold, one penny out of the ten pence received is in like manner paid to the government, by the time that one exchange of all the commodities is affected, one tenth of the money has been paid to government, with the money, government, as fast as it received it, has come into the market to purchase the same goods, the former purchasers came with all the former quantity, namely with one o-o pence, government came with a tenth more, for the same quantity of goods, therefore, for which one hundred pence were paid before, one hundred and ten pence have been paid now it is therefore proved that the price of goods is raised at the rate of the tax, the reason is, that one portion of the money which only performed one operation, in effecting one exchange of the goods, now performs two operations, the case would be precisely the same, if we supposed the rapidity of circulation to be much greater, and that each piece of money had to perform ten operations in order to effect one exchange of the whole of the commodities, it is necessary to observe that this is the only correct meaning of the term rapidity of circulation, this is the only meaning in which rapidity of circulation has any effect upon the value of the money, this is strictly, therefore, the sense in which the term is here employed, if we suppose that in order to perform one exchange of the whole of the commodities, the money has to be exchanged ten times, it is obvious, as before explained, that it exchanges each time for precisely one tenth of the goods, let us conceive that the bread and the meat supposed in the former case are ten times as great, the loaves fifty and the pounds of meat fifty, the money remaining the same, but performing ten operations to effect one exchange of the whole, it is very obvious that the effect which we have just explained, as taking place, in consequence of the tax, upon the whole of the goods, when the whole was exchanged by one operation of the money, will now take place upon the one tenth of the goods which is exchanged by one operation of the money, it will be raised one tenth in money value, each tenth will be so raised and therefore by necessary consequence the whole, section x, attacks upon the produce of the land, attacks upon the produce of land attacks upon corn, for example, would raise the price of corn, as of any other commodity, it would fall, by consequence, neither upon the farmer, nor upon the landlord, but upon the consumer, the farmer is situated as any other capitalist, or producer and we have seen sufficiently in what manner the tax upon commodities is transferred from him that produces to him that consumes. The landlord is equally exempted, we have already seen that there is a portion of the capital employed upon the land, the return to which is sufficient to yield the ordinary profits of stock, and no more, the price of produce must be sufficient to yield this profit, otherwise the capital would be withdrawn, if a tax is imposed upon produce, and levied upon the cultivator, it follows that the price of produce must rise sufficiently to refund the tax, if the tax is ten percent, or any other rate, upon the selling price, corn must rise in value one tenth, or any other proportion, in that case it is easy to see, that no part of the tax falls upon the landlord, it is the same as if one tenth of the produce were paid in kind, in that case, it is evident, that one tenth less of the produce would come to the landlord but as it would rise one tenth in value, his compensation would be complete, his rent, though not the same in point of produce, would be the same in point of value, if, instead of a money tax, varying according to price, it were a fixed money tax upon the bushel, or the quarter, the money rent of the landlord would still be the same, suppose the land or capital, which, as explained above, yields no rent, to produce in all two quarters, that which does yield rent to produce six quarters four quarters, in that case, are the share of the landlord, suppose the tax per quarter to be one a pound, corn must rise one a pound, per quarter, the farmer, before the imposition of the tax, paid the landlord the price of four quarters after it, he pays him the price of four quarters, deducting one a pound, per quarter for what he had paid as tax, but corn has risen one a pound, per quarter, he, therefore, pays him the same sum as before, section 11, attacks upon the profits of the farmer, and upon agricultural instruments, if attacks were imposed upon the profits of the farmer, without being imposed upon the profits of any other class of producers, the following would be its effects, it would in the first place raise the price of raw produce because that price is determined by the produce of the capital which pays no rent, and which, if it sustains a tax, must rise like any other taxed commodity to indemnify the producer, in consequence of this rise of price, it would increase the rent of the landlords, suppose that capital is employed on the land in this case under three degrees of productiveness, the most productive portion yielding ten quarters, the second date, and the last six, a landlord who had land cultivated under these circumstances, would receive six quarters of corn as rent, four produced by the first portion, and two by the second, suppose attacks imposed such as to raise the price of corn five percent, it leaves the six quarters of corn a crewing to the landlord, the same as before but the value of these six quarters is five percent, higher the landlord's rent, therefore, is increased five percent, there. difference between this case, and those treated of in the preceding section, is, that the landlord's portion of the produce is not taxed, when the profits of the farmer are taxed, attacks upon the instruments of agriculture, is the same thing in effect, as attacks upon the profits of the farmer, it raises the value of produce, without affecting the quantity which goes as rent to the landlord, thus, if a tax is laid upon agricultural horses, it increases the expense of production to the farm and just as attacks upon coals would increase the cost of production to the iron founder, for this cost the farmer can only be indemnified by a rise in the price of the produce, the quantities, however, of the corn, the ten, the eight, the six quarters, yielded to the different portions of his capital, are not affected, six quarters of corn are the rent of the landlord the same as before, not only, therefore, does the whole of the tax fall upon the consumer, but another sum, which is paid to the landlord, the community is taxed, in part for the use of the government, in part for the benefit of the landlords, section twelve, tithes and poor rates, tithes are attacks upon the produce of the land at tenth of the produce, perfectly or imperfectly collected, the operation, therefore, of this tax, has been already ascertained, it raises the price of produce, and falls wholly upon the consumer, if the poor rate were levied in proportion to profits, upon farmers, manufacturers, and merchants, it would be attacks upon profits, if it were levied in proportion to the rent of land, it would be attacks upon the rent of land, if it were levied upon the rent of houses, it would fall upon the inmates, and be attacks upon income, from the mode in which it is levied, it is drawn in part from all these sources, if it falls disproportionately upon the profits of any one class of capitalists, that class receives compensation, if the farmers, as is usually supposed, pay a higher rate for the maintenance of the poor than other producers, this, as far as the excess extends, is the same thing as a separate and additional tax upon them, but if a separate tax is laid upon the farmers, we have already seen that it operates immediately to raise the price of corn sufficiently high to afford them compensation for the tax, and raises the rent of the landlords, it is to them a benefit, not a burden, of all such taxes as raise the price of corn, one effect is remarkable, as a certain quantity of corn is necessary to the subsistence of the laborer, his wages must be competent to the purchase of that quantity, they must often, therefore, rise as the price of that quantity rises, but we have already seen, that, in proportion as wages rise, profits fall, attacks upon corn, therefore, operates upon all men as consumers, upon capitalists it is apt to operate in two ways it is, first, attacks upon them as consumers and, secondly, it has often the same effect upon them as attacks upon their profits, section 13, attacks break on the land, we have already considered in what manner attacks laid upon the land, and proportional to the rent, would operate in what manner attacks laid upon the land, and proportional to the produce, would operate and in what manner attacks laid upon the land, and proportional to the farmers profits, would operate, the first would be attacks upon the landlord the second would be attacks upon the consumer, and would not affect the landlord a third would be a tax upon the consumer, and would benefit the landlord, a tax may also be laid upon the land at so much parakea, the operation of this tax would be different, if it were levied upon cultivated land only, and if it were levied on both cultivated and uncultivated, if it were levied dh cultivated and uncultivated, it would not raise the price of produce, and would fall wholly upon the landlord if it were levied on cultivated land only, it would raise the price of produce, would fall wholly on the consumers, and would increase the rent of the landlords, we have seen that there is a portion of capital employed upon the land, the return to which is sufficient to afford the ordinary profits of stock, but no more, if any addition is made to the cost of producing, a rise of price must afford compensation, if no addition is made to such cost, price will not be affected, if a tax is laid at so much parakea on land, both cultivated and uncultivated, no addition will be made to the cost of producing, there are two cases in which portions of capital are employed on the land without yielding more than the ordinary profits of stock of course yielding nothing for rent, the one is, where, after two or more doses of capital have been bestowed upon land, each yielding less than the former, a third or a fourth comes to be employed the other is, where, after land of the second or third degree of fertility has been exhausted, cultivation is forced upon land of a still inferior quality, in the first of these cases, it is evident, immediately, that a tax on the acre does not affect the cost of production upon any subsequent dose of capital, when the first dose only is applied, the tax is paid and it is, therefore, the interest of the farmer to apply a second, as soon as the price of produce has risen sufficiently high to afford him a full profit, and nothing more, no allowance remains to be made for the tax which was already paid, the same conclusion holds, when capital is applied to new land of inferior quality, in this case, also, if the tax was previously paid, the owner of the land has an interest in cultivating it, the moment when produce rises sufficiently high to afford the profits of the stock which the cultivation may require, the case, however, is different, when the tax is levied only on cultivated land, when capital passes downwards from the more fertile land which has been cultivated before, to the less fertile, which has not been cultivated, a tax then begins immediately to be paid, the produce to be raised must yield, not only the ordinary profits of stock, but the tax also such land will not be cultivated till the price of produce has risen sufficiently high to yield that accumulated return, the tax, therefore, is included in the price, the consequence, with regard to the landlord, is beneficial, suppose that land of the third degree of fertility is the last to which cultivation has descended that such land yields at the rate of two quarters per acre, land of the next degree above it at the rate of four quarters, and land of the first degree of thirty six quarters in this case, it is, evident, that two quarters upon each acre affords both the tax, and the remuneration to the farmer. The landlord, therefore, may derive two quarters, from the acre of second quality, four quarters from the acre of first, he draws this quantity of produce equally in both cases, as well when such a tax is levied, as when it is not levied, but in the case of the tax, the price is raised, and each of his quarters of corn is of greater value, such a tax would, therefore, raise upon the consumers, not only so much per acre to the government, but a great deal more for the benefit of the landlords. Section 14 Taxes upon the transfer of property Taxes upon the transfer of property are of several kinds as stamp duties upon purchase and sale, legacy duties, duties upon the writings required in the conveying of property, and others of the same nature, in the case of all property which is the produce of labour and capital, the tax upon purchase and sale falls upon the purchaser, because the cost of production, including the profits of stock, must be afforded along with the tax, taxes upon the transfer of land, which is a source of production, and not the effect of labour and capital, fall upon the seller because the purchaser considers what benefit he could derive from his capital employed in another way and if the land will not afford him an equivalent, he will refuse to exchange it for the land. The legacy duties, and duties upon free gifts, fall, it is evident, upon the receivers. Section 15 Taxes upon proceedings at law are levied chiefly in the form of stamps on the different writings employed in the business of judicature and in that of fees. On the several steps and incidents of the judicial procedure, it is evident enough that they fall upon the suitors, it is equally evident that they are a tax uponly demand for justice, justice is demanded in two cases either that in which it is a matter of doubt to which of two persons a certain right belongs or that in which the right of some person has been violated, and a remedy is required, there is no peculiar propriety in taxing a man because he has a right which is unfortunately disputed, but there is the greatest of all improprieties in taxing a man because he has sustained an act of injustice, it is very evident that all such taxes are bar in the way of obtaining redress of injury and just in so far as anything obstructs the redress of injury, injustice is promoted, a tax upon justice, therefore, is a premium upon injustice. Section 16 Taxes on money and the precious metals, a tax upon money cannot be conveniently levied, excepting either upon the occasion of its coinage or that of the first acquisition of the bullion, it might be levied upon the bullion, either upon its importation from abroad or, if the mine were within the country, upon its issuing from the mine, a tax upon coinage is the same thing, in effect, with what has been called a sagnarage, it is the paying of something more for the coins, than the quantity of bullion of which they are composed, the effect of this is evident, when a currency consists entirely of the metals, no man will carry bullion to be coined, unless the metal in the coin is of as much more value than the bullion, as the amount of the tax, the currency, therefore, is raised in value that is to say, the metal in the state of currency is raised in value, to an amount equal to that of the tax. This is a tax which possesses the peculiar property. Of falling upon nobody, it falls not upon the man who carries bullion to be coined, because he carries it only when the coins are equal in value to the tax and bullion together, it falls not upon the persons t