ure no public record would be kept of it and it would be a matter of comparative indifference to the country whether a faithfully performed his contract to be or unjustly retained the 100 pounds per annum in his own possession the country would have a general interest in the faithful performance of a contract but with respect to the national wealth it would have no other interest than whether a or b would make this 100 pounds most productive but on this question it would neither have the right nor the ability to decide it might be possible that if a retained it for his own use he might squander it unprofitably and if it were paid to b he might add it to his capital and employ it productively and the converse would also be possible b might squander it and a might employ it productively with a view to wealth only it might be equally or more desirable that a should or should not pay it but the claims of justice and good faith are greater utility and not to be compelled to yield to those of a less and accordingly if the state were called upon to interfere the course of justice would oblige a to perform his contract a debt guaranteed by the nation differs in no respect from the above transaction justice and good faith demand that the interest of the national debt should continue to be paid and that those who have advanced their capitals for the general benefit should not be required to forego their equitable claims on the plea of expediency but independently of this consideration it is by no means certain that political utility would gain anything by the sacrifice of political integrity it does by no means follow that the party exonerated from the payment of the interest of the national debt would employ it more productively than those to whom indisputably it is due by cancelling the national debt one man's income might be raised from 1,000 pounds to 1,500 pounds but another man's would be lowered from 1,500 pounds to 1,000 pounds these two men's incomes no amount to 2,500 pounds they would amount to no more then if it be the object of government to raise taxes they would be precisely the same taxable capital and income in one case as in the other it is not then by the payment of the interest on the national debt that a country is distressed nor is it by the exoneration from payment that it can be relieved it is only by saving from income and re-trenching in expenditure that the national capital can be increased and neither the income would be increased nor the expenditure diminished by the annihilation of the national debt it is by the profuse expenditure of government and of individuals and by loans that the country is impoverished every measure therefore which is calculated to promote public and private economy will relieve the public distress but it is error and illusion to suppose that a real national difficulty can be removed by shifting it from the shoulders of one class of the community who justly ought to bear it to the shoulders of another class who upon every principle of equity ought to bear no more than their share from what I have said it must not be inferred that I consider the system of borrowing as the best calculated to defray the extraordinary expenses of the state it is a system which tends to make us less thrifty to blind us to our real situation if the expenses of a war be 40 millions per annum and the share which a man would have to contribute towards that annual expense for 100 pounds he would endeavor on being at once called upon for his portion to save speedily the 100 pounds from his income by the system of loans he is called upon to pay only the interest of this 100 pounds or 5 pounds per annum and considers that he does enough by saving this 5 pounds from his expenditure and then deludes himself with the belief that he is as rich as before the whole nation by reasoning and acting in this manner save only the interest of 40 millions or 2 millions and thus not only lose all the interest or profit which 40 millions of capital employed productively would afford but also 38 millions the difference between their savings and expenditure if as I before observed each man had to make his own loan and contribute his full proportion to the exigencies of the state as soon as the war ceased taxation would cease and we should immediately fall into a natural state of prices out of his private funds A might have to pay B interest for the money he borrowed of him during the war to enable him to pay his quota of the expense but with this the nation would have no concern a country which has accumulated a large debt is placed in a most artificial situation and although the amount of taxes and the increased price of labor may not and I believe does not place it under any other disadvantage with respect to foreign countries except the unavoidable one of paying those taxes yet it becomes the interest of every contributor to withdraw his shoulder from the burden and to shift this payment from himself to another and the temptation to remove himself and his capital to another country where he will be exempted from such burdens becomes at last irresistible and overcomes the natural reluctance which every man feels to quit the place of his birth and the scene of his early associations a country which is involved itself in the difficulties attending this artificial system would act wisely by ransoming itself from them at the sacrifice of any portion of its property which might be necessary to redeem its debt that which is wise in an individual is wise also in a nation a man who has 10,000 pounds paying him an income of 500 pounds out of which he has to pay 100 pounds per annum towards the interest of the debt is really worth only 8,000 pounds and would be equally rich whether he continued to pay 100 pounds per annum or at once and for only once sacrificed 2,000 pounds but where it is asked would be the purchaser of the property which he must sell to obtain this 2,000 pounds the answer is plain the national creditor who is to receive this 2,000 pounds will want an investment for his money and will be disposed either to lend it to the landholder or manufacturer or to purchase from them a part of the property of which they have to dispose to such a payment the stockholders themselves would largely contribute this scheme has been often recommended but we have I fear neither wisdom enough nor virtue enough to adopt it it must however be admitted that during peace our unceasing efforts should be directed towards paying off that part of the debt which has been contracted during war and that no temptation of relief no desire of escape from present had I heard temporary distresses should induce us to relax in our attention to that great object no sinking fund can be efficient for the purpose of diminishing the debt if it be not derived from the excess of the public revenue over the public expenditure it is to be regretted that the sinking fund in this country is only such in name for there is no excess of revenue above expenditure it ought by economy to be made what it is professed to be a really efficient fund for the payment of the debt if from the breaking out of any future war we shall not have very considerably reduced our debt one of two things must happen either the whole expenses of that war must be defrayed by taxes raised from year to year or we must at the end of that war if not before submit to a national bankruptcy not that we shall be unable to bear any large additions to the debt it would be difficult to set limits to the powers of a great nation but assuredly there are limits to the price which in the form of perpetual taxation individuals will submit to pay for the privilege merely of living in their native country footnote in economy politic Monsieur Say says credit in general is good as it allows capitals to leave those hands where they are not usefully employed to pass into those where they will be made productive it diverts a capital from an employment useful only to the capitalist such as an investment in the public funds to make it productive in the hands of industry it facilitates the employment of all capitals and leaves none unemployed unquote this must be an oversight of Monsieur Say the capital of the stockholder can never be made productive it is in fact no capital if he were to sell his stock and employ the capital he obtained for it productively he could only do so by detaching the capital of the buyer of his stock from a productive employment end of footnote when a commodity is at a monopoly price it is at the very highest price at which the consumers are willing to purchase it commodities are only at a monopoly price when they know possible device their quantity can be augmented and when therefore the competition is wholly on one side amongst the buyers the monopoly price of one period may be much lower or higher than the monopoly price of another because the competition amongst the purchasers must depend on their wealth and their tastes and caprices those particular wines which are produced in very limited quantity and those works of art which from their excellence or rarity have acquired a fanciful value will be exchanged for a very different quantity of the produce of ordinary labour according as the society is rich or poor as it possesses an abundance or scarcity of such produce or as it may be in a rude or polished state the exchangeable value therefore of a commodity which is at a monopoly price is nowhere regulated by the cost of production raw produce is not at a monopoly price because the market price of barley and wheat is as much regulated by their cost of production as the market price of cloth and linen the only difference is this that one portion of the capital employed in agriculture regulates the price of corn namely that portion which pays no rent whereas in the production of manufactured commodities every portion of capital is employed with the same results and as no portion pays rent every portion is equally a regulator of price corn and other raw produce can be augmented too in quantity by the employment of more capital on the land and therefore they are not at a monopoly price there is competition among the sellers as well as amongst the buyers this is not the case in the production of those rare wines and those valuable specimens of art of which we have been speaking their quantity cannot be increased and their price is limited only by the extent of the power and will of the purchasers the rent of these vineyards may be raised beyond any moderately assignable limits because no other land being able to produce such wines none can be brought into competition with them the corn and raw produce of a country may indeed for a time sell at a monopoly price but they can do so permanently only when no more capital can be profitably employed on the lands and when therefore their produce cannot be increased at such time every portion of land in cultivation and every portion of capital employed on the land will yield a rent differing indeed in proportion to the difference in the return at such time too any tax which may be imposed on the farmer will fall on rent and not on the consumer he cannot raise the price of his corn because by the supposition it is already at the highest price at which the purchasers will or can buy it he will not be satisfied with a lower rate of profits than that obtained by other capitalists and therefore his only alternative will be to obtain a reduction of rent or to quit his employment Mr Buchanan considers corn and raw produce as at a monopoly price because they yield a rent all commodities which yield a rent he supposes must be at a monopoly price and that seems first that all taxes on raw produce would fall on the landlord and not on the consumer the price of corn he says which always affords a rent being a no-respect influence by the expenses of its production those expenses must be paid out of the rent and when they rise or fall therefore the consequence is not a higher or lower price but a higher or a lower rent in this view all taxes on farm servants horses or the implements of agriculture are in reality land taxes the burden falling on the farmer during the currency of his lease and on the landlord when the lease comes to be renewed in like manner all those improved implements of husbandry which save expense to the farmer such as machines for threshing and reaping whatever gives him easier access to the market such as good roads, canals and bridges though they lessen the original cost of corn do not lessen its market price whatever is saved by those improvements therefore belongs to the landlord as part of his rent it is evident that if we yield to Mr Buchanan the basis on which his argument is built namely that the price of corn always yields a rent all the consequences which he contends for would follow of course taxes on the farmer then would fall not on the consumer but on rent and all improvements in husbandry would increase rent but i hope i have made it sufficiently clear that until a country is cultivated in every part and up to the highest degree there is always a portion of capital employed on the land which yields no rent and that it is this portion of capital the result of which as in manufacturers is divided between profits and wages that regulates the price of corn the price of corn then which does not afford a rent being influenced by the expenses of its production those expenses cannot be paid out of rent the consequence therefore of those expenses increasing is a higher price and not a lower rent footnote Buchanan states quote manufacturing industry increases its produce in proportion to the demand and the price falls but the produce of land cannot be so increased and a high price is still necessary to prevent the consumption from exceeding the supply unquote is it possible that Mr Buchanan can seriously assert that the produce of the land cannot be increased if the demand increases end of footnote it is remarkable that both Adam Smith and Mr Buchanan who entirely agree that taxes on raw produce for land tax and tithes all fall on the rent of land and not on the consumers of all produce should nevertheless admit that taxes on malt would fall on the consumer of beer and not on the rent of the landlord Adam Smith's argument is so able a statement of the view which I take of the subject of the tax on malt and every other tax on raw produce that I cannot refrain from offering it to the attention of the listener the rent and profits of barley land must always be nearly equal to those of other equally fertile and equally well cultivated land if they were less some part of the barley land would soon be turned to some other purpose and if they were greater more land would soon be turned to the raising of barley when the ordinary price of any particular produce of land is at what may be called a monopoly price a tax upon it necessarily reduces the rent and profit of the land which grows it footnote at which the wet profit had been omitted Dr Smith must suppose the profits of the tenants of these precious vineyards to be above the general rate of profits if they were not they would not pay the tax unless they could shift it either to the landlord or consumer end of footnote a tax upon the produce of those precious vineyards of which the wine falls so much short of the effectual demand that its price is always above the natural proportion to that of other equally fertile and equally well cultivated land would necessarily reduce the rent and profit of those vineyards the price of the wines being already the highest that could be got for the quantity commonly sent to market it could not be raised higher without diminishing that quantity and the quantity could not be diminished without still greater loss because the lands could not be turned to any other equally valuable produce the whole weight of the tax therefore would fall upon the rent and profit properly upon the rent of the vineyard but the ordinary price of barley has never been a monopoly price and the rent and profit of barley land have never been above their natural proportion to those of other equally fertile and equally well cultivated land the different taxes which have been imposed upon malt, beer and ale have never lowered the price of barley have never reduced the rent and profit of barley land the price of malt to the brewer has constantly risen in proportion to the taxes imposed upon it and those taxes together with the different duties upon beer and ale have constantly either raised the price or what comes to the same thing reduced the quality of those commodities to the consumer the final payment of those taxes has fallen constantly upon the consumer and not upon the producer on this passage Mr Buchanan remarks a duty on malt never could reduce the price of barley because unless as much could be made of barley by malting it as by selling it unmalted the quantity required would not be brought to market it is clear therefore that the price of malt must rise in proportion to the tax imposed on it as the demand could not otherwise be supplied the price of barley however is just as much a monopoly price as that of sugar they both yield a rent and the market price of both has equally lost all connection with the original cost it appears then to be the opinion of Mr Buchanan that a tax on malt would raise the price of malt but that a tax on the barley from which malt is made would not raise the price of barley and therefore if malt is taxed the tax will be paid by the consumer if barley is taxed it will be paid by the landlord as he will receive a diminished rent according to Mr Buchanan then barley is at a monopoly price at the highest price which the purchasers are willing to give for it but malt made of barley is not at a monopoly price and consequently it can be raised in proportion to the taxes that may be imposed upon it this opinion of Mr Buchanan of the effects of a tax on malt appears to me to be in direct contradiction to the opinion he has given of a similar tax a tax on bread a tax on bread will be ultimately paid not by a rise of price but by a reduction of rent if a tax on malt would raise the price of beer a tax on bread must raise the price of bread the following argument of mrs says founded on the same views as mr Buchanan's the quantity of wine or corn which a piece of land will produce will remain nearly the same whatever may be the tax with which it is charged the tax may take away a half or even three fourths of its net produce or of its rent if you please yet the land would nevertheless be cultivated for the half or the quarter not absorbed by the tax the rent that is to say the landlord's share would nearly be somewhat lower the reason of this will be perceived if we consider that in the case supposed the quantity of produce obtained from the land and centre market will remain nevertheless the same on the other hand the motives on which the demand for the produce is founded continue also the same now if the quantity of produce supplied and the quantity demanded necessarily continue the same notwithstanding the establishment or the increase of the tax the price of that produce will not vary and if the price do not vary the consumer will not pay the smallest portion of this tax would it be said that the farmer he who furnishes labour and capital will jointly with the landlord bear the burden of this tax certainly not because the circumstance of the tax has not diminished the number of farms to be let nor increase the number of farmers since in this instance also the supply and demand remain the same the rent of farms must also remain the same the example of the manufacturer of salt who can only make the consumers pay a portion of the tax and that of the landlord who cannot reimburse himself in the smallest degree prove the error of those who maintain in opposition to the economists that all taxes fall ultimately on the consumer volume to page 338 if the tax took away half or even three fourths of the net produce of the land and the price of produce did not rise how could those farmers obtain the usual profits of stock who paid very moderate rents having that quality of land which required a much larger proportion of labour to obtain a given result than land of a more fertile quality if the whole rent were emitted they would still obtain lower profits than those in other trades and would therefore not continue to cultivate their land unless they could raise the price of its produce if the tax fell on the farmers there would be fewer farmers disposed to hire farms if it fell on the landlord many farms would not be led at all for they would afford no rent but from what fund would those pay the tax who produce corn without paying any rent it is quite clear that the tax must fall on the consumer how would such land as mr say describes in the following passage pay a tax of one half or three fourths of its produce we see in scotland poor lands thus cultivated by the proprietor and which could be cultivated by no other person thus to we see in the interior provinces of the united states vast and fertile lands the revenue of which alone would not be sufficient for the maintenance of the proprietor these lands are cultivated nevertheless but it must be by the proprietor himself or in other words he must add to the rent which is little or nothing the profits of his capital and industry to enable him to live in competence it is well known that land though cultivated yields no revenue to the landlord when no farmer will be willing to pay a rent for it which is a proof that such land will give only the profits of the capital and of the industry necessary for its cultivation say volume 2 page 127 chapter 18 poor rates we have seen that taxes on raw produce and on the profits of the farmer will fall on the consumer of raw produce since unless he had the power of remunerating himself by an increase of price the tax would reduce his profits below the general level of profits and would urge him to remove his capital to some other trade we have seen too that he could not by deducting it from his rent transfer the tax to his landlord because that farmer who paid no rent would equally with the cultivator of better land be subject to the tax whether it will aid on raw produce or on the profits of the farmer i've also attempted to show that if a tax for general and affected equally all profits whether manufacturing or agricultural it would not operate either on the price of goods or raw produce but would be immediately as well as ultimately paid by the producers the tax on rented has been observed would fall on the landlord only and could not by any means be made to devolve on the tenant the poor rate is a tax which partakes of the nature of all these taxes and under different circumstances falls on the consumer of raw produce and goods on the profits of stock and on the rent of land it is a tax which falls with peculiar weight on the profits of the farmer and therefore may be considered as affecting the price of raw produce according to the degree in which it bears on manufacturing and agricultural profits equally it will be a general tax on the profits of stock and will occasion no alteration in the price of raw produce and manufacturers in proportion to the farmers inability to remunerate himself by raising the price of raw produce for that portion of the tax which peculiarly affects him it will be a tax on rent and will be paid by the landlord to know then the operation of the poor at any particular time you must ascertain whether at that time it affects in an equal or unequal degree the profits of the farmer and manufacturer and also whether the circumstances be such as to afford to the farmer the power of raising the price of raw produce the poor rates are professed to be levied on the farmer in proportion to his rent and accordingly the farmer who paid a very small rent or no rent at all should pay little or no tax if this were true poor rates as far as they are paid by the agricultural class would entirely fall on the landlord and could not be shifted to the consumer of raw produce but i believe that it is not true the poor rate is not levied according to the rent which a farmer actually pays to his landlord it is proportioned to the annual value of his land whether that annual value be given to it by the capital of the landlord or of the tenant if two farmers rented land of two different qualities in the same parish the one paying a rent of 100 pounds per annum for 50 acres of the most fertile land and the other the same sum of 100 pounds for 1000 acres of the least fertile land they would pay the same amount of poor rates if neither of them attempted to improve the land but if the farmer of the poor land presuming on a very long lease should be induced at a great expense to improve the productive powers of his land by manuring, draining, fencing etc. he would contribute to the poor rates not in proportion to the actual rent paid to the landlord but to the actual annual value of the land the rate might equal or exceed the rent but whether it did or not no part of this rate would be paid by the landlord it would have been previously calculated upon by the tenant and if the price of produce were not sufficient to compensate him for all his expenses together with this additional charge for poor rates his improvements would not have been undertaken it is evident then that the tax in this case is paid by the consumer for if there had been no rate the same improvements would have been undertaken and the usual in general rate of profits would have been obtained on the stock employed with a lower price of corn nor would it make the slightest difference in this question if the landlord had made these improvements himself that had in consequence raised his rent from 100 pounds to 500 pounds the rate would be equally charged to the consumer for whether the landlord should expend a large sum of money on his land would depend on the rent or what is called rent which he would receive as a remuneration for it and this again would depend on the price of corn or other raw produce being sufficiently high not only to cover this additional rent but also the rate to which the land would be subject if at the same time all manufacturing capital contributed to the poor rates in the same proportion as the capital expended by the farmer or landlord in improving the land then it would no longer be a partial tax on the profits of the farmers or landlords capital but a tax on the capital of all producers and therefore it could no longer be shifted either on the consumer of raw produce or on the landlord the farmer's profits would feel the effect of the rate no more than those of the manufacturer and the former could not any more than the latter plead it as a reason for an advance in the price of his commodity it is not the absolute but the relative fall of profits which prevents capital from being employed in any particular trade it is the difference of profit which sends capital from one employment to another it must be acknowledged however that in the actual state of the poor rates a much larger amount falls on the farmer than on the manufacturer in proportion to their respective profits the farmer being rated according to the actual productions which he obtains the manufacturer only according to the value of the buildings in which he works without any regard to the value of the machinery labor or stock which he may employ from this circumstance it follows that the farmer will be enabled to raise the price of his produce by this whole difference for since the tax falls unequally and peculiarly on his profits he would have less motive to devote his capital to the land than to employ it in some other trade were not the price of raw produce raised if on the contrary the rate had fallen with greater weight on the manufacturer than on the farmer he would have been enabled to raise the price of his goods by the amount of the difference for the same reason that the farmer under similar circumstances could raise the price of raw produce in a society therefore which is extending its agriculture when poor rates fall with peculiar weight on the land they will be paid partly by the employers of capital in the diminution of the profits of stock and partly by the consumer of raw produce in its increased price in such a state of things the tax may under some circumstances be even advantageous rather than injurious to landlords for if the tax paid by the cultivator of the worst land be higher in proportion to the quantity of produce obtained than that paid by the farmers of the more fertile lands the rise in the price of corn which will extend to all corn will more than compensate the latter for the tax this advantage will remain with them during the continuance of their leases but it will afterwards be transferred to their landlords this then would be the effect of poor rates in an advancing society but in a stationary or in a retrograde country so far as capital could not be withdrawn from the land if a further rate were levied for the support of the poor that part of it which fell on agriculture would be paid during the current leases by the farmers but at the expiration of those leases it would almost wholly fall on the landlords the farmer who during his former lease had expended his capital in improving his land if it was still in his own hands would be rated for this new tax according to the new value which the land had acquired by its improvement and this amount he would be obliged to pay during his lease although his profits might thereby be reduced below the general rate of profits for the capital which he has expended may be so incorporated with the land that it cannot be removed from it if indeed he or his landlord should it have been expended by him were able to remove this capital and thereby reduce the annual value of the land the rate would proportionably fall and as the produce would at the same time be diminished its price would rise he would be compensated for the tax by charging it to the consumer and no part would fall on rent but this is impossible at least with respect to some proportion of the capital and consequently in that proportion the tax will be paid by the farmers during their leases and by landlords at their expiration this additional tax if it fell with peculiar severity on manufacturers which it does not would under such circumstances be added to the price of their goods but there can be no reason why their profits should be reduced below the general rate of profits when their capitals might be easily removed to agriculture footnote in a former part of this work i have noticed the difference between rent properly so-called and the remuneration paid to the landlord under the name for the advantages which the expenditure of his capital has procured to his tenant but i did not perhaps sufficiently distinguish the difference which would arise from the different modes in which this capital might be applied as a part of this capital when once expended in the improvement of a firm is inseparably amalgamated with the land and tends to increase its productive powers the remuneration paid to the landlord for its use is strictly of the nature of rent and is subject to all the laws of rent whether the improvement be made at the expense of the landlord or the tenant it will not be undertaken in the first instance unless there is a strong probability that the return will at least be equal to the profit that can be made by the disposition of any other equal capital but when once made the return obtained will ever after be wholly of the nature of rent and will be subject by the variations of rent some of these expenses however only give advantages to the land for a limited period and do not add permanently to its productive powers being bestowed on buildings and other perishable improvements they require to be constantly renewed and therefore do not obtain for the landlord any permanent addition to his real rent end of footnote chapter 19 on sudden changes in the channels of trade a great manufacturing country is peculiarly exposed to temporary reverses and contingencies produced by the removal of capital from unemployment to another the demands for the produce of agriculture are uniform they are not under the influence of fashion prejudice or priests to sustain life food is necessary and the demand for food must continue in all ages and in all countries it is different with manufacturers the demand for any particular manufactured commodity is subject not only to the once but to the tastes and caprice of the purchasers a new tax too may destroy the comparative advantage which a country before possessed in the manufacture of a particular commodity or the effects of war may so raise the freight and insurance on its conveyance that it can no longer enter into competition with the home manufacturer of the country to which it was before exported in all such cases considerable distress and no doubt some loss will be experienced by those who are engaged in the manufacture of such commodities and it will be felt not only at the time of the change but through the whole interval during which they are removing their capitals and the labor which they can command from one employment to another nor will distress be experienced in that country alone where such difficulties originate but in the countries to which its commodities were before exported no country can long import unless it also exports or can long export unless it also imports if then any circumstance should occur which should permanently prevent a country from importing the usual amount of foreign commodities it will necessarily diminish the manufacture of some of those commodities which were usually exported and although the total value of the productions of the country will probably be but little altered since the same capital will be employed yet they will not be equally abundant and cheap and considerable distress will be experienced through the change of employment if by the employment of ten thousand pounds in the manufacture of cotton goods for exportation we imported annually three thousand pair of silk stockings of the value of two thousand pounds and by the interruption of foreign trade we should be obliged to withdraw this capital from the manufacture of cotton and employed ourselves in the manufacture of stockings we should still obtain stockings of the value of two thousand pounds provided no part of the capital we destroyed but instead of having three thousand pair we might only have two thousand five hundred in the removal of the capital from the cotton to the stocking trade much distress might be experienced but it would not considerably impair the value of the national property although it might lessen the quantity of our annual productions quick note mrs say writes quote commerce enables us to obtain a commodity in the place where it is to be found and to convey it to another where it is to be consumed it therefore gives us the power of increasing the value of the commodity by the whole difference between its price in the first of these places and its price in the second unquote true but how is this additional value given to it by adding to the cost of production first the expenses of conveyance secondly the profit on the advance of capital made by the merchant the commodity is only more valuable for the same reasons that every other commodity may become more valuable because more labor is expended on its production and conveyance before it is purchased by the consumer this must not be mentioned as one of the advantages of commerce when the subject is more closely examined it will be found that the whole benefits of commerce resolve themselves into the means which it gives us of acquiring not more valuable objects but more useful ones end of footnote the commencements of war after a long piece or a piece after a long war generally produces considerable distress in trade it changes in a great degree the nature of the employment to which the respective capitals of countries were before devoted and during the interval while they are settling in the situations which new circumstances have made the most beneficial much fixed capital is unemployed perhaps wholly lost and laborers are without full employment the duration of this distress will be longer or shorter according to the strength of that disinclination which most men feel to abandon that employment of their capital to which they have long been accustomed it is often protracted too by the restrictions and prohibitions to which the absurd jealousies which prevail between the different states of the commercial commonwealth give rise the distress which proceeds from a revulsion of trade is often mistaken for that which accompanies a diminution of the national capital and a retrograde state of society and it would perhaps be difficult to point out any marks by which they may be accurately distinguished when however such distress immediately accompanies a change from water peace our knowledge of the existence of such a cause will make it reasonable to believe that the funds for the maintenance of labor have rather been diverted from their usual channel than materially impaired and that after temporary suffering the nation will again advance in prosperity it must be remembered too that the retrograde condition is always an unnatural state of society man from youth grows to manhood then decays and dies but this is not the progress of nations when arrived to a state of the greatest figure their further advance may indeed be arrested but their natural tendencies to continue for ages to sustain undiminished their wealth and their population in rich and powerful countries where large capitals are invested in machinery more distress will be experienced from a revulsion in trade than in poorer countries where there is proportionally a much smaller amount of fixed and a much larger amount of circulating capital and where consequently more work is done by the labor of men it is not so difficult to withdraw a circulating as a fixed capital from any employment in which it may be engaged it is often impossible to divert the machinery which may have been erected for one manufacturer to the purposes of another but the clothing the food and the lodging of the laborer in one employment may be devoted to the support of the laborer in another or the same laborer may receive the same food clothing and lodging whilst his employment is changed this however is an evil to which a rich nation must submit and it would not be more reasonable to complain of it than it would be in a rich merchant to lament that his ship was exposed to the dangers of the sea whilst his poor neighbor's cottage was safe from all such hazard from contingencies of this kind though in an inferior degree even agriculture is not exempted or which in a commercial country interrupts the commerce of states frequently prevents the exportation of corn from countries where it can be produced with little cost to others not so favorably situated under such circumstances an unusual quantity of capital is drawn to agriculture and the country which before imported becomes independent of foreign aid at the termination of the war the obstacles to importation are removed and a competition destructive to the home grower commences from which he is unable to withdraw without the sacrifice of a great part of his capital the best policy of the state would be to lay a tax decreasing an amount from time to time on the importation of foreign corn for a limited number of years in order to afford to the home grower an opportunity to withdraw his capital gradually from the land footnote in the last volume to the supplement of the encyclopedia britannica article corn laws and trade are the following excellent suggestions and observations if we shall at any future period think of retracting our steps in order to give time to withdraw capital from the cultivation of our poor soils and to invest it in more lucrative employments a gradually diminishing scale of duties may be adopted the price of which foreign grain should be admitted duty-free may be made to decrease from 80 shillings its present limit by four shillings or five shillings per quarter annually till it reaches 50 shillings when the port could safely be thrown open and the restrictive system be forever abolished when this happy event shall have taken place it will be no longer necessary to force nature the capital and enterprise of the country will be turned into those departments of industry in which our physical situation national character or political institutions fit us to excel the core of poland and the raw cotton of carolina will be exchanged for the wares of Birmingham and the muslins of Glasgow the genuine commercial spirit that which permanently secures the property of nations is altogether inconsistent with the dark and shallow policy of monopoly the nations of the earth are like provinces of the same kingdom a free and unfettered intercourse is alike productive of general and of local advantage the whole article is well worthy of attention it is very instructive is ably written and shows that the author is completely master of the subject end of footnote in so doing the country might not be making the most advantageous distribution of its capital but the temporary tax to which it was subjected would be for the advantage of a particular class the distribution of whose capital was highly useful in procuring a supply of food when importation was stopped if such exertions in a period of emergency were followed by risk of ruin on the termination of the difficulty capital would shun such an employment besides the usual profits of stock farmers would expect to be compensated for the risk which they incurred of a sudden influx of corn and therefore the price to the consumer at the seasons when he most required a supply would be enhanced not only by the superior cost of growing corn at home but also by the insurance which he would have to pay in the price for the peculiar risk to which this employment of capital was exposed not with standing then that it would be more productive of wealth to the country at whatever sacrifice of capital it might be done to allow the importation of cheap corn it would perhaps be advisable to charge it with a duty for a few years in examining the question of rent we found that with every increase in the supply of corn and with the consequent fall of its price capital would be withdrawn from the poorer land and land of a better description which would then pay no rent would become the standard by which the natural price of corn would be regulated at four pounds per quarter land of an inferior quality which may be designated by number six might be cultivated at three pounds ten shillings number five at three pounds number four and so on if corn in consequence of permanent abundance fell to three pounds ten shillings the capital employed on number six would cease to be employed for it was only when corn was at four pounds that it could obtain the general profits even without paying rent it would therefore be withdrawn to manufacture those commodities with which all the corn grown on number six would be purchased and imported in this employment it would necessarily be more productive to its owner or it would not be withdrawn from the other for if he could not obtain more corn by purchasing it with a commodity which he manufactured then he got from the land for which he paid no rent its price could not be under four pounds it has however been said that capital cannot be withdrawn from the land that it takes the form of expenses which cannot be recovered such as manureing fencing draining etc which are necessarily inseparable from the land this is in some degree true but that capital which consists of cattle sheep hay and corn ricks carts etc may be withdrawn and it always becomes a matter of calculation whether these shall continue to be employed on the land notwithstanding the low price of corn or whether they shall be sold and their value transferred to another employment suppose however the fact to be as stated and that no part of the capital could be withdrawn footnote whatever capital becomes fixed on the land must necessarily be the landlords and not the tenants at the expiration of the lease whatever compensation the landlord may receive for this capital on reletting his land will appear in the form of rent but no rent will be paid if with a given capital more corn can be obtained from abroad than can be grown on this land at home if the circumstances of the society should require corn to be imported and 1000 quarters can be obtained by the employment of a given capital and if this land with the employment of the same capital will yield 1100 quarters 100 quarters will necessarily go to rent but if 1200 can be got from abroad then this land will go out of circulation for it will not then yield even the general rate of profit but this is no disadvantage however great the capital may have been that had been expended on the land such capital is spent with a view to augment the produce that it should be remembered is the end of what importance then can it be to the society whether half its capital be sunk in value or even annihilated if they obtain a greater annual quantity of production those who deplore the loss of capital in this case are for sacrificing the end to the means end of footnote the farmer would continue to raise corn and precisely the same quantity too at whatever price it might sell for it could not be his interest to produce less and if he did not so employ his capital he would obtain from it no return whatever corn could not be imported because he would sell it lower than three pounds 10 shillings rather than not sell it at all and by the supposition the importer could not sell it under that price although then the farmers who cultivated land of this quality would undoubtedly be injured by the fall in the exchangeable value of the commodity which they produced how would the country be affected we should have precisely the same quantity of every commodity produced but raw produce and corn would sell at a much cheaper price the capital of a country consists of its commodities and as these would be the same as before reproduction would go on at the same rate this alone price of corn would however only afford the usual profits of stock for the land number five which would then pay no rent and the rent of all better land would fall wages would also fall and profits would rise however low the price of corn might fall if capital could not be removed from the land and the demand did not increase no importation would take place but the same quantity as before would be produced at home although there would be a different division of the produce and some classes would be benefited and others injured the aggregate of production would be precisely the same and the nation collectively would neither be richer nor poorer but there is this advantage always resulting from a relatively low price of corn that the division of the actual production is more likely to increase the fund for the maintenance of labor in as much as more will be allotted under the name of profit to the productive class and less under the name rent to the unproductive class this is true even if a capital cannot be withdrawn from the land and must be employed there or not be employed at all but if great part of the capital can be withdrawn as it evidently could it will be only withdrawn when it will yield more to the owner by being withdrawn than by being suffered to remain where it was it will be only withdrawn then when it can elsewhere be employed more productively both for the owner and the public he consents to sink that part of his capital which cannot be separated from the land because with that part which he can take away he can obtain a greater value and a greater quantity of raw produce than by not sinking this part of the capital this case is precisely similar to that of a man who has erected machinery in his manufacturing at a great expense machinery which is afterwards so much improved upon by more modern inventions that the commodities manufactured by him very much sink in value it would be entirely a matter of calculation with him whether he should abandon the old machinery and erect the more perfect losing all the value of the old or continue to avail himself of its comparatively feeble powers who under such circumstances would exhort him to forego the use of the better machinery because it would deteriorate or annihilate the value of the old yet this is the argument of those who would wish us to prohibit the importation of corn because it will deteriorate or annihilate that part of the capital of the farmer which is forever sunk in land they do not see that the end of all commerce is to increase production and that by increasing production though you may occasion partial loss you increase the general happiness to be consistent they should endeavor to arrest all improvements in agriculture and manufacturers and all inventions of machinery for though these contribute to general abundance and therefore to the general happiness they never fail at the moment of their introduction to deteriorate or annihilate the value of a part of the existing capital of farmers and manufacturers footnote among the most able of the publications on the impolicy of restricting the importation of corn may be classed major torrens essay on the external corn trade his arguments appear to me to be unanswered and to be unanswerable end of footnote agriculture like all other trades and particularly in a commercial country is subject to a reaction which in an opposite direction succeeds the action of a strong stimulus thus when war interrupts the importation of corn its consequent high price attracts capital to the land from the large profits which such an employment of it affords this will probably cause more capital to be employed and more raw produce to be brought to market than the demands of the country require in such case the price of corn will fall from the effects of a glut and much agricultural distress will be produced till the average supply is brought to a level with the average demand chapter 20 value and riches their distinctive properties a man is rich or poor says adam smith according to the degree in which he can afford to enjoy the necessaries conveniences and amusements of human life value then essentially differs from riches for value depends not on abundance but on the difficulty or facility of production the labor of a million of men in manufacturers will always produce the same value but will not always produce the same riches by the invention of machinery by improvements in skill by better division of labor or by the discovery of new markets where more advantageous exchanges may be made a million of men may produce double or treble the amount of riches of necessaries conveniences and amusements in one state of society that they could produce in another but they will not on that account add anything to value for everything rises or falls in value in proportion to the facility or difficulty of producing it or in other words in proportion to the quantity of labor employed on its production suppose with a given capital the labor of a certain number of men produced 1000 pair of stockings and that by inventions in machinery the same number of men can produce 2000 pair or that they can continue to produce 1000 pair and can produce besides 500 hats then the value of the 2000 pair of stockings or of the 1000 pair of stockings and 500 hats will be neither more nor less than that of the 1000 pair of stockings before the introduction of machinery but they will be the produce of the same quantity of labor but the value of the general mass of commodities will nevertheless be diminished for although the value of the increased quantity produced in consequence of the improvements will be the same exactly as the value would have been of the less quantity that would have been produced had no improvement taken place an effect is also produced on the portion of good still unconsumed which were manufactured previously to the improvement the value of those goods will be reduced in as much as they must fall to the level quantity for quantity of the goods produced under all the advantages of the improvement and the society will notwithstanding the increased quantity of commodities notwithstanding its augmented riches and its augmented means of enjoyment have a less amount of value but constantly increasing the facility of production we constantly diminish the value of some of the commodities before produced though by the same means we not only add to the national riches but also to the power of future production many of the errors in political economy have arisen from errors on this subject from considering an increase of riches and an increase of value as meaning the same thing and from unfounded notions as to what constituted a standard measure of value one man considers money as a standard of value and a nation grows richer or poorer according to him in proportion as its commodities of all kinds can exchange for more or less money others represent money as a very convenient medium for the purpose of barter but not as a proper measure by which to estimate the value of other things the real measure of value according to them is corn footnote adam smith says quote that the difference between the real and the nominal price of commodities and labor is not a matter of mere speculation but may sometimes be of considerable use in practice unquote i agree with him but the real price of labor and commodities is no more to be ascertained by their price in goods adam smith's real measure than by their price in gold and silver is nominal measure the laborer is only paid a really high price for his labor when his wages will purchase the produce of a great deal of labor end of footnote and a country is rich or poor according as its commodities would exchange for more or less corn footnote must you say in first that silver is now of the same value as in the reign of louis the 14th because the same quantity of silver will buy the same quantity of corn end of footnote there are others again who consider a country rich or poor according to the quantity of labor that it can purchase but why should gold or corn or labor be the standard measure of value more than coals or iron more than cloth soap candles and the other necessaries of the laborer why in short should any commodity or all commodities together be the standard when such a standard is itself subject to fluctuations in value corn as well as gold may from difficulty or facility of production vary 10 20 or 30 percent relatively to other things why should we always say that it is those other things which have varied and not the corn that commodity is a lone invariable which at all times requires the same sacrifice of toil and labor to produce it of such a commodity we have no knowledge but we may hypothetically argue and speak about it as if we had and may improve our knowledge of the science by showing distinctly the absolute inapplicability of all the standards which have been hitherto adopted but supposing either of these to be a correct standard of value still it would not be a standard of riches for riches do not depend on value a man is rich or poor according to the abundance of necessaries and luxuries which he can command and whether the exchangeable value of these for money for corn or for labor be high or low they will equally contribute to the enjoyment of their possessor it is through confounding the ideas of value and wealth or riches that it has been asserted that by diminishing the quantity of commodities that is to save the necessaries conveniences and enjoyments of human life riches may be increased if value were the measure of riches this could not be denied because by scarcity the value of commodities is raised but if adam smith be correct if riches consist in necessaries and enjoyments then they cannot be increased by diminution of quantity it is true that the man in possession of a scarce commodity is richer if by means of it he can command more of the necessaries and enjoyments of human life but as the general stock out of which each man's riches are drawn is diminished in quantity by all that any individual takes from it other men's shares must necessarily be reduced in proportion as this favored individual is able to appropriate a greater quantity to himself let water become scarce says lord lord dale and be exclusively possessed by an individual and you will increase his riches because water will then have value and if wealth be the aggregate of individual riches you will by the same means also increase wealth you undoubtedly will increase the riches of this individual but inasmuch as the farmer must sell a part of his corn the shoemaker a part of his shoes and all men give up a portion of their possessions with the sole purpose of supplying themselves with water which they before had for nothing they are poorer by the whole quantity of commodities which they are obliged to devote to this purpose and the proprietor of water is benefited precisely by the amount of their loss the same quantity of water and the same quantity of commodities are enjoyed by the whole society but they're differently distributed this is however supposing rather a monopoly of water than a scarcity of it if it should be scarce then the riches of the country and of individuals would be actually diminished inasmuch as it would be deprived of a portion of one of its enjoyments the farmer would not only have less corn to exchange for the other commodities which might be necessary or desirable to him but he and every other individual would be abridged in the enjoyment of one of the most essential of their comforts not only would there be a different distribution of riches but an actual loss of wealth it may be said then of two countries possessing precisely the same quantity of all the necessaries and comforts of life that they are equally rich but the value of their respective riches would depend on the comparative facility or difficulty with which they were produced for if an improved piece of machinery should enable us to make two pair of stockings instead of one without additional labor double the quantity would be given in exchange for a yard of cloth if a similar improvement be made in the manufacturer of cloth stockings and cloth will exchange in the same proportions as before but they will both have fallen in value for in exchanging them for hats for gold or other commodities in general twice the former quantity must be given extend the improvement to the production of gold and every other commodity and they will all regain their former proportions there will be double the quantity of commodities annually produced in the country and therefore the wealth of the country will be doubled but this wealth will not have increased in value although adam smith has given the correct description of riches which i have more than once noticed he afterwards explains them differently and says that a man must be rich or poor according to the quantity of labor which he can afford to purchase now this description differs essentially from the other and is certainly incorrect for suppose the mines were to become more productive so that gold and silver fell in value from the greater facility of their production or that felvets were to be manufactured with so much less labor than before that they fell to half their former value the riches of all those who purchased those commodities would be increased one man might increase the quantity of his plate another might buy double the quantity of velvet with the possession of this additional plate and velvet they could employ no more labor than before because as the exchangeable value of velvet and of plate would be lowered they must part with proportionally more of these species of riches to purchase a day's labor riches then cannot be estimated by the quantity of labor which they can purchase from what has been said it will be seen that the wealth of the country may be increased in two ways it may be increased by employing a greater portion of revenue in the maintenance of productive labor which will not only add to the constip but to the value of the mass of commodities or it may be increased without employing any additional quantity of labor by making the same quantity more productive which will add to the abundance but not to the value of commodities in the first case a country would not only become rich but the value of its riches would increase it would become rich by parsimony by diminishing its expenditure on objects of luxury and enjoyment and employing those savings in reproduction in the second case there will not necessarily be either any diminished expenditure on luxuries and enjoyments or any increased quantity of productive labor employed but with the same labor more would be produced wealth would increase but not value of these two modes of increasing wealth the last must be preferred since it produces the same effect without deprivation and diminution of enjoyments which can never fail to accompany the first mode capital is that part of the wealth of a country which is employed with a view to future production and may be increased in the same manner as well an additional capital will be equally efficacious in the production of future wealth whether it be obtained from improvements in skill and machinery or from using more revenue reproductively for wealth always depends on the quantity of commodities produced without any regard to the facility with which the instruments employed in production may have been procured a certain quantity of clothes and provisions will maintain and employ the same number of men and will therefore procure the same quantity of work to be done whether they be produced by the labor of 100 or 200 men but they will be of twice the value of 200 have been employed on their production mr. say notwithstanding the corrections he has made in the fourth and last edition of his work that a economy politic appears to me to have been singularly unfortunate in his definition of riches and value he considers these two terms as synonymous and that a man is rich in proportion as he increases the value of his possessions and is enabled to command an abundance of commodities the value of incomes is then increased he observes if they can procure it does not signify by what means a greater quantity of products according to mr. say if the difficulty of producing cloth were to double and consequently cloth was to exchange for double the quantity of the commodities for which it exchanged before it would be doubled in value to which I give my fullest ascent but if there were any peculiar facility in producing the commodities and no increased difficulty in producing cloth and cloth should in consequence exchange as before for double the quantity of commodities mr. say would still say that cloth that doubled in value whereas according to my view of the subject he should say that cloth retained its former value and those particular commodities had fallen to half of their former value must not mr. say be inconsistent with himself when he says that by facility of production two sacks of corn may be produced by the same means that one was produced before and that each sack will therefore fall to half its former value and it maintained that the clothier who exchanges his cloth for two sacks of corn would obtain double the value he before obtained when he could only get one second exchange for his cloth if two sacks be of the value that one was of before he evidently obtains the same value and no more he gets indeed double the quantity of riches double the quantity of utility double the quantity of what adam smith calls value in use but not double the quantity of value and therefore mr. say cannot be right in considering value riches and utility to be synonymous indeed there are many parts of mr. say's work for which i can confidently refer in support of the doctrine which i maintain respecting the essential difference between value and riches although it must be confessed that there are also various other passages in which a contrary doctrine is maintained these passages i cannot reconcile and i point them out by putting them in opposition to each other that mr. say may if he should do me the honor to notice these observations in any future addition of his work give such explanations of his view as may remove the difficulty which many others as well as myself feel in our endeavors to expound them one in the exchange of two products we only in fact exchange the productive services which have served to creek them page 504 two there is no real dearness but that which arises from the cost of production a thing really dear is that which cost much in producing page 457 three the value of all the productive services that must be consumed to create a product constitute the cost of production of that product page 505 four it is utility which determines the demand for a commodity but it is the cost of its production which limit the extent of its demand when its utility does not elevate its value to the level of the cost of production the thing is not worth what it cost it is a proof that the productive services might be employed to create a commodity of a superior value the possessors of productive funds that is to say those who have the disposal of labour of capital or land are perpetually occupied in comparing the cost of production with the value of the things produced or which comes to the same thing in comparing the value of different commodities with each other because the cost of production is nothing else but the value of productive services consumed in forming a production and the value of a productive service is nothing else than the value of the commodity which is the result the value of a commodity the value of a productive service the value of the cost of production are all then similar values when everything is left to its natural course five the value of incomes is then increased if they can procure it does not signify by what means a greater quantity of product six price is the measure of the value of things and their value is the measure of their utility volume one page four seven exchanges made freely show at the time in the place and in the state of society in which we are the value which men attached to the things exchanged page four six six eight to produce is to create value by giving or increasing the utility of the thing and thereby establishing a demand for it which is the first cause of its value volume two page 487 nine utility being created constitutes a product the exchangeable value which results is only the measure of this utility the measure of the production which has taken place page 490 10 the utility which people of a particular country find in a product can no otherwise be appreciated than by the price which they give for it page 502 11 this price is the measure of the utility which it has in the judgment of men of the satisfaction which they derive from consuming it because they would not prefer consuming this utility if for the price which it cost they could acquire a utility which would give them more satisfaction page 506 12 the quantity of all other commodities which a person can immediately obtain in exchange for the commodity of which he wishes to dispose is at all times a value not to be disputed volume 2 page 4 if there is no real dearness but that which arises from cost of production c2 how can a commodity be said to rise in value c5 if its cost of production be not increased and merely because it will exchange for more of a cheap commodity for more of a commodity the cost of production of which has diminished when i give 2 000 times more cloth for a pound of gold than i give for a pound of iron does it prove that i attached 2 000 times more utility to gold than i do to iron certainly not it proves only as admitted by missus say c4 that the cost of production of gold is 2 000 times greater than the cost of production of iron if the cost of production of the two metals were the same i should give the same price for them but if utility with a measure of value it is probable i should give more for the iron it is the competition of the producers who are perpetually employed in comparing the cost of production with the value of the thing produced c4 which regulates the value of different commodities if then i give one shilling for a loaf and 21 shillings for a kidney it is no proof that this in my estimation is the comparative measure of their utility in number four missus say maintains with scarcely any variation the doctrine which i hold concerning value in his productive services he includes the services rendered by land capital and labor in line i include only capital and labor and wholly exclude land our difference proceeds from the different view which we take of rent i always consider it as the result of a partial monopoly never really regulating price but rather is the effect of it if all rent were relinquished by landlords i am of opinion that the commodities produced on the land would be no cheaper because there is always a portion of the same commodities produced on land for which no rent is or can be paid as the surplus produce is only sufficient to pay the profits of stock to conclude although no one is more disposed than i am to estimate highly the advantage which results to all classes of consumers from the real abundance and cheapness of commodities i cannot agree with missus say in estimating the value of the commodity by the abundance of other commodities for which it will exchange i am of the opinion of a very distinguished writer missus desto the tressie who says that to measure any one thing is to compare it with a determinant quantity of that same thing which we take for a standard of comparison for unity to measure then to ascertain a length a weight a value is to find how many times they contain meters grams francs in a word unit is of the same description a franc is not a measure of value for anything but for a quantity of the same metal of which francs are made unless francs and the thing to be measured can be referred to some other measure which is common to both this i think they can be they are both the result of labor and therefore labor is a common measure by which they're real as well as their relative value may be estimated this also i am happy to say appears to be missus desto the tressie's opinion footnote in elemande de logi missus de tressie has given a useful and enabled treatise on the general principles of political economy and i am sorry to be obliged to add that he supports by his authority the definitions which missus say has given of the words value riches and utility end of footnote he says as it is certain that our physical and moral faculties are alone our original riches the employment of those faculties labor of some kind is our only original treasure and that it is always from this employment that all those things are created which we call riches those which are the most necessary as well as those which are the most purely agreeable it is certain too that all those things only represent the labor which has created them and if they have a value or even two distinct values they can only derive them from that of the labor from which they emanate missus say in speaking of the excellences and imperfections of the great work of adam smith imputes to him as an error that he attributes to the labor of man alone the power of producing value a more correct analysis shows us that value is owing to the action of labor or rather the industry of man combined with the action of those agents which nature supplies and with that of capital its ignorance of this principle prevented him from establishing the true theory of the influence of machinery in the production of riches in contradiction to the opinion of adam smith missus say in the fourth chapter speaks of the value which is given to commodities by natural agents such as the sun the air the pressure of the atmosphere etc which are sometimes substituted for the labor of man and sometimes concur with him in producing footnote missus say writes quote the first man who knew how to soften metals by fire is not the creator of the value which that process adds to the melted metal that value is the result of the physical action of fire added to the industry and capital of those who availed themselves of this knowledge unquote and in a further passage missus say writes quote from this error smith has drawn this false result that the value of all productions represents the recent or former labor of man or in other words that which is a nothing else but accumulated labor from which by a second consequence equally false labor is the sole measure of riches or of the value of productions unquote the influences with which missus say concludes are his own and not dr smith's they are correct if no distinction be made between value and riches and in this passage missus say makes none but though adam smith who defined riches to consist in the abundance of necessaries conveniences and enjoyments of human life would have allowed that machines and natural agents might very greatly add to the riches of a country he would not have allowed that they add anything to the value of those riches end of footnote but these natural agents though they add greatly to value in use never add exchangeable value of which missus say is speaking to a commodity as soon as by the aid of machinery or by the knowledge of natural philosophy you oblige natural agents to do the work which was before done by man the exchangeable value of such work falls accordingly if 10 men turned a cornmeal and it be discovered that by the assistance of wind or water the labor of these 10 men may be spared the flower which is the produce partly of the work performed by the mill would immediately fall in value in proportion to the quantity of labor saved and the society would be richer by the commodities which the labor of the 10 men could produce the funds destined for their maintenance being in no degree impaired but you say constantly overlooks the essential difference that there is between value in use and value in exchange must you say accuses dr smith of having overlooked the value which is given to commodities by natural agents and by machinery because he considered that the value of all things was derived from the labor of man but it does not appear to me that this charge is made out for adam smith nowhere undervalues the services which these natural agents and machinery perform for us but he very justly distinguishes the nature of the value which they add to commodities they are serviceable to us by increasing the abundance of productions by making men richer by adding to value in use but as they perform their work gratuitously as nothing is paid for the use of air of heat and of water the assistance which they afford us adds nothing to value in exchange chapter 21 effects of accumulation on profits and interest from the account which has been given of the profits of stock it will appear that no accumulation of capital will permanently lower profits unless there be some permanent cause for the rise of wages if the funds for the maintenance of labor were doubled trebled or quadrupled there would not long be any difficulty in procuring the requisite number of hands to be employed by those funds but owing to the increasing difficulty of making constant additions to the food of the country funds of the same value would probably not maintain the same quantity of labor if the necessary of the workmen could be constantly increased with the same facility there could be no permanent alteration in the rate of profits or wages to whatever amount capital might be accumulated Adam Smith however uniformly ascribes the thought of profits to accumulation of capital and to the competition which will result from it without ever averting to the increasing difficulty of providing food the additional number of laborers which the additional capital will employ the increase of stock he says which raises wages tends to lower profit when the stocks of many rich merchants are turned into the same trade their mutual competition naturally tends to lower its profit and when there is a like increase of stock in all the different trades carried on in the same society the same competition must produce the same effect in all Adam Smith speaks here of a rise of wages but it is of a temporary rise proceeding from increased funds before the population is increased and he does not appear to see that at the same time that capital is increased the work to be affected by capital is increased in the same proportion but she say has however most satisfactorily shown that there is no amount of capital which may not be employed in a country because demand is only limited by production no man produces but with a view to consume or sell that he never sells but with an intention to purchase some other commodity which may be immediately useful to him or which may contribute to future production by producing then he necessarily becomes either the consumer of his own goods or the purchaser and consumer of the goods of some other person it is not to be supposed that he should for any length of time be ill informed of the commodities which he can most advantageously produce to attain the object which he has in view namely the possession of other goods and therefore it is not probable that he will continually produce a commodity for which there is no demand footnote Adam Smith speaks of Holland as affording an instance of the fall of profits from the accumulation of capital and from every employment being consequently overcharged quote the government there borrow at two percent and private people of good credit at three percent unquote but it should be remembered that Holland was obliged to import almost all the corn which he consumed and by imposing heavy taxes on the necessaries of the laborer she further raised the wages of labor these facts will sufficiently account for the low rate of profits and interest in Holland end of footnote that cannot then be accumulated in a country any amount of capital which cannot be employed productively until wages rise so high in consequence of the rise of necessaries and so little consequently remains for the profits of stock that the motive for accumulation ceases footnote is the following quite consistent with missus says principle quote the more disposable capitals are abundant in proportion to the extent of employment for them the more will the rate of interest on loans of capital fall unquote if capital to any extent can be employed by a country how can it be said to be abundant compared with the extent of employment for it end of footnote while the profits of stock are high men will have a motive to accumulate whilst a man has any wished for gratification unsupplied he will have a demand for more commodities and it will be an effectual demand while he has any new value to offer in exchange for them if ten thousand pounds were given to a man having one hundred thousand pounds per annum he would not lock it up in a chest but would either increase his expenses by ten thousand pounds employ it himself productively or lend it to some other person for that purpose in either case demand would be increased although it would be for different objects if he increased his expenses his effectual demand might probably be for buildings furniture or some such enjoyment if he employed his ten thousand pounds productively his effectual demand would be for food clothing and raw material which might set new laborers to work but still it would be a demand footnote adam smith says that quote when the produce of any particular branch of industry exceeds that the demand of the country requires the surplus must be sent abroad and exchanged for something for which there is a demand at home without such exploitation a part of the productive labor of the country must cease and the value of its annual produce diminish the land and labor of great britain produced generally more corn woolens and hardware than the demand of the home market requires the surplus part of them therefore must be sent abroad and exchanged for something for which there is a demand at home it is only by means of such exploitation that this surplus can acquire a value sufficient to compensate the labor and expense of producing it unquote one would be led to think by the previously quoted passage that adam smith concluded we were under some necessity of producing a surplus of corn woolen goods and hardware and that the capital which produced them could not otherwise be employed it is however always a matter of choice in what way a capital should be employed and therefore there can never for any length of time be a surplus of any commodity for if there were it would fall below its natural price and capital would be removed to some more profitable employment no writer has more satisfactorily and ably shown that dr smith the tendency of capital to move from employment in which the goods produced do not repay by their price the whole expenses including the ordinary profits of producing and bringing them to market end of footnote productions are always bought by productions or by services money is the only medium by which the exchange is affected too much of a particular commodity may be produced of which there may be such a glut in the market as not to repay the capital expended on it but this cannot be the case with respect to all commodities the demand for corn is limited by the mouths which are to eat it for shoes and coats by the persons who are to wear them but they were community or a part of a community may have as much corn and as many hats and shoes as it is able or may wish to consume the same cannot be said of every commodity produced by nature or by art some would consume more wine if they had the ability to procure it others having enough of wine would wish to increase the quantity or improve the quality of their furniture others might wish to ornament their grounds or to enlarge their houses the wish to do all or some of these is implanted in every man's breast nothing is required but the means and nothing can afford the means but an increase of production if i had food and necessaries at my disposal i should not be long in want of workmen who would put me in possession of some of the objects most useful or most desirable to me whether these increased productions and the consequent demand which they occasion child or shall not lower profits depends solely on the rise of wages and the rise of wages accepting for a limited period on the facility of producing the food and necessaries of the laborer i say accepting for a limited period because no point is better established than that the supply of laborers will always ultimately be in proportion to the means of supporting them there is only one case and that will be temporary in which the accumulation of capital with a low price of food may be attended with the fall of profits and that is when the funds for the maintenance of labor increase much more rapidly than population wages will then be high and profits low if every man were to forego the use of luxuries and be intent only on accumulation a quantity of necessaries might be produced for which there could not be any immediate consumption of commodities so limited in number there might undoubtedly be an universal clot and consequently there might neither be demand for an additional quantity of such commodities nor profits on the employment of more capital if men cease to consume they would cease to produce this admission does not impugn the general principle in such a country as england for example it is difficult to suppose that there can be any disposition to devote the whole capital and labor of the country for the production of necessaries only when merchants engage their capitals in foreign trade or in the carrying trade it is always from choice and never from necessity it is because in that trade their profits will be somewhat greater than in the home trade adam smith has justly observed that the desire of food is limited in every man by the narrow capacity of the human stomach but the desire of the conveniences and ornaments of building, dress, equipments and household furniture seems to have no limit or certain boundary nature then has necessarily limited the amount of capital which can at any one time be profitably engaged in agriculture but she has placed no limits to the amount of capital that may be employed in procuring the conveniences and ornaments of life to procure these gratifications in the greatest abundance is the object in view and it is only because foreign trade or the carrying trade will accomplish it better that men engage in them in preference to manufacturing the commodities required or a substitute for them at home if however from peculiar circumstances we were precluded from engaging capital in foreign trade or in the carrying trade we should though with less advantage employed at home and while there is no limit to the desire of conveniences ornaments of building, dress, equipments and household furniture there can be no limit to the capital that may be employed in procuring them except that which bounds our power to maintain the workmen who are to produce them Adam Smith however speaks of the carrying trade as one not of choice but of necessity as if the capital engaged in it would be inert if not so employed as if the capital in the home trade could overflow if not confined to a limited amount he says when the capital stock of any country is increased to such a degree that it cannot be all employed in supplying the consumption and supporting the productive labor of that particular country the surplus part of it naturally disgorges itself into the carrying trade and is employed in performing the same offices to other countries about 96,000 hoax heads of tobacco are annually purchased with a part of the surplus produce of British industry but the demand of Great Britain does not require perhaps more than 14,000 if the remaining 82,000 therefore could not be sent abroad and exchanged for something more in demand at home the importation of them would cease immediately and with it the productive labor of all the inhabitants of Great Britain who are at present employed in preparing the goods with which these 82,000 hoax heads are annually purchased but could not this portion of the productive labor of Great Britain be employed in preparing some other sort of goods with which something more in demand at home might be purchased and if it could not might we not employ this productive labor though with less advantage in making those goods in demand at home or at least some substitute for them if we wanted velvets might we not attempt to make velvets and if we could not succeed might we not make more cloth or some other object desirable to us we manufacture commodities and with them buy goods abroad because we can obtain a greater quantity than we could make at home deprive us of this trade and we immediately manufacture again for ourselves but this opinion of adam smith is at variance with all his general doctrines on this subject if a foreign country can supply us with a commodity cheaper than we ourselves can make it better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage the general industry of the country being always in proportion to the capital which employs it will not thereby be diminished but only left to find out the way in which it can be employed with the greatest advantage again those therefore who have the command of more food than they themselves can consume are always willing to exchange the surplus or what is the same thing the price of it for gratifications of another kind what is over and above satisfying the limited desire is given for the amusement of those desires which cannot be satisfied but seem to be altogether endless the poor in order to obtain food exert themselves to gratifying those fancies of the rich and to obtain it more certainly they vie with one another in the cheapness and perfection of their work the number of workmen increases with the increasing quantity of food or with the growing improvement and cultivation of the lands and as the nature of their business admits of the utmost subdivisions of labors the quantity of materials which they can work up increases in a much greater proportion than their numbers hence arises a demand for every sort of material which human invention can employ either usefully or ornamentally in building dress equipage or household furniture for the fossils and minerals contained in the bowels of the earth precious metals and the precious stones it follows then from these admissions that there is no limit to demand no limit to the employment of capital while it yields any profit and that however abundant capital may become there is no other adequate reason for a fall of profit but a rise of wages and further it may be added that the only adequate and permanent cause for the rise of wages is the increasing difficulty of providing food and necessaries for the increasing number of workmen adam smith has justly observed that it is extremely difficult to determine the rate of the profits of stock profit is so fluctuating that even in a particular trade and much more in trades in general it would be difficult to state the average rate of it to judge of what it may have been formally or in remote periods of time with any degree of precision must be altogether impossible yet since it is evident that much will be given for the use of money when much can be made by it he suggests that the market rate of interest will lead us to form some notion of the rate of profits and the history of the progress of interest afford us that of the progress of profits undoubtedly if the market rate of interest could be accurately known for any considerable period we should have a tolerably correct criterion by which to estimate the progress of profits but in all countries from mistaken notions of policy the status interfered to prevent a fair and free market rate of interest by imposing heavy and ruinous penalties on all those who shall take more than the rate fixed by law in all countries probably these laws are evaded but records give us little information on this head and point out rather the legal and fixed rate than the market rate of interest during the present war exchequer and navy bills have been frequently at so high a discount as to afford the purchases of them seven eight percent or a greater rate of interest for their money loans have been raised by government at an interest exceeding six percent and individuals have been frequently obliged by indirect means to pay more than 10 percent for the interest of money yet during the same period the legal rate of interest has been uniformly at five percent little dependence for information then can be placed on that which is the fixed and legal rate of interest when we find it may differ so considerably from the market rate adam smith informs us that from the thirty seventh of henry the eighth to the twenty first of james the first 10 continued to be the legal rate of interest soon after the restoration it was reduced to six percent and by the twelfth of an to five percent he thinks the legal rate followed and did not proceed the market rate of interest before the american war government borrowed at three percent and the people of credit in the capital and in many other parts of the kingdom at three and a half four and four and a half percent the rate of interest though ultimately and permanently governed by the rate of profit is however subject to temporary variations from other causes with every fluctuation in the quantity and value of money the prices of commodities naturally vary they vary also as we have already shown from the alteration in the proportion of supply to demand although there should not be either greater facility or difficulty of production when the market prices of goods fall from an abundant supply from a diminished demand or from a rise in the value of money a manufacturer naturally accumulates an unusual quantity of finished goods being unwilling to sell them at very depressed prices to meet his ordinary payments for which he used to depend on the sale of his goods he now endeavors to borrow on credit and is often obliged to give an increased rate of interest this however is but of temporary duration for either the manufacturer's expectations were well grounded and the market price of his commodities rises or he discovers that there is a permanently diminished demand and he no longer resists the course of affairs prices fall and money and interest regain their real value if by the discovery of a new mind by the abuses of banking or by any other cause the quantity of money be greatly increased its ultimate effect is to raise the prices of commodities in proportion to the increased quantity of money but there is probably always an interval during which some effect is produced on the rate of interest the price of funded property is not a steady criterion by which to judge of the rate of interest in time of war the stock market is so loaded by the continual loans of government that the price of stock has not time to settle at its fair level before a new operation of funding takes place or it is affected by anticipation of political events in time of peace on the contrary the operations of the sinking fund the unwillingness which a particular class of persons feel to divert their funds to any other employment than that to which they have been accustomed which they think secure and in which their dividends are paid with the utmost regularity elevates the price of stock and consequently depresses the rate of interest on these securities below the general market rate it is observable too that for different securities government pays very different rates of interest while 100 pounds capital in five percent stock is selling for 95 pounds an exchequer bill of 100 pounds will be sometimes selling for 100 pounds five shillings for which exchequer bill no more interest will be annually paid than four pounds eleven shillings three one of these securities pays to a purchaser of the above prices an interest of more than five and a quarter percent the other but little more than four and a quarter a certain quantity of these exchequer bills is required as a safe and marketable investment for bankers if they were increased much beyond this demand they would probably be as much depreciated as the five percent stock a stock paying three percent per annum will always sell at a proportionally greater price than the stock paying five percent the capital debt of neither can be discharged but at par or 100 pounds money for 100 pounds stock the market rate of interest may fall to four percent and government would then pay the holder of five percent stock at par unless he consented to take four percent or some diminished rate of interest under five percent they would have no advantage from so paying the holder of three percent stock till the market rate of interest had fallen below three percent per annum to pay the interest on the national debt large sums of money are withdrawn from circulation four times in the year for a few days these demands for money being only temporary seldom affect prices they're generally surmounted by the payment of a large rate of interest chapter 22 bounties on exportation and prohibitions of importation a bounty on the exportation of corn tends to lower its price to the foreign consumer but it has no permanent effect on its price in the home market suppose that to afford the usual and general profits of stock the price of corn should in england be four pounds per quarter it could not then be exported to foreign countries where it sold for three pounds fifteen shillings per quarter but if a bounty of ten shillings per quarter were given on exportation it could be sold in the foreign market at three pounds ten shillings and consequently the same profit would be afforded to the corn grower whether he sold it at three pounds ten shillings in the foreign or at four pounds in the home market a bounty then which should lower the price of british corn in the foreign country below the cost of producing corn in that country would naturally extend the demand for british and diminish the demand for their own corn this extension of demand for british corn could not fail to raise its price for a time in the home market and during that time to prevent also its falling so low in the foreign market as the bounty has a tendency to effect but the causes which would thus operate on the market price of corn in england would produce no effect whatever on its natural price or its real cost of production to grow corn would neither require more labor nor more capital and consequently if the profits of the farmer's stock were before only equal to the profits of the stock of other traders they will after the rise of price be considerably above them by raising the profits of the farmer's stock the bounty will operate as an encouragement to agriculture and capital will be withdrawn from manufacturers to be employed on the land till the enlarged demand for the foreign market has been supplied when the price of corn will again fall in the home market to its natural and necessary price and profits will be again at their ordinary and accustomed level the increased supply of grain operating on the foreign market will also lower its price in the country to which it is exported and will thereby restrict the profits of the exporter to the lowest rate at which he can afford to trade the ultimate effect then of a bounty on the exploitation of corn is not to raise or to lower the price in the home market but to lower the price of corn to the foreign consumer to the whole extent of the bounty if the price of corn had not before been lower in the foreign than in the home market and in a less degree if the price in the home had been above the price in the foreign market a writer in the fifth volume of the Edinburgh review on the subject of a bounty on the exploitation of corn has very clearly pointed out its effects on the foreign and home demand he has also justly remarked that it would not fail to give encouragement to agriculture in the exporting country but he appears to have imbibed the common error which has misled dr smith and i believe most other writers on this subject he supposes because the price of corn ultimately regulates wages that therefore it will regulate the price of all other commodities he says that the bounty by raising the profits of farming will operate as an encouragement to husbandry by raising the price of corn to the consumers at home it will diminish for the time their power of purchasing this necessary of life and thus abridge their real wealth it is evident however that this last effect must be temporary the wages of the labouring consumers had been adjusted before by competition and the same principle will adjust them again to the same rate by raising the money price of labour and through that of other commodities to the money price of corn the bounty upon exportation therefore will ultimately raise the money price of corn in the home market not directly however but through the medium of an extended demand in the foreign market and a consequent enhancement of the real price at home and this rise of the money price when it has once been communicated to other commodities will of course become fixed if however i have succeeded in showing that it is not the rise in the money wages of labour which raises the price of commodities but that such rise always affects profits it will follow that the prices of commodities would not rise in consequence of a bounty but a temporary rise in the price of corn produced by an increased demand from abroad would have no effect on the money price of labour the rise of corn is occasioned by competition for that supply which was before exclusively appropriated to the home market by raising profits additional capital is employed in agriculture and the increased supply is obtained until it be obtained the high price is absolutely necessary to proportion the consumption to the supply which would be counteracted by a rise of wages the rise of corn is the consequence of its scarcity and is the means by which the demand of the home purchases is diminished if wages were increased the competition would increase and a further rise of the price of corn would become necessary in this account of the effects of a bounty nothing has been supposed to occur to raise the natural price of corn by which its market price is ultimately governed for it has not been supposed that any additional labour would be required on the land to ensure a given production and this alone can raise its natural price if the natural price of cloth with 20 shillings per yard a great increase in the foreign demand might raise the price to 25 shillings or more but the profits which would then be made by the clothing would not fail to attract capital in that direction and although the demand should be doubled troubled or quadrupled the supply would ultimately be obtained and cloth would fall to its natural price of 20 shillings so in the supply of corn although we should export to three or eight hundred thousand quarters annually it would ultimately be produced at its natural price which never varies unless a different quantity of labour becomes necessary to production perhaps in no part of adam smith's justly celebrated work are his conclusions more liable to objection than in the chapter on bounties in the first place he speaks of corn as of a commodity of which the production cannot be increased in consequence of a bounty on exportation he supposes invariably that it acts only on the quantity actually produced and is no stimulus to further reduction in years of plenty he says by occasioning an extraordinary exportation it necessarily keeps up the price of corn in the home market above what it would naturally fall to in years of scarcity though the bounty is frequently suspended yet the great exportation which it occasions in years of plenty must frequently hinder more or less the plenty of one year from relieving the scarcity of another both in the years of plenty and in years of scarcity therefore the bounty necessarily tends to raise the money price of corn somewhat higher than it otherwise would be in the home market footnote in another place he says that quote whatever extension of the foreign market can be occasioned by the bounty must in every particular year be altogether at the expense of the home market and every bushel of corn which is exported by means of the bounty and which would not have been exported without the bounty would have remained in the home market to increase the consumption and to lower the price of that commodity the corn bounty it is to be observed as well as every other bounty upon exportation imposes two different taxes upon the people first the tax which they are obliged to contribute in order to pay the bounty and secondly the tax which arises from the advanced price of the commodity in the home market and which as the whole body of the people are purchasers of corn must in this particular commodity be paid by the whole body of the people in this particular commodity therefore the second tax is by much the heaviest of the two for every five shillings therefore which they contribute to the payment of the first tax they must contribute six pounds four shillings to the payment of the second the extraordinary exportation of corn therefore occasioned by the bounty not only in every particular year diminishes the home just as much as it extends the foreign market and consumption but by restraining the population and industry of the country its final tendency is to stunt and restrain the gradual extension of the home market and thereby in the long run rather to diminish than to augment the whole market and consumption of corn unquote end of footnote aderson it appears to have been fully aware that the correctness of his argument entirely depended on the fact whether the increase of the money price of corn by rendering that commodity more profitable to the farmer would not necessarily encourage its production by answer he says that this might be the case if the effect of the bounty was to raise the real price of corn or to enable the farmer with an equal quantity of it to maintain a greater number of laborers in the same manner whether liberal moderate or scanty as other laborers are commonly maintained in his neighborhood if nothing were consumed by the laborer but corn and if the portion which he received was the very lowest which his sustenance required there might be some ground for supposing that the quantity paid to the laborer could under no circumstances be reduced but the money wages of labor sometimes do not rise at all and never rise in proportion to the rise in the money price of corn because corn though an important part is only a part of the consumption of the laborer if half his wages were expended on corn and the other half on soap candles fuel tea sugar clothing etc commodities on which no rise is supposed to take place it is evident that he would be quite as well paid with a bushel and a half of wheat when it was 16 shillings of bushel as he was with two bushels when the price was eight shillings per bushel or with 24 shillings in money as he was before with 16 shillings his wages would rise only 50% though the corn rose 100% and consequently there would be sufficient motive to divert more capital to the land if profits on other trades continued the same as before but such a rise of wages would also induce manufacturers to withdraw their capital from manufacturers to employ them on the land but whilst the farmer increased the price of his commodity 100% and his wages only 50% the manufacturer would be obliged also to raise wages 50% whilst he had no compensation whatever in the rise of his manufactured commodity for this increased charge of production capital would consequently flow from manufacturers to agriculture till the supply would again lower the price of corn to 8 shillings per bushel and wages to 16 shillings per week when the manufacturer would obtain the same profits as the farmer and the tide of capital would cease to set in either direction this is in fact the mode in which the cultivation of corn is always extended and the increased once of the market supplied the funds for the maintenance of labor increase and wages are raised the comfortable situation of the laborer induces him to marry population increases and the demand for corn raises its price relatively to other things more capital is profitably employed on agriculture and continues to flow towards it till the supply is equal to the demand when the price again falls and agricultural and manufacturing profits are again brought to a level but whether wages were stationary after the rise in the price of corn or advanced moderately or enormously is of no importance to this question for wages are paid by the manufacturer as well as by the farmer and therefore in this respect they must be equally affected by a rise in the price of corn but they are unequally affected in their profits in as much as the farmer sells his commodity at an advanced price while the manufacturer sells his for the same prices before it is however the inequality of profit which is always the inducement to remove capital from one employment to another and therefore more corn would be produced and fewer commodities manufactured manufacturers would not rise because fuel would be manufactured for a supply of them would be obtained in exchange for the exported corn a bounty if it raises the price of corn either raises it in comparison with the price of other commodities or it does not if the affirmative be true it is impossible to deny the greater profits of the farmer and the temptation to the removal of capital till its price is again lowered by an abundant supply if it does not raise it in comparison with other commodities where is the injury to the home consumer beyond the inconvenience of paying the tax if the manufacturer pays a greater price for his corn he is compensated by the greater price at which he sells his commodity with which his corn is ultimately purchased the error of Adam Smith proceeds precisely from the same source as that of the writer in the Edinburgh review for they both think that the money price of corn regulates that of all other homemade commodities it regulates says Adam Smith the money price of labour which must always be such as to enable the labourer to purchase a quantity of corn sufficient to maintain him and his family either in the liberal moderate or scanty manner in which the advancing stationary or declining circumstances of the society oblige his employers to maintain him by regulating the money price of all the other parts of the rude produce of land it regulates that of the materials of almost all manufacturers by regulating the money price of labour it regulates that of manufacturing art and industry and by regulating both it regulates that of the complete manufacturer the money price of labour and of everything that is the produce either of land and labour must necessarily rise or fall in proportion to the money price of corn this opinion of adam smith i have before attempted to refute in considering a rise in the price of commodities as a necessary consequence of a rise in the price of corn he reasons as though there were no other fund from which the increased charge could be paid he has wholly neglected the consideration of profits the diminution of which forms that fund without raising the price of commodities if this opinion of dr smith were well founded profits could never rarely fall whatever accumulation of capital there might be if when wages rose the farmer could raise the price of his corn and the clothier the hat of the shoemaker and every other manufacturer could also raise the price of their goods in proportion to the advance although estimated in money they might be all raised they would continue to bear the same value relatively to each other each of these trades could command the same quantity as before of the goods of the others which since it is goods and not money which constitute wealth is the only circumstance that could be of importance to them and the whole rise in the price of raw produce and of goods would be injurious to no other persons but to those whose property consisted of gold and silver or whose annual income was paid in a contributed quantity of those metals whether in the form of bullion or of money suppose the use of money to be wholly laid aside and all trade to be carried on by barter under such circumstances could corn rise in exchangeable value with other things if it could then it is not true that the value of corn regulates the value of all other commodities but to do that it should not vary in relative value to them if it could not then it must be maintained that whether corn be obtained on rich or on poor land with much labor or with little with the aid of machinery or without it would always exchange for an equal quantity of all other commodities I cannot however but remark that though Adam Smith's general doctrines correspond with this which I have just quoted it in one part of his work he appears to have given a correct account of the nature of value the proportion between the value of gold and silver and that of goods of any other kind depends in all cases he says upon the proportion between the quantity of labor which is necessary in order to bring a certain quantity of gold and silver to market and that which is necessary to bring with a certain quantity of any other sort of goods as he not here fully acknowledged that if any increase takes place in the quantity of labor required to bring one sort of goods to market whilst no such increase takes place in bringing another sort with the first sort will rise in relative value if no more labor than before be required to bring either cloth or gold to market they will not vary in relative value but if more labor be required to bring corn and shoes to market will not corn and shoes rise in value relatively to cloth and money made of gold Adam Smith again considers that the effect of the bounty is to cause a partial degradation in the value of money that degradation says he in the value of silver which is the effect of the fertility of the mind and which operates equally or very nearly equally through the greater part of the commercial world is a matter of very little consequence to any particular country the consequent rise of all money prices though it does not make those who receive them really richer does not make them really poorer a service of plate becomes really cheaper and everything else remains precisely of the same real value as before this observation is most correct but that degradation in the value of silver which being the effect either of the peculiar situation or of the political institutions of a particular country takes place only in that country is a matter of very great consequence which far from tending to make anybody really richer tends to make everybody really poorer the rise in the money price of all commodities which is in this case peculiar to that country tends to discourage more or less every sort of industry which is carried on within it and to enable foreign nations by furnishing almost all sorts of goods for a smaller quantity of silver than its own workmen can afford to do to undersell them not only in the foreign but even in the home market i have elsewhere attempted to show that a partial degradation in the value of money which shall affect both agricultural produce and manufactured commodities cannot possibly be permanent to say that money is partially degraded in this sense is to say that all commodities are at a high price but while gold and silver are at liberty to make purchases in the cheapest market they will be exported for the cheaper goods of other countries and the reduction of their quantity will increase their value at home commodities will regain their usual level and those fitted for foreign markets will be exported as before a bounty therefore cannot i think be objected to on this ground if then a bounty raises the price of corn in comparison with all other things the farmer will be benefited and more land will be cultivated but if the bounty do not raise the value of corn relatively to other things then no other inconvenience will attend it than that of paying the bounty one which i neither wish to conceal nor underrate dr smith states that by establishing high duties on the importation and bounties on the exportation of corn the country gentlemen seemed to have imitated the conduct of the manufacturers by the same means both had endeavored to raise the value of their commodities they did not perhaps attend to the great and essential difference which nature has established between corn and almost every other sort of goods when by either of the above means you enable our manufacturers to sell their goods for somewhat a better price than they otherwise could get for them you raise not only the nominal but the real price of those goods you increase not only the nominal but the real profit the real wealth and revenue of those manufacturers you really encourage those manufacturers but when by the like institutions you raise the nominal or money price of corn you do not raise its real value you do not increase the real wealth of our farmers or country gentlemen you do not encourage the growth of corn the nature of things has stamped upon corn a real value which cannot be altered by merely altering its money price through the world in general that value is equal to the quantity of labor which it can maintain i have already attempted to show that the market price of corn would under an increased demand from the effects of a bounty exceed its natural price till the requisite additional supply was obtained and that then it would again fall to its natural price but the natural price of corn is not so fixed as the natural price of commodities because with any great additional demand for corn land of a worse quality must be taken into cultivation on which more labor will be required to produce a given quantity and the natural price of corn will be raised by a continued bounty therefore on the exploitation of corn there would be created a tendency to a permanent rise in the price of corn and this as i have shown elsewhere never fails to raise rent country gentlemen then have not only a temporary but a permanent interest in prohibitions of the importation of corn and in bounties on its exportation the manufacturers have no permanent interest in establishing high duties on the importation and bounties on the exportation of commodities their interest is wholly temporary a bounty on the exportation of manufacturers will undoubtedly as dr smith contends raise for a time the market price of manufacturers but it will not raise their natural price the labor of 200 men will produce double the quantity of these goods that 100 could produce before and consequently when the requisite quantity of capital was employed in supplying the requisite quantity of manufacturers they would again fall to their natural price and all advantage from a high market price would cease it is then only during the interval after the rise in the market price of commodities until the additional supplies obtained the manufacturers will enjoy high profits for as soon as prices had subsided their profits would sink to the general level instead of agreeing therefore with adam smith that the country gentlemen had not so great an interest in prohibiting the importation of corn as the manufacturer had in prohibiting the importation of manufactured goods i contend that they have a much superior interest but their advantage is permanent while that of the manufacturer is only temporary dr smith observes that nature has established a great and essential difference between corn and other goods but the proper inference from that circumstance is directly the reverse of that which he draws from it for it is on account of this difference that rent is created and that country gentlemen have an interest in the rise of the natural price of corn instead of comparing the interest of the manufacturer with the interest of the country gentlemen dr smith should have compared it with the interest of the farmer which is very distinct from that of his landlord manufacturers have no interest in the rise of the natural price of their commodities nor have farmers any interest in the rise of the natural price of corn or other raw produce though both these classes have benefited while the market price of their productions exceeds their natural price on the contrary landlords have a most decided interest in the rise of the natural price of corn but the rise of rent is the inevitable consequence of the difficulty of producing raw produce without which its natural price could not rise now as bounties on exportation and prohibitions of the importation of corn increase the demand and drive us to the cultivation of poorer lands they necessarily occasion an increased difficulty of production the sole effect of high duties on the importation either of manufacturers or of corn or of a bounty on the exportation is to divert a portion of capital to an employment which it would not naturally seek it causes a pernicious distribution of the general funds of the society it bribes a manufacturer to commence or continue in a comparatively less profitable employment it is the worst species of taxation for it does not give to the foreign country or that it takes away from the home country the balance of loss being made up by the less advantageous distribution of the general capital thus if the price of corn is in england four pounds and in france three pounds fifteen shillings a bounty of ten shillings will ultimately reduce it to three pounds ten shillings in france and maintain it at the same price of four pounds in england for every quarter exported england pays a tax of ten shillings for every quarter imported into france france gains only five shillings so that the value of five shillings per quarter is absolutely lost to the world by such a distribution of its funds as to cause diminished production probably not of corn but of some other object of necessity or enjoyment mr bucannon appears to have seen the fallacy of dr smith's arguments respecting bounties and on the last passage which i have quoted very judiciously remarks in asserting that nature has stamped a real value on corn which cannot be altered by merely altering its money price dr smith confounds its value in use with its value in exchange a bushel of wheat will not feed more people during scarcity than during plenty but a bushel of wheat will exchange for a greater quantity of luxuries and conveniences when it is scarce than when it is abundant and the landed proprietors who have a surplus of food to dispose of will therefore in times of scarcity be richer man they will exchange their surplus for a greater value of other enjoyments than when corn is in greater plenty it is vain to argue therefore that if the bounty occasions a forced exportation of corn it will not also occasion a real rise of price the whole of mr bucannon's arguments on this part of the subject of bounties appear to me to be perfectly clear and satisfactory mr bucannon however has not i think any more than dr smith or the writer in the edinburgh correct opinions as to the influence of a rise in the price of labor on manufactured commodities from his peculiar views which i have elsewhere noticed he thinks that the price of labor has no connection with the price of corn and therefore that the real value of corn might and would rise without affecting the price of labor but if labor were affected he would maintain with adam smith and the writer in the edinburgh review that the price of manufactured commodities would also rise and then i do not see how he would distinguish such a rise of corn from a fall in the value of money or how he could come to any other conclusion than that of dr smith in a note to page 276 volume one of the wealth of nations mr bucannon observes that the price of corn does not regulate the money price of all the other parts of the rude produce of land it regulates the price neither of metals nor of various other useful substances such as coals wood stones etc and as it does not regulate the price of labor it does not regulate the price of manufacturers so that the bounty in so far as it raises the price of corn is undoubtedly a real benefit to the farmer it is not on this ground therefore that its policy must be argued its encouragement agriculture by raising the price of corn must be admitted and the question then comes to be whether agriculture ought to be thus encouraged it is there according to mr bucannon a real benefit to the farmer because it does not raise the price of labor but if it did it would raise the price of all things in proportion and then it would afford no particular encouragement to agriculture it must however be conceded that the tendency of a bounty on the exportation of any commodity is to lower in a small degree the value of money whatever facilitates exportation tends to accumulate money in a country and on the contrary whatever impede's exportation tends to diminish it the general effect of taxation by raising the prices of the commodities taxed tends to diminish exportation and therefore to check the influx of money and on the same principle a bounty encourages the influx of money this is more fully explained in the general observations on taxation the injurious effects of the mercantile system have been fully exposed by dr smith the whole aim of that system was to raise the price of commodities in the home market by prohibiting foreign competition but this system was no more injurious to the agricultural classes than to any other part of the community by forcing capital into channels where it would not otherwise flow it diminished the whole amount of commodities produced the price though permanently higher was not sustained by scarcity but by difficulty of production and therefore though the sellers of such commodities sold them for a higher price they did not sell them after the requisite constee of capital was employed in producing them at higher profits footnote monsieur say supposes the advantage of the manufacturers at home to be more than temporary quote a government which absolutely prohibits the importation of certain foreign goods establishes a monopoly in favor of those who produce such commodities at home against those who consume them in other words those at home who produce them having the exclusive privilege of selling them they elevate their price above the natural price and the consumers at home not being able to obtain them elsewhere are obliged to purchase them at a higher price unquote but how can they permanently support the market price of their goods above the natural price when every one of their fellow citizens is free to enter into the trade they're guaranteed against foreign but not against home competition the real evil arising to the country from such monopolies if they can be called by that name lies not in raising the market price of such goods but in raising their real and natural price by increasing the cost of production a portion of the labor of the country is less productively employed end of footnote the manufacturers themselves as consumers had to pay an additional price for such commodities and therefore it cannot be correctly said that the enhancement of price occasioned by both operational laws and high duties on the importations of foreign commodities is everywhere fully paid by the landlords farmers and laborers of the country it is the more necessary to make this remark as in the present day the authority of adam smith is quoted by country gentlemen for imposing similar high duties on the importation of foreign corn because the cost of production and therefore the prices of various manufactured commodities are raised to the consumer by one error in legislation the country has been called upon on the plea of justice quietly to submit to fresh transactions because we all pay an additional price for our linen muslin and cottons it is thought just that we should pay also an additional price for our corn because in the general distribution of the labor of the world we have prevented the greatest amount of productions from being obtained by our portion of th