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ModernWorldHistoryOnline
TheWealthofNations(excerpt)
WhenAdamSmithwroteTheWealthofNationsin1776hisintentionwastoproposea
neweconomictheory,capitalism,asasubstituteformercantilism.Hearguedthatthe
economydidnotneedtoberegulatedbythestate,aswasthemercantilistpractice,
andthatthemostefficientandactiveeconomywouldresultintheabsenceofstate
regulation.Undercapitalism,individualswouldregulatetheeconomybyactingin
theirfinancialselfinterest,andthiswouldresultinthegreatestsocialgoodby
encouragingindividualstoproducethosegoodsmostindemandinthemarket.Keyto
Smith'sunderstandingoftheworkingsoftheeconomywashisanalysisofthedivision
oflabor.Herealizedthatproductswereproducedexponentiallymorequicklyand
cheaplywhentherequiredlaborwasbrokendownintoseparatetasksperformedby
differentpeople.Thisindicatedtohimthatespeciallyinconjunctionwithadvancesin
technology,goodscouldbeproducedonascalethatwouldresultinaneverexpanding
economy.

BookI,Chapter1.OftheDivisionofLabor:Thegreatestimprovementinthe
productivepowersoflabor,andthegreaterpartoftheskill,dexterity,andjudgment
withwhichitisanywheredirected,orapplied,seemtohavebeentheeffectsofthe
divisionoflabor.Totakeanexample,therefore,thetradeofthepinmakera
workmannoteducatedtothisbusiness,noracquaintedwiththeuseofthemachinery
employedinit,couldscarce,perhaps,withhisutmostindustry,makeonepininaday,
andcertainlycouldnotmaketwenty.Butinthewayinwhichthisbusinessisnow
carriedon,notonlythewholeworkisapeculiartrade,butitisdividedintoanumber
ofbranches,ofwhichthegreaterpartarelikewisepeculiartrades.Onemandrawsout
thewire,anotherstraightsit,athirdcutsit,afourthpointsit,afifthgrindsitatthe
topforreceiving,theheadtomaketheheadrequirestwoorthreedistinctoperations
toputitonisapeculiarbusiness,towhitenthepinsisanotheritisevenatradeby
itselftoputthemintothepaperandtheimportantbusinessofmakingapinis,inthis
manner,dividedintoabouteighteendistinctoperations,which,insomefactories,are
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allperformedbydistincthands,thoughinothersthesamemanwillsometimes
performtwoorthreeofthem.
Ihaveseenasmallmanufactoryofthiskindwheretenmenonlywereemployed,and
wheresomeofthemconsequentlyperformedtwoorthreedistinctoperations.But
thoughtheywereverypoor,andthereforebutindifferentlyaccommodatedwiththe
necessarymachinery,theycould,whentheyexertedthemselves,makeamongthem
abouttwelvepoundsofpinsinaday.Thereareinapoundupwardsoffourthousand
pinsofamiddlingsize.Thosetenpersons,therefore,couldmakeamongthem
upwardsoffortyeightthousandpinsinaday.Eachperson,therefore,makingatenth
partoffortyeightthousandpins,mightbeconsideredasmakingfourthousandeight
hundredpinsinaday.Butiftheyhadallwroughtseparatelyandindependently,and
withoutanyofthemhavingbeeneducatedtothispeculiarbusiness,theycertainly
couldnoteachofthemhavemadetwenty,perhapsnotonepininadaythatis,
certainly,notthetwohundredandfortieth,perhapsnotthefourthousandeight
hundredthpartofwhattheyareatpresentcapableofperforming,inconsequenceofa
properdivisionandcombinationoftheirdifferentoperations.
Thedivisionoflabor,sofarasitcanbeintroduced,occasions,ineveryart,a
proportionableincreaseoftheproductivepowersoflabor.Theseparationofdifferent
tradesandemploymentsfromoneanotherseemstohavetakenplaceinconsequence
ofthisadvantage.Thisseparation,too,isgenerallycalledfurthestinthosecountries
whichenjoythehighestdegreeofindustryandimprovementwhatistheworkofone
maninarudestateofsocietybeinggenerallythatofseveralinanimprovedone.
Thisgreatincreaseofthequantityofworkwhich,inconsequenceofthedivisionof
labor,thesamenumberofpeoplearecapableofperforming,isowingtothreedifferent
circumstancesfirst,totheincreaseofdexterityineveryparticularworkman
secondly,tothesavingofthetimewhichiscommonlylostinpassingfromonespecies
ofworktoanotherandlastly,totheinventionofagreatnumberofmachineswhich
facilitateandabridgelabor,andenableonemantodotheworkofmany.
Itisthegreatmultiplicationoftheproductionsofallthedifferentarts,inconsequence
ofthedivisionoflabor,whichoccasions,inawellgovernedsociety,thatuniversal
opulencewhichextendsitselftothelowestranksofthepeople.Everyworkmanhasa
greatquantityofhisownworktodisposeofbeyondwhathehimselfhasoccasionfor
andeveryotherworkmanbeingexactlyinthesamesituation,heisenabledto
exchangeagreatquantityofhisowngoodsforagreatquantity,or,whatcomestothe
samething,forthepriceofagreatquantityoftheirs.Hesuppliesthemabundantly
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withwhattheyhaveoccasionfor,andtheyaccommodatehimasamplywithwhathe
hasoccasionfor,andageneralplentydiffusesitselfthroughallthedifferentranksof
thesociety.
BookI,Chapter2.OfthePrinciplewhichgivesoccasiontotheDivisionofLabor:
Thisdivisionoflabor,fromwhichsomanyadvantagesarederived,isnotoriginallythe
effectofanyhumanwisdom,whichforeseesandintendsthatuniversalopulenceto
whichitgivesoccasion.Itisthenecessary,thoughveryslowandgradualconsequence
ofacertainpropensityinhumannaturewhichhasinviewnosuchextensiveutility
thepropensitytotruck,barter,andexchangeonethingforanother.Manhasalmost
constantoccasionforthehelpofhisbrethren,anditisinvainforhimtoexpectitfrom
theirbenevolenceonly.Hewillbemorelikelytoprevailifhecaninteresttheirself
loveinhisfavor,andshowthemthatitisfortheirownadvantagetodoforhimwhat
herequiresofthem.Whoeverofferstoanotherabargainofanykind,proposestodo
this.GivemethatwhichIwant,andyoushallhavethiswhichyouwant,isthe
meaningofeverysuchofferanditisinthismannerthatweobtainfromoneanother
thefargreaterartofthosegoodofficeswhichwestandinneedof.Itisnotfromthe
benevolenceofthebutcher,thebrewer,orthebakerthatweexpectourdinner,but
fromtheirregardtotheirowninterest.
Asitisbytreaty,bybarter,andbypurchasethatweobtainfromoneanotherthe
greaterpartofthosemutualgoodofficeswhichwestandinneedof,soitisthissame
truckingdispositionwhichoriginallygivesoccasiontothedivisionoflabor.Inatribe
ofhuntersorshepherdsaparticularpersonmakesbowsandarrows,forexample,with
morereadinessanddexteritythananyother.Hefrequentlyexchangesthemforcattle
orforvenisonwithhiscompanionsandhefindsatlastthathecaninthismannerget
morecattleandvenisonthanifhehimselfwenttothefieldtocatchthem.Froma
regardtohisowninterest,therefore,themakingofbowsandarrowsgrowstobehis
chiefbusiness,andhebecomesasortofarmorer,etc.
BookI,Chapter4.OftheOriginandUseofMoney:Whenthedivisionoflaborhas
beenoncethoroughlyestablished,itisbutaverysmallpartofaman'swantswhichthe
produceofhisownlaborcansupply.Hesuppliesthefargreaterpartofthemby
exchangingthatsurpluspartoftheproduceofhisownlabor,whichisoverandabove
hisownconsumption,forsuchpartsoftheproduceofothermen'slaborashehas
occasionfor.Everymanthuslivesbyexchanging,orbecomesinsomemeasurea
merchant,andthesocietyitselfgrowstobewhatisproperlyacommercialsociety.

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Butwhenthedivisionoflaborfirstbegantotakeplace,thispowerofexchangingmust
frequentlyhavebeenverymuchcloggedandembarrassedinitsoperations.Oneman,
weshallsuppose,hasmoreofacertaincommoditythanhehimselfhasoccasionfor,
whileanotherhasless.Theformerconsequentlywouldbegladtodisposeof,andthe
lattertopurchase,apartofthissuperfluity.Butifthislattershouldchancetohave
nothingthattheformerstandsinneedof,noexchangecanbemadebetweenthem.
Thebutcherhasmoremeatinhisshopthanhehimselfcanconsume,andthebrewer
andthebakerwouldeachofthembewillingtopurchaseapartofit.Buttheyhave
nothingtoofferinexchange,exceptthedifferentproductionsoftheirrespective
trades,andthebutcherisalreadyprovidedwithallthebreadandbeerwhichhehas
immediateoccasionfor.Noexchangecan,inthiscase,bemadebetweenthem.In
ordertoavoidtheinconvenienceofsuchsituations,everyprudentmanineveryperiod
ofsociety,afterthefirstestablishmentofthedivisionoflabor,mustnaturallyhave
endeavoredtomanagehisaffairsinsuchamannerastohaveatalltimesbyhim,
besidesthepeculiarproduceofhisownindustry,acertainquantityofsomeone
commodityorother,suchasheimaginedfewpeoplewouldbelikelytorefusein
exchangefortheirproduce....Itisinthismannerthatmoneyhasbecomeinallcivilized
nationstheuniversalinstrumentofcommerce,bytheinterventionofwhichgoodsof
allkindsareboughtandsold,orexchangedforoneanother.
BookI,Chapter5.OftheRealandNominalPriceofCommodities,ortheirPricein
Labor,andtheirPriceinMoney:Everymanisrichorpooraccordingtothedegreein
whichhecanaffordtoenjoythenecessaries,conveniences,andamusementsofhuman
life.Butafterthedivisionoflaborhasoncethoroughlytakenplace,itisbutavery
smallpartofthesewithwhichaman'sownlaborcansupplyhim.Thefargreaterpart
ofthemhemustderivefromthelaborofotherpeople,andhemustberichorpoor
accordingtothequantityofthatlaborwhichhecancommand,orwhichhecanafford
topurchase.Thevalueofanycommodity,therefore,tothepersonwhopossessesit,
andwhomeansnottouseorconsumeithimself,buttoexchangeitforother
commodities,isequaltothequantityoflaborwhichitenableshimtopurchaseor
command.Labor,therefore,istherealmeasureoftheexchangeablevalueofall
commodities.
Therealpriceofeverything,whateverythingreallycoststothemanwhowantsto
acquireit,isthetoilandtroubleofacquiringit.Whateverythingisreallyworthtothe
manwhohasacquiredit,andwhowantstodisposeofitorexchangeitforsomething
else,isthetoilandtroublewhichitcansavetohimself,andwhichitcanimposeupon
otherpeople.Whatisboughtwithmoneyorwithgoodsispurchasedbylaborasmuch
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aswhatweacquirebythetoilofourownbody.Thatmoneyorthosegoodsindeedsave
usthistoil.
BookI,Chapter6.OftheComponentPartsofthePriceofCommodities:Inthat
earlyandrudestateofsocietywhichprecedesboththeaccumulationofstockandthe
appropriationofland,theproportionbetweenthequantitiesoflabornecessaryfor
acquiringdifferentobjectsseemstobetheonlycircumstancewhichcanaffordanyrule
forexchangingthemforoneanother.Ifamonganationofhunters,forexample,it
usuallycoststwicethelabortokillabeaverwhichitdoestokilladeer,onebeaver
shouldnaturallyexchangefororbeworthtwodeer.Itisnaturalthatwhatisusually
theproduceoftwodays'ortwohours'labor,shouldbeworthdoubleofwhatisusually
theproduceofoneday'soronehour'slabor.Iftheonespeciesoflaborshouldbemore
severethantheother,someallowancewillnaturallybemadeforthissuperior
hardshipandtheproduceofonehour'slaborintheonewaymayfrequentlyexchange
forthatoftwohours'laborintheother.
Assoonasstockhasaccumulatedinthehandsofparticularpersons,someofthemwill
naturallyemployitinsettingtoworkindustriouspeople,whomtheywillsupplywith
materialsandsubsistence,inordertomakeaprofitbythesaleoftheirwork,orby
whattheirlaboraddstothevalueofthematerials.Inexchangingthecomplete
manufactureeitherformoney,forlabor,orforothergoods,overandabovewhatmay
besufficienttopaythepriceofthematerials,andthewagesoftheworkmen,
somethingmustbegivenfortheprofitsoftheundertakeroftheworkwhohazardshis
stockinthisadventure.Thevaluewhichtheworkmenaddtothematerials,therefore,
resolvesitselfinthiseaseintotwoparts,ofwhichtheonepaystheirwages,theother
theprofitsoftheiremployeruponthewholestockofmaterialsandwageswhichhe
advanced.
Inthisstateofthings,thewholeproduceoflabordoesnotalwaysbelongtothe
laborer.Hemustinmostcasesshareitwiththeownerofthestockwhichemploys
him.Neitheristhequantityoflaborcommonlyemployedinacquiringorproducing
anycommodity,theonlycircumstancewhichcanregulatethequantitywhichitought
commonlytopurchase,command,orexchangefor.Anadditionalquantity,itis
evident,mustbeduefortheprofitsofthestockwhichadvancedthewagesand
furnishedthematerialsofthatlabor.Therealvalueofallthedifferentcomponent
partsofprice,itmustbeobserved,ismeasuredbythequantityoflaborwhichthey
can,eachofthem,purchaseorcommand.Labormeasuresthevaluenotonlyofthat
partofpricewhichresolvesitselfintolabor,butofthatwhichresolvesitselfintorent,
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andofthatwhichresolvesitselfintoprofit.Ineverysocietythepriceofevery
commodityfinallyresolvesitselfintosomeoneorother,orallofthosethreepartsand
ineveryimprovedsociety,allthethreeentermoreorless,ascomponentparts,into
thepriceofthefargreaterpartofcommodities.
BookI,Chapter7.OftheNaturalandMarketPriceofCommodities:Thereisin
everysocietyorneighborhoodanordinaryoraverageratebothofwagesandprofit
ineverydifferentemploymentoflaborandstock.Thisrateisnaturallyregulated,asI
shallshowhereafter,partlybythegeneralcircumstancesofthesociety,theirrichesor
poverty,theiradvancing,stationary,ordecliningconditionandpartlybythe
particularnatureofeachemployment.Thereislikewiseineverysocietyor
neighborhoodanordinaryoraveragerateofrent,whichisregulatedtoo,asIshall
showhereafter,partlybythegeneralcircumstancesofthesocietyorneighborhoodin
whichthelandissituated,andpartlybythenaturalorimprovedfertilityoftheland.
Theseordinaryoraverageratesmaybecalledthenaturalratesofwages,profit,and
rent,atthetimeandplaceinwhichtheycommonlyprevail.Whenthepriceofany
commodityisneithermorenorlessthanwhatissufficienttopaytherentoftheland,
thewagesofthelabor,andtheprofitsofthestockemployedinraising,preparing,and
bringingittomarket,accordingtotheirnaturalrates,thecommodityisthensoldfor
whatmaybecalleditsnaturalprice.Thoughtheprice,therefore,whichleaveshimthis
profitisnotalwaysthelowestatwhichadealermaysometimessellhisgoods,itisthe
lowestatwhichheislikelytosellthemforanyconsiderabletimeatleastwherethere
isperfectliberty,orwherehemaychangehistradeasoftenashepleases.
Theactualpriceatwhichanycommodityiscommonlysoldiscalleditsmarketprice.
Itmayeitherbeabove,orbelow,orexactlythesamewithitsnaturalprice.Themarket
priceofeveryparticularcommodityisregulatedbytheproportionbetweenthe
quantitywhichisactuallybroughttomarket,andthedemandofthosewhoarewilling
topaythenaturalpriceofthecommodity,orthewholevalueoftherent,labor,and
profit,whichmustbepaidinordertobringitthither.Whenthequantityofany
commoditywhichisbroughttomarketfallsshortoftheeffectualdemand,allthose
whoarewillingtopaythewholevalueoftherent,wages,andprofit,whichmustbe
paidinordertobringitthither,cannotbesuppliedwiththequantitywhichtheywant.
Ratherthanwantitaltogether,someofthemwillbewillingtogivemore.A
competitionwillimmediatelybeginamongthem,andthemarketpricewillrisemore
orlessabovethenaturalprice,accordingaseitherthegreatnessofthedeficiency,or
thewealthandwantonluxuryofthecompetitors,happentoanimatemoreorlessthe
eagernessofthecompetition.
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Whenthequantitybroughttomarketexceedstheeffectualdemand,itcannotbeall
soldtothosewhoarewillingtopaythewholevalueoftherent,wages,andprofit,
whichmustbepaidinordertobringitthither.Somepartmustbesoldtothosewho
arewillingtopayless,andthelowpricewhichtheygiveforitmustreducethepriceof
thewhole.Themarketpricewillsinkmoreorlessbelowthenaturalprice,accordingas
thegreatnessoftheexcessincreasesmoreorlessthecompetitionofthesellers,or
accordingasithappenstobemoreorlessimportanttothemtogetimmediatelyridof
thecommodity.Whenthequantitybroughttomarketisjustsufficienttosupplythe
effectualdemand,andnomore,themarketpricenaturallycomestobeeitherexactly,
orasnearlyascanbejudgedof,thesamewiththenaturalprice.Thewholequantity
uponhandcanbedisposedofforthisprice,andcannotbedisposedofformore.The
competitionofthedifferentdealersobligesthemalltoacceptofthisprice,butdoes
notobligethemtoacceptofless.
Suchfluctuationsaffectboththevalueandtherateeitherofwagesorofprofit,
accordingasthemarkethappenstobeeitheroverstockedorunderstockedwith
commoditiesorwithlaborwithworkdone,orwithworktobedone.Butthoughthe
marketpriceofeveryparticularcommodityisinthismannercontinuallygravitating,if
onemaysayso,towardsthenaturalprice,yetsometimesparticularaccidents,
sometimesnaturalcauses,andsometimesparticularregulationsofpolice,may,in
manycommodities,keepupthemarketprice,foralongtimetogether,agooddeal
abovethenaturalprice.
Whenbyanincreaseintheeffectualdemand,themarketpriceofsomeparticular
commodityhappenstoriseagooddealabovethenaturalprice,thosewhoemploy
theirstocksinsupplyingthatmarketaregenerallycarefultoconcealthischange.Ifit
wascommonlyknown,theirgreatprofitwouldtemptsomanynewrivalstoemploy
theirstocksinthesamewaythat,theeffectualdemandbeingfullysupplied,the
marketpricewouldsoonbereducedtothenaturalprice,andperhapsforsometime
evenbelowit.Ifthemarketisatagreatdistancefromtheresidenceofthosewho
supplyit,theymaysometimesbeabletokeepthesecretforseveralyearstogether,and
maysolongenjoytheirextraordinaryprofitswithoutanynewrivals.Secretsofthis
kind,however,itmustbeacknowledged,canseldombelongkeptandthe
extraordinaryprofitcanlastverylittlelongerthantheyarekept.
Amonopolygrantedeithertoanindividualortoatradingcompanyhasthesame
effectasasecretintradeormanufactures.Themonopolists,bykeepingthemarket
constantlyunderstocked,byneverfullysupplyingtheeffectualdemand,selltheir
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commoditiesmuchabovethenaturalprice,andraisetheiremoluments,whetherthey
consistinwagesorprofit,greatlyabovetheirnaturalrate.Thepriceofmonopolyis
uponeveryoccasionthehighestwhichcanbegot.Thenaturalprice,orthepriceof
freecompetition,onthecontrary,isthelowestwhichcanbetaken,notuponevery
occasion,indeed,butforanyconsiderabletimetogether.Theoneisuponevery
occasionthehighestwhichcanbesqueezedoutofthebuyers,orwhich,itissupposed,
theywillconsenttogive:theotheristhelowestwhichthesellerscancommonlyafford
totake,andatthesametimecontinuetheirbusiness.
Theexclusiveprivilegesofcorporations,statutesofapprenticeship,andallthoselaws
whichrestrain,inparticularemployments,thecompetitiontoasmallernumberthan
mightotherwisegointothem,havethesametendency,thoughinalessdegree.They
areasortofenlargedmonopolies,andmayfrequently,foragestogether,andinwhole
classesofemployments,keepupthemarketpriceofparticularcommoditiesabovethe
naturalprice,andmaintainboththewagesofthelaborandtheprofitsofthestock
employedaboutthemsomewhatabovetheirnaturalrate.Suchenhancementsofthe
marketpricemaylastaslongastheregulationsofpolicewhichgiveoccasiontothem.

BookI,Chapter8.OftheWagesofLabor:Theproduceoflaborconstitutesthe
naturalrecompenseorwagesoflabor.Inthatoriginalstateofthings,whichprecedes
boththeappropriationoflandandtheaccumulationofstock,thewholeproduceof
laborbelongstothelaborer.Hehasneitherlandlordnormastertosharewithhim.
Hadthisstatecontinued,thewagesoflaborwouldhaveaugmentedwithallthose
improvementsinitsproductivepowerstowhichthedivisionoflaborgivesoccasion.
Allthingswouldgraduallyhavebecomecheaper.Theywouldhavebeenproducedbya
smallerquantityoflaborandasthecommoditiesproducedbyequalquantitiesof
laborwouldnaturallyinthisstateofthingsbeexchangedforoneanother,theywould
havebeenpurchasedlikewisewiththeproduceofasmallerquantity.Butthisoriginal
stateofthings,inwhichthelaborerenjoyedthewholeproduceofhisownlabor,could
notlastbeyondthefirstintroductionoftheappropriationoflandandthe
accumulationofstock.Itwasatanend,therefore,longbeforethemostconsiderable
improvementsweremadeintheproductivepowersoflabor,anditwouldbetono
purposetotracefurtherwhatmighthavebeenitseffectsupontherecompenseor
wagesoflabor.Assoonaslandbecomesprivateproperty,thelandlorddemandsa
shareofalmostalltheproducewhichthelaborercaneitherraise,orcollectfromit.
Hisrentmakesthefirstdeductionfromtheproduceofthelaborwhichisemployed
uponland.
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Mastersarealwaysandeverywhereinasortoftacit,butconstantanduniform
combination,nottoraisethewagesoflaborabovetheiractualrate.Toviolatethis
combinationiseverywhereamostunpopularaction,andasortofreproachtoamaster
amonghisneighborsandequals.Masters,too,sometimesenterintoparticular
combinationstosinkthewagesoflaborevenbelowthisrate.Thesearealways
conductedwiththeutmostsilenceandsecrecy,tillthemomentofexecution,andwhen
theworkmenyield,astheysometimesdo,withoutresistance,thoughseverelyfeltby
them,theyareneverheardofbyotherpeople.Suchcombinations,however,are
frequentlyresistedbyacontrarydefensivecombinationoftheworkmenwho
sometimestoo,withoutanyprovocationofthiskind,combineoftheirownaccordto
raisethepriceoftheirlabor.Amanmustalwayslivebyhiswork,andhiswages
mustatleastbesufficienttomaintainhim.Theymustevenuponmostoccasionsbe
somewhatmoreotherwiseitwouldbeimpossibleforhimtobringupafamily,andthe
raceofsuchworkmencouldnotlastbeyondthefirstgeneration.
Whenthelandlord,annuitant,ormoniedman,hasagreaterrevenuethanwhathe
judgessufficienttomaintainhisownfamily,heemployseitherthewholeorapartof
thesurplusinmaintainingoneormoremenialservants.Increasethissurplus,andhe
willnaturallyincreasethenumberofthoseservants.Whenanindependentworkman,
suchasaweaverorshoemaker,hasgotmorestockthanwhatissufficienttopurchase
thematerialsofhisownwork,andtomaintainhimselftillhecandisposeofit,he
naturallyemploysoneormorejourneymenwiththesurplus,inordertomakeaprofit
bytheirwork.Increasethissurplus,andhewillnaturallyincreasethenumberofhis
journeymen.Thedemandforthosewholivebywages,therefore,necessarilyincreases
withtheincreaseoftherevenueandstockofeverycountry,andcannotpossibly
increasewithoutit.Theincreaseofrevenueandstockistheincreaseofnational
wealth.
Isthisimprovementinthecircumstancesofthelowerranksofthepeopletobe
regardedasanadvantageorasaninconveniencetothesociety?Theanswerseemsat
firstsightabundantlyplain.Servants,laborers,andworkmenofdifferentkinds,make
upthefargreaterpartofeverygreatpoliticalsociety.Butwhatimprovesthe
circumstancesofthegreaterpartcanneverberegardedasaninconveniencetothe
whole.Nosocietycansurelybeflourishingandhappy,ofwhichthefargreaterpartof
themembersarepoorandmiserable.Itisbutequity,besides,thattheywhofeed,
clothe,andlodgethewholebodyofthepeople,shouldhavesuchashareofthe
produceoftheirownlaborastobethemselvestolerablywellfed,clothed,andlodged.

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Theliberalrewardoflabor,asitencouragesthepropagation,soitincreasesthe
industryofthecommonpeople.Thewagesoflaboraretheencouragementofindustry,
which,likeeveryotherhumanquality,improvesinproportiontotheencouragementit
receives.Aplentifulsubsistenceincreasesthebodilystrengthofthelaborer,andthe
comfortablehopeofbetteringhiscondition,andofendinghisdaysperhapsinease
andplenty,animateshimtoexertthatstrengthtotheutmost.Wherewagesarehigh,
accordingly,weshallalwaysfindtheworkmenmoreactive,diligent,andexpeditious
thanwheretheyarelow.
BookI,Chapter10.OfWagesandProfitinthedifferentEmploymentsofLabor
andStock:ThepolicyofEurope,bynotleavingthingsatperfectliberty,occasions
otherinequalitiesofmuchgreaterimportance.Itdoesthischieflyinthethree
followingways.First,byrestrainingthecompetitioninsomeemploymentstoa
smallernumberthanwouldotherwisebedisposedtoenterintothemSecond,by
increasingitinothersbeyondwhatitnaturallywouldbeand,Third,byobstructing
thefreecirculationoflaborandstock,bothfromemploymenttoemploymentand
fromplacetoplace.
First,thepolicyofEuropeoccasionsaveryimportantinequalityinthewholeofthe
advantagesanddisadvantagesofthedifferentemploymentsoflaborandstock,by
restrainingthecompetitioninsomeemploymentstoasmallernumberthanmight
otherwisebedisposedtoenterintothem.Theexclusiveprivilegesofcorporations,or
guilds,aretheprincipalmeansitmakesuseofforthispurpose.Thepropertywhich
everymanhasinhisownlabor,asitistheoriginalfoundationofallotherproperty,so
itisthemostsacredandinviolable.Thepatrimonyofapoormanliesinthestrength
anddexterityofhishandsandtohinderhimfromemployingthisstrengthand
dexterityofhishandsandtohinderhimfromemployingthisstrengthanddexterity
inwhatmannerhethinksproperwithoutinjurytohisneighborisaplainviolationof
thismostsacredproperty.Itisamanifestencroachmentuponthejustlibertybothof
theworkmanandofthosewhomightbedisposedtoemployhim.Asithinderstheone
fromworkingatwhathethinksproper,soithinderstheothersfromemployingwhom
theythinkproper.Thepretensethatcorporationsarenecessaryforthebetter
governmentofthetradeiswithoutanyfoundation.Therealandeffectualdiscipline
whichisexercisedoveraworkmanisnotthatofhiscorporation,butthatofhis
customers.Itisthefearoflosingtheiremploymentwhichrestrainshisfraudsand
correctshisnegligence.Anexclusivecorporationnecessarilyweakenstheforceofthis
discipline.

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Second,thepolicyofEurope,byincreasingthecompetitioninsomeemployments
beyondwhatitnaturallywouldbe,occasionsanotherinequalityofanoppositekindin
thewholeoftheadvantagesanddisadvantagesofthedifferentemploymentsoflabor
andstock....Intheprofessions,suchaslawandmedicine,ifanequalproportionof
peoplewereeducatedatthepublicexpense,thecompetitionwouldsoonbesogreatas
tosinkverymuchtheirpecuniaryreward.Itmightthennotbeworthanyman'swhile
toeducatehissontoeitherofthoseprofessionsathisownexpense.
Third,thepolicyofEurope,byobstructingthefreecirculationoflaborandstockboth
fromemploymenttoemployment,andfromplacetoplace,occasionsinsomecasesa
veryinconvenientinequalityinthewholeoftheadvantagesanddisadvantagesoftheir
differentemployments.Whateverobstructsthefreecirculationoflaborfromone
employmenttoanotherobstructsthatofstocklikewisethequantityofstockwhich
canbeemployedinanybranchofbusinessdependingverymuchuponthatofthe
laborwhichcanbeemployedinit.Corporationlaws,however,givelessobstructionto
thefreecirculationofstockfromoneplacetoanotherthantothatoflabor.Itis
everywheremucheasierforawealthymerchanttoobtaintheprivilegeoftradingina
towncorporate,thanforapoorartificertoobtainthatofworkinginit.
BookI,Chapter11.EffectsoftheProgressofImprovementupontheRealPriceof
Manufactures:Itisthenaturaleffectofimprovement,however,todiminishgradually
therealpriceofalmostallmanufactures.Thatofthemanufacturingworkmanship
diminishes,perhaps,inallofthemwithoutexception.Inconsequenceofbetter
machinery,ofgreaterdexterity,andofamoreproperdivisionanddistributionof
work,allofwhicharethenaturaleffectsofimprovement,amuchsmallerquantityof
laborbecomesrequisiteforexecutinganyparticularpieceofwork,andthough,in
consequenceoftheflourishingcircumstancesofthesociety,therealpriceoflabor
shouldriseveryconsiderably,yetthegreatdiminutionofthequantitywillgenerally
muchmorethancompensatethegreatestrisewhichcanhappenintheprice.Butin
allcasesinwhichtherealpriceoftherudematerialseitherdoesnotriseatall,ordoes
notriseverymuch,thatofthemanufacturedcommoditysinksveryconsiderably.
Everyimprovementinthecircumstancesofthesocietytendseitherdirectlyor
indirectlytoraisetherealrentofland,toincreasetherealwealthofthelandlord,his
powerofpurchasingthelabor,ortheproduceofthelaborofotherpeople.The
extensionofimprovementandcultivationtendstoraiseitdirectly.Thelandlord's
shareoftheproducenecessarilyincreaseswiththeincreaseoftheproduce.Every
increaseintherealwealthofthesociety,everyincreaseinthequantityofusefullabor
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employedwithinit,tendsindirectlytoraisetherealrentofland.Acertainproportion
ofthislabornaturallygoestotheland.Agreaternumberofmenandcattleare
employedinitscultivation,theproduceincreaseswiththeincreaseofthestockwhich
isthusemployedinraisingit,andtherentincreaseswiththeproduce.

CitationInformation
Smith,Adam."TheWealthofNations(excerpt)."PrimarySourceDocuments:1750to
1799.NewYork:FactsOnFile,2014.ModernWorldHistoryOnline.Web.13Apr.
2015.<http://online.infobase.com/HRC/Search/Print?
assetId=2285&assetType=primarySource&citeType=none>.
Copyright2015InfobaseLearning.AllRightsReserved.

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