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INTRODUCTION. 
 
 Among all the different means taken by men for the attain- 
 ment of the common object, happiness, few are more general 
 in employment, or more satisfactory in result, than the pro- 
 duction and consumption of wealth. Consisting, as wealth 
 does, of the various necessary, useful, and agreeable commo- 
 dities in constant use and enjoyment, the method, and condi- 
 tions, and stimulants of its production, of necessity assume an 
 important and peculiar interest. And this interest is greatly 
 enhanced, when it is considered that the pursuit of wealth is 
 not confined to the individual, or to the class, in community ; 
 but that it is an impulse, which spreads its activity widely, 
 and in a certain sense, equally, through all the numerous and 
 differing relations: from the most ordinary labourer, to the 
 most extensive capitalist : from him, whose daily exertions 
 yield his daily support, to him, whose vast and superfluous 
 pecuniary resources require his constant and unwearied atten- 
 tion, barely to invest and continue them in productive operation. 
 
 It was in this view of the nature and important bearings of 
 wealth upon the happiness of life, that Political Economy, the 
 science of its production and uses, had its origin. It is an 
 offspring of modern times and of mature civilization. Amidst 
 the stir and warlike energies of the old republics, and of the 
 ancient world, it could find no existence. It surely could not 
 spring from their philosophers — men whose mighty and wide- 
 ranging minds seem to have drawn their inspiration mostly in 
 a twilight season, between reality and dreaming ; little could 
 they find worth study or investigation, in the practical and 
 noon-day matters of the market and exchange. Not more 
 
4 INTRODUCTION. 
 
 easily would it have birth among their restless and wayward 
 citizens; for to them, while predatory habits, and an assumed 
 right to plunder, fostered and made characteristic by unremit- 
 ting wars, seem to justify and promise an easy obtaining of 
 subsistence by force of arms, the encouragement of slavery by 
 governments, and the entire dependence on the part of citizens 
 upon slave labour in the mechanic arts, and mostly in com- 
 merce and agriculture, would conspire to bring discredit alike 
 upon these occupations, and upon any who might have thought 
 them proper subjects of scientific investigation. 
 
 It has been fortunate for the domestic as well as the political 
 happiness of mankind, that the power of rapid and easy inter- 
 course across the ocean and the continent, a general dissemi- 
 nation of knowledge by the art of printing, and the wide spread 
 of the Christian religion and its purer morals, have wrought, 
 among other reforms, a change of opinion and practice in this 
 respect, as happy as it is permanent and effectual. To preserve 
 peace has become an object with nations; the causes of war 
 are matters for close inquiry and question ; by many govern- 
 ments enslavement and the traffic in slaves has been abolished, 
 and the relative and common rights of communities have been 
 so minutely analyzed, and so well defined and systematized, 
 as to assume the character of a conventional code of laws. 
 
 During these great changes, Political Economy has had its 
 origin. The first treatise, embracing a regular digest and body 
 of its principles, came from the pen of the celebrated Scotch 
 philosopher, Adam Smith, about the time of the American re- 
 volution. Since the publication of the Wealth of Nations, the 
 subject has been pursued by other distinguished writers ; among 
 whom may be mentioned Mr. Ricardo and Mr. Malthus of 
 England, Mr. Say, the Marquis Gamier, and others, of France, 
 together with many of eminence in other countries. Their 
 labours have been successful, in giving a more complete and 
 lucid exposition of some of the principles of Dr. Smith than 
 he himself afforded, in overturning some of his doctrines, in 
 introducing others more consonant to truth and experience, 
 and in placing the whole science upon a surer, as well as a 
 more liberal foundation, 
 
INTRODUCTION. 5 
 
 As has been before remarked, the science of Political Econo- 
 my may be of interest and importance to any individual : but 
 particularly so to the American citizen. For while the go- 
 vernments of the Old World have learned their lessons of 
 financial policy in the slow and, not unfrequently, sad school 
 of experience; and by series of miscalculations, and mistaken 
 expedients, have too often entailed much fruitless toil upon suc- 
 ceeding generations ; political economy, with a knowledge of the 
 past, will point out to him the nature and causes of their 
 errors, with the policies opposed, whereby to avoid them. Not 
 only so, but it may teach him how the vast resources of his 
 own country may best be brought forward and made produc- 
 tive ; it may show him the close connexion between peace, 
 good order, and prosperity ; and having, as an indirect object, 
 the decrease of poverty and want, it will enlarge and liberalize 
 his mind — convincing him, both as a man and a citizen, that 
 the prosperity of a neighbouring state and individual, far from 
 being a hindrance, or an object of envy, is a facility afforded 
 for his own advancement, and for the advancement of others. 
 Moreover, the principles of political economy, although general 
 in their nature, are yet applicable in individual cases. They 
 come home to the " business and bosoms" of men, and make 
 manifest the reasons, character, and ultimate results, of the 
 pursuits of industry in which they are daily engaged. 
 
 In the following essay, in which a consideration of all the 
 principles and somewhat of the details of the science is de- 
 signed, an order will be pursued corresponding to the annexed 
 analysis : — 
 
 General Analysis of the Science. 
 
 After ascertaining the nature of wealth and defining it, Po- 
 litical Economy teaches, 
 
 I. The original and necessary agents by which wealth is 
 produced, being, 
 
 1. By the operations of nature. 
 
 2. By the operations of industry. 
 
 II. How the greatest amount of wealth may be produced by 
 these agents, being, 
 
 1+ 
 
6 INTRODUCTION. 
 
 1. Under a good government. 
 
 2. By division of labour. 
 
 3. By capital. 
 
 Leaving, then, the production of wealth, political economy 
 teaches the just and proper rules of its distribution — shares 
 being given to all who are connected with, and engaged in its 
 production, viz : — 
 
 1. To owners of land, or landlords, as rent. 
 
 2. To employers and loaners of capital, or capitalists, as 
 profits, or as interest. 
 
 3. To subordinate assistants and workmen, as wages 
 or hire. 
 
 Supposing wealth to have been produced and distributed, 
 political economy next discusses the method whereby to ex- 
 change shares, or parts of shares, being, 
 
 1. By barter. 
 
 2. By coined money. 
 
 3. By paper money. 
 
 In the last place, political economy explains the final use or 
 consumption of wealth, being, 
 
 I. Productively consumed, > , ., , 
 
 , TT ... ' } by three agents, viz : 
 
 II. Unproductively consumed^ y 
 
 1. By the nation at home. 
 
 2. By foreign nations. 
 
 3. By government. 
 
INDEX. 
 
 PAGE. 
 
 Introduction 3 
 
 General analysis of the science 6 
 
 PART I. 
 
 Sec. 1.— Definition op the science 9 
 
 of wealth ib. 
 
 of the wealth of a nation 12 
 
 2. Op THE AGENTS IN PRODUCTION ib. 
 
 Capital not to be considered as an original agent 14 
 
 3. OP THE CIRCUMSTANCES WHICH FACILITATE PRODUCTION lb. 
 
 A STRONG AND LIBERAL GOVERNMENT ib. 
 
 Security of person and property ib. 
 
 Division of labour 15 
 
 General division of labour ib. 
 
 Particular division of labour 16 
 
 Division of labour saves time 17 
 
 —increases dexterity of workmen ib. 
 
 leads to invention of machinery 18 
 
 is limited by the extent of the market 19 
 
 The most general division of labour ib. 
 
 Capital 20 
 
 Definition of capital ib. 
 
 Fixed capital ib. 
 
 Circulating capital ib- 
 
 Capital of a mental or immaterial producer ib. 
 
 Division of labour cannot take place until after an accumulation of capital 21 
 
 Capital enables to produce what, without it, cannot be produced ib. 
 
 saves labour in production 22 
 
 enables to do work better and more advantageously ib. 
 
 Of the means of accumulating capital ib. 
 
 4. General CONSIDERATIONS RELATING to production 23 
 
 What class most necessary for national wealth 1 ib. 
 
 In what division of labour may capital and labour be most profitably in- 
 vested ? 24 
 
 Erroneous opinion of Dr. Smith as to agriculture 25 
 
 PART II. 
 
 Sec. 1. — Outline op the distribution op wealth 26 
 
 2. The class of labourers 27 
 
 Rate of wages, for all employ merits, equal ib. 
 
 Differences of employment cause differences in amount of wages for the 
 
 same time 28 
 
 The price of provisions and demand for labour, ruling principles of wages 
 
 of ordinary labourers 29 
 
 Differences of employments to be referred to ordinary labour as the stand- 
 ard by which to estimate them ib. 
 
 3. The class of capitalists ib 
 
 Employers of capital ib. 
 
 Components of profit ib. 
 
 Rate of profit, for all employments, equal ib. 
 
 Loaners of capital 30 
 
 Components of interest ib. 
 
 Definition of interest ib. 
 
 Profit more than interest ib. 
 
 Limitation of rate of interest by government 31 
 
 Erroneous prejudice against the loaner of money ib. 
 
8 INDEX. 
 
 PAOB. 
 
 4. The CLASS OF LANDLORDS 31 
 
 Opinion of Dr. Smith as to rent ib. 
 
 Definitions of rent ib. 
 
 Nature, origin, and cause of rent 32 
 
 General remarks upon rent 34 
 
 5. Of price ib. 
 
 The means of realizing wages and profits ib. 
 
 Cost of production, or natuial price 36 
 
 Market price ib. 
 
 Heal and nominal price ib. 
 
 6. Effect of fluctuations in wages upon thice, and profits ib. 
 
 Cause of decrease of profits in the advance of society 38 
 
 7. General remarks concerning price, and of monopolies 40 
 
 Definition of a monopoly 41 
 
 Effect of monopolies ' ib. 
 
 PART III. 
 
 Sec. 1.— Of exchange in general 42 
 
 Definition of barter ib. 
 
 Its inconvenience ib. 
 
 Origin of money ib. 
 
 The precious metals as instruments of money 43 
 
 — as articles of commerce ib. 
 
 Issues and coining of money ib. 
 
 2. Of paper money ib. 
 
 Nature of a paper currency 44 
 
 Issued by banks ib. 
 
 Advantages of a paper currency ib. 
 
 Disadvantages of a paper currency 45 
 
 Recapitulation of the nature and general uses of money 46 
 
 PART IV. 
 
 Sec. 1.— Nature of consumption 47 
 
 The opposite and object of production ib. 
 
 Productive consumption 48 
 
 Unproductive consumption ib. 
 
 Test of a nation's decline or advance in wealth 49 
 
 The asents of consumption ib. 
 
 2. Consumption by foreign nations ib. 
 
 Encouragements of branches of commerce by governments 50 
 
 Tariffs or duties 51 
 
 Bounties ib. 
 
 Effect of prohibitions and bounties ib. 
 
 General remark on systems of restraint and encouragement by govern- 
 ment 52 
 
 3. Consumption by government 53 
 
 The expense of defence ib. 
 
 — of justice 54 
 
 of public works ib. 
 
 — of public institutions 55 
 
 of maintaining the dignity of government 56 
 
 The consumption of government is productive ib. 
 
 4. Of taxes ib. 
 
 Taxes upon rent 57 
 
 profit 58 
 
 ■ wages ib. 
 
 Excise taxes ib. 
 
 General effect of taxation 60 
 
PART I. 
 
 THE PRODUCTION OF WEALTH. 
 
 Section I. — Definitions. 
 
 Definition of the Science. — Political economy may be de- 
 fined "the science of the nature and causes of the Wealth 
 of Nations." The most common use of the word economy, 
 (compounded of the Greek oikoo\ a house, and vo/<o$,its law or 
 regulation,) was a household term, designating a particu- 
 lar course of conduct and management, by the observance 
 of which, the expense of a family may be diminished, its 
 income increased, and its advance towards wealth and in- 
 dependence accelerated. Nearly allied to this is its signi- 
 fication, when used as denoting a science of political 
 character. For it considers nations as the families, and 
 a whole people as the household, whose increase of reve- 
 nue and pecuniary advancement it considers. It purposes 
 to explain the best and most effectual ways of producing 
 wealth ; the just and proper rules of its distribution ; and 
 how it is naturally and most advantageously consumed. 
 The constant object of its inquiry is wealth, and it pro- 
 mises to consider it in jevery stage and manner of its exist- 
 ence. To him, therefore, who would become a student of 
 its doctrines, it must be of the highest importance to form 
 a clear and correct notion of what constitutes wealth, and 
 for what reasons. 
 
 Definition of Wealth. — Few words in so common use 
 have ideas more discordant, ambiguous, and false, attached 
 to them, than the term wealth. The most frequent error 
 lies in supposing that money alone is wealth. And such a 
 thought is of easy introduction into the mind ; for when it 
 is considered that money will procure for us almost any 
 object of common desire, how can we resist the idea that 
 money must, in itself, possess a certain intrinsic value ? 
 Yet what is this value in paper money '? Is it in the petty 
 piece of paper and its engraving? How completely false 
 is this notion, which in reality is a supposition, that ex- 
 changeability, rather than exchangeable utility, constitutes. 
 
10 PRINCIPLES OP 
 
 wealth, we hope the following considerations will make 
 apparent. Previously, however, it may be remarked, that 
 this error is not confined to individuals ; it has been the 
 mistake of nations. At one time, with different communi- 
 ties in Europe, so common and influential was it, that go- 
 vernments, for the increase of wealth among their respective 
 people, laboured after no object more strenuously, than to 
 draw and confine at home as much of the coin of their 
 own and other countries, as was in any way possible. 
 Vast expenditures and investments of capital were made 
 in gold and silver mines, and in the manufacture of bullion. 
 Of the disastrous effects of such a policy, it is to be feared 
 that Spain in particular, and her South American Colo- 
 nies, will yet long remain conspicuous and melancholy 
 examples. 
 
 A silver shilling can be of no more value in the eyes of 
 a savage than a glittering pebble ; and he would stop to 
 pick up the latter sooner, perhaps, than the former, al- 
 though he were starving. This shilling, and a hundred 
 others with it, cannot feed him ; they cannot clothe him, if 
 he is cold and naked, nor procure him a shelter, if he is 
 without a home. Yet change the case, and suppose a 
 vagabond member of civilized community to be in similar 
 circumstances, cold, tired, a stranger, and penniless, in 
 the streets of a city. It surely is not because that little coin 
 will serve his necessities, of itself, more than it would have 
 served those of the savage, that he is so eager to become 
 its possessor ; but it is because he is aware that in the city 
 where he is, that coin will exchange for victuals, and that 
 similar coins would purchase for him rest and clothing. 
 It may well then appear strange, that any should mistake 
 money, which only exchanges for the necessary, useful, 
 and agreeable commodities composing wealth, for wealth 
 itseif. This value of money is contingent and derivative, 
 while the value of commodities composing wealth, and for 
 which money exchanges, is intrinsic and unalienable, ex- 
 cept by the consumption of the commodities. This value 
 of money is a value in exchange, which is conventional, 
 and dependent upon purposes of convenience which the 
 metal or paper acquiring it may answer in the mere com- 
 mercial intercourse of men ; while consumable value or 
 value in use, the characteristic of wealth, is imparted by 
 nature and industry, and varies in kind and quality, wisely 
 adapted to the peculiarities of mental and physical consti- 
 tution. Let the reader carefully bear in mind this distinct 
 tion between money, which merely possesses the value in 
 exchange, and which, when the power to exchange it is 
 gone, is worthless, and other commodities which possess 
 
FOLITICAL ECONOMY. 11 
 
 a permanent utility or value in use, and which, in them- 
 selves and always, are wealth : it will be indispensable to a 
 clear understanding of the principles of political economy. 
 The metals, indeed, and the paper which are thus useful, 
 and can be thus consumed as means of exchange, are so 
 far and as such, components of wealth ; but for any other 
 reason, to suppose that he alone possesses wealth, who 
 possesses money, is just as absurd as to think, that mere 
 ownership of a book, the means of information, is real 
 possession of the thoughts and opinions, the information 
 itself, which it contains, and which make it valuable. Wealth 
 consists in all those products, both material and immaterial, 
 which possess an exchangeable utility and inherent value. 
 It will be perceived from this definition, that to invest any 
 product with the character of wealth, it is necessary that 
 it should possess, first, Utility, and secondly, Exchangea- 
 ble Utility. The existence of one only of these requisites 
 in a commodity will not stamp it with the character of 
 wealth : they both must co-exist ; and it is only chang- 
 ing the terms to say, that the absence of either, as well as 
 both, destroys such a character. That mere exchangea- 
 bility does not constitute wealth, we hope has been pre- 
 viously shown in the instance of money, when in the hands 
 of a savage who could not exchange it. We proceed now 
 to illustrate, by several examples, the position that both 
 these qualifications are requisite. 
 
 Water, in a country which is profusely supplied with it, 
 is always a convenience, sometimes a necessary of life. It 
 therefore possesses, in a high degree, the first named cha- 
 racteristic of wealth, viz. utility. Yet an abundance of 
 water, in a particular spot, will not enrich the owner of that 
 spot. Does it not seem rather, that it is least cared for 
 where its abundance is greatest ? And why? The plain 
 reason must have occurred, that this very abundance dis- 
 qualifies it to buy or exchange for other commodities of 
 which there is not like abundance. Moreover, most other 
 commodities have cost time and labour, or the price of 
 time and labour, to their possessor; while water is a free 
 gift of nature, and in such plenty that the wants of all indi- 
 viduals are alike, and equally, and easily, supplied. It is 
 plain then, why it cannot exchange for other commodities, 
 and why possessing no exchangeable utility, it is no part 
 of wealth. Yet in the sandy deserts of Arabia, where it 
 has only the same utility, but at the same time is extremely 
 scarce and to be procured only by much toil and difficulty, 
 it obtains the character of exchangeability, and ranks with 
 other commodities which, in like manner 3 are procured by 
 labour, and are bought and sold. 
 
12 PRINCIPLES OP 
 
 A similar example among many others, of the inability 
 of mere utility, however great, to give the character of 
 wealth, may be taken from the air which we breathe, when 
 contrasted with the skill of the physician, an immaterial 
 product of mental industry. Both have great utility ; the 
 one is absolutely necessary for life ; the other frequently is 
 so. Yet the one is common to all men ; the other is pecu- 
 liar to a few ; the privilege of use of the one has cost no 
 toil to any individual; every exercise of the other has been 
 made possible only by laborious years of study and atten- 
 tion : hence there must necessarily be a super-addition to 
 the value of the latter — which super-addition is, exchange- 
 ability; rendering the skill of the physician a component 
 of the wealth of his nation. 
 
 Definition of the Wealth of a Nation. — In the science of 
 political economy, a government is considered as one, yet 
 as the most influential and important one of the individuals 
 composing a community. Regarding it in such a view, 
 the wealth of a nation is best defined to be, the aggregate 
 of wealth belonging to the individuals who compose it. And 
 from hence, too, it will appear, that political economy, or 
 the science of national wealth, is but a generalization from 
 individual interests. 
 
 Section II. — Of the agents in the production of wealth. 
 
 The members of community engaged in the pursuits of 
 industry may be divided into two general and comprehen- 
 sive classes : the producers of material wealth, and the 
 producers of immaterial wealth. The one class is cora- 
 posedof the various individuals engaged in the occupations 
 of agriculture, of manufactures, and of trade; and the other, 
 of all those employed in the different liberal professions, 
 in the instruction of youth, and in general, all who contri- 
 bute to the comfort, information, and pleasure of commu- 
 nity, by the production of immaterial wealth. The great 
 and original agents whereby these classes alike both pro- 
 duce wealth, are, 
 
 I. The operations of nature. 
 
 II. The operations of industry. 
 
 To verify this position, let us select a raw material, for 
 example, a crop of wheat, and pursuing it through different 
 stages of production, till it reaches its most complete con- 
 sumable utility, and consequently, its highest exchangeable 
 value, observe whether the wealth which its different hold- 
 ers have possessed in it, either as wheat, or as flour, or as 
 flour in the market, or as flour manufactured into -bread, 
 has been owing to aught else, except the agency of nature 
 
POLITICAL ECONOMY. 13 
 
 aiid industry. An agriculturist was its first producer. 
 After his seeding time had passed, while the nascent germ 
 was putting forth, soon to spring up and ripen to the per- 
 fect plant, full grown and ready for the reaper, each ad- 
 vance which it made towards utility and value was inde- 
 pendent of his exertions. His labour, indeed, by previous 
 preparation of the earth, may have aided its growth, and 
 must hereafter secure the harvest, to render it of any ex- 
 changeable value. Yet, therefore, to consider that value 
 solely as the product of his labour, seems just as incom- 
 plete and unsatisfactory as to reckon it the spontaneous 
 gift of nature. 
 
 Suppose, now, that the grain has been secured: it will 
 possess exchangeable utility or value, because it has a ca- 
 pability of manufacture into flour. A miller, in the first 
 place, will purchase it of the farmer. He will subject it to 
 a new operation, by which its value will be increased, and 
 it will be fitted for final manufacture into bread. A mer- 
 chant, in the second place, will procure it in this its mar- 
 ketable state, and will also increase its value by increasing 
 the facilities for obtaining it, and by exposing it for sale in 
 a known and public place. Finally, it will be bought by a 
 baker and be manufactured into bread, when it will have 
 acquired its highest value, having, after the respective ope- 
 rations of these different producers, been gifted with its last 
 consumable utility. Now, in all the steps of this process 
 can any other agents be found in operation, except nature 
 and industry? And do not they both seem equally indis- 
 pensable to the final value? 
 
 It would appear, then, that the doctrine of many political 
 economists, which refers the production of exchangeable 
 utility entirely to labour, if not an error, is yet an unneces- 
 sary refinement. It is true that industry, in all cases of 
 production, must necessarily have an operation ; yet we 
 cannot conceive it as the sole originator of value. It is 
 rather the hand-maiden to nature ; and while either nature 
 or industry alone would be insufficient to produce a single 
 commodity possessing exchangeable value, inasmuch as 
 the exertions of the one would be fruitless, the operations 
 of the other unappropriated, yet both of them mutually giving 
 aid, afford alike the necessaries, and conveniences, and 
 luxuries of existence. 
 
 But let it not be supposed, that the earth alone is the re- 
 siding place of the operations of nature— efficient in pro- 
 duction. The weight and pressure of water, upon the 
 wheel which moves the machinery of the miller; the ocean, 
 which supports, and the wind, which wafts the merchant's 
 ship laden with flour for his foreign customers, are mani- 
 2 
 
14 PRINCIPLES OP 
 
 fest assistants. The fire, to heat the iron, is just as efficient 
 and necessary to give it an increased exchangeable value, 
 as the labour of the smith at the anvil. Who in this age 
 and country is ignorant of the wonderful agency of the 
 powers of steam ? There is reason to believe that this 
 agency of nature will be yet more extended than it now 
 is: — so frequently do the discoveries in science, and inves- 
 tigations of" nature, by the producers of immaterial wealth, 
 lead to practical applications and uses. 
 
 Capital has been considered, by some political econo- 
 mists, as one of the agents in the production of wealth. We 
 consider it, however, as a secondary agent, or rather a de- 
 rived assistance to production. Thus, fixed capital in the 
 shape of a machine for spinning yarn: the wood and iron 
 of which it is composed were originally produced, like 
 other raw materials, by the necessary agents of all produc- 
 tion, nature and industry; the form and appearance which 
 they have as a machine, and the aid which they afford as 
 such, to the manufacturer of woollens, is the result of the 
 additional labour bestowed upon them by the inventor and 
 maker of the machine. Capital, therefore, is properly con- 
 sidered, not as one of the original agents in the production 
 of wealth, but rather as a derived assistance and facility to 
 it: and as such, it is afterwards considered. 
 
 Section III. — Of the circumstances which facilitate the 
 
 PRODUCTION OF WEALTH. 
 
 Having thus ascertained the nature of wealth, and con- 
 sidered the agents of its production, it is next in order to 
 inquire, what circumstances will enable these agents to pro- 
 duce the most wealth. And, 
 
 First, A strong and liberal government. 
 
 Perhaps the greatest benefit which a government can 
 confer upon community, is to provide for a perfect and en- 
 tire security of property and person. The accomplish- 
 ment of such an order of things, with the establishment of 
 accompanying means for their perpetuity, are the true, 
 practical essentials of civil liberty. And while such an or- 
 der of things is a matter of right and of just demand, under 
 proper restrictions, to every individual member of a soci- 
 ety, a consideration of its bearing upon the pursuit of wealth 
 increases its value, by assuring us that it is not more right- 
 eous than it is expedient. 
 
 Security of person is requisite for the greatest production 
 of wealth, since, if an individual engaged in it, were liable 
 to seizure or enslavement, if found working in his fields, 
 or would probably be made prisoner on the ocean if h«? 
 
POLITICAL ECONOMY. 35 
 
 ventured forth from home with goods or merchandise, it is 
 plain that few would be willing to place such personal risk 
 in competition with any probable gain of wealth. From 
 hence it is evident, in like manner, that a state of war is a 
 great drawback upon the prosperity of a nation ; not 
 merely by the expense of armies and navies, but by hin- 
 dering the production which would have taken place, had 
 there been peace and security. A war between two neigh- 
 bouring maritime states has most particularly this effect : 
 for then, insecurity exists both at home and abroad: of in- 
 vasion, to the agriculturist and manufacturer in the field 
 or shop, and of capture, to the merchant on the ocean. 
 
 Security' of property is requisite, because no man will la- 
 bour, unless he at least think, that the greater part, if not 
 all that he produces, will be his own, to use, enjoy and dis- 
 pose of as he may think proper. A weak and tyrannical 
 government, as opposed to a strong and liberal one, may 
 cause insecurity of property in either or both of two wa5's: 
 I. By arbitrary extortions, taxes, or seizures of the wealth 
 of those who live under it ; or, II. From a want of strength 
 and effective jurisdiction, it may be unable to protect pro- 
 perty in the hands of its producers; but the vicious and 
 abandoned may rob and plunder with impunity, from the 
 industrious and labouring classes. Either of these two 
 cases of insecurity of property, of both of which it would 
 be easy to point out examples, are plainly sufficient to de- 
 ter men, if not entirely, yet to a very great degree, from the 
 production of wealth. 
 
 Secondly, Division op labour. 
 
 There is a general division of the labour of communities 
 into the employments of agriculture, of manufactures, and 
 of trade. Previous to this division, each individual of 
 community must perform all the different operations of la- 
 bour for himself, as he stands in need of them. He must 
 be his own cultivator and his own artificer. Not only must 
 he procure the materials of his clothing, but he must fashion 
 it himself; his dwelling must be the work of his own 
 hands, and every thing in use with himself and his de- 
 pendants, he and they must procure and fit for such use. 
 The poverty, and, in case of his or their inability to labour, 
 the extreme misery of such a condition, contrast very 
 strongly with the different order of things in the society 
 under which we live. By the division of labour among us, 
 one class of men, agriculturists, apply their industry to 
 the production of the materials of food and clothing, and 
 other articles necessary, useful, and agreeable. Another 
 class, manufacturers, taking the materials, are busied in 
 £he construction and fabric of the articles themselves; 
 
16 PRINCIPLES OP 
 
 while yet another class, merchants, keep the raw as well 
 as manufactured commodities, in known and public places, 
 where other producers may obtain them for just equiva- 
 lents. Thus, by this division of labour, the products of the 
 several departments of it being distributed and exchanged 
 in manners which will be hereafter learned, an abundance 
 of the necessaries and conveniences, besides the luxuries 
 of life, is to be found in all modern and civilized commu- 
 nities. The origin of this division of employment, Dr. 
 Adam Smith thus illustrates: — Suppose a nation of hunt- 
 ers, without division of labour, who obtain food and cloth- 
 ing from the animals which they kill in chase, and whose 
 habitations are of their own construction. At a certain 
 season, when the tribe are about to seek the hunting- 
 grounds, it happens that many huts need repair. But the 
 body of hunters must leave home ; their provisions are 
 nearly exhausted, which renders it impossible that they 
 should stay to mend their dwellings. There is one among 
 them who is more expert than others in constructing and 
 repairing huts, but is not so successful a hunter. They all 
 urge him, in this necessity, to remain behind and make the 
 necessary repairs : upon condition that they reward him 
 with a share of the hunting spoils, as a recompense for his 
 labour, he consents. Thus, division of employment, from 
 the necessity of the occasion, is introduced, and he becomes 
 the house-carpenter to his tribe. The advantage of this 
 plan could not fail soon to be apparent, and it would soon 
 be carried further and perfected. Not only is their work 
 thereby better performed, but it is surer to be done. Other 
 similar employments in like manner would be gradually 
 allotted to other individuals, and the attention of each 
 having been directed particularly to a single department, 
 material production would be rendered successful and 
 easy, and but few steps further, lead them to the immate- 
 rial products of civilized life. 
 
 But besides this general division of labour, there is what 
 may be called a particular division of labour, introduced 
 afterwards. Thus, it is not a single man who is engaged 
 in the manufacture of cloth, after the farmer has put 
 wool into his hands ; but one must comb, another must 
 card it, or two or three attend the machine which per- 
 forms these operations ; one weaves it, another colours, 
 another dresses it, till at last put up in rolls by another, it is 
 fitted for sale. It is no uncommon thing, to see the labour 
 of making one piece of cloth thus divided among more than 
 six different persons. And why ? Why is this better than 
 that one person should perform all these different opera- 
 tions successively ? There are three strong reasons: 
 
POLITICAL ECONOMY. 17 
 
 T. This division of labour saves time. 
 
 II. It increases the dexterity and skill of workmen. 
 
 III. It leads to the invention of machinery. 
 
 I. Division of labour saves time. — A person who is about 
 to engage in any kind of work, will usually consume a 
 short space of time in thinking how he will commence. 
 He must see that the tools and instruments, which he is 
 soon to use, are in order and arranged in a convenient 
 way. He must have the material he is to work upon close 
 at hand. In very many parts of employments, he must 
 make some preliminary arrangements of dress. In fine, 
 almost every kind of work has its particular and peculiar 
 preparations, previous to and distinct from itself, which 
 must be made by the person intending to engage in it 
 Besides, there are very few workmen who are ready at 
 once to take hold ; more particularly, if it is a new kind of 
 work, or different from one just accomplished. They gene- 
 rally loiter a little, and require a little time to withdraw 
 their thoughts and attention from that upon which they 
 were last engaged, and fix them upon a new object. Now 
 if one man be supposed, with five or six different kinds of 
 labour in which he is to engage successively, and wasting 
 time upon each one of them, in all or any of the ways just 
 mentioned, it must at once occur, that many of his working 
 hours will slip away without any thing accomplished. 
 But if, as is the case by a division of labour, after the dal- 
 lying of the first man is over, and he has done his part, 
 another stands ready to commence a new operation, ano- 
 ther after him, and another, and so on to the number proper 
 for any particular kind of business, all this time is saved. 
 Each individual is kept busy in a special kind of labour, 
 and saving the time otherwise spent in passing from one 
 operation to another, a body of men will together accom- 
 plish an amountof work, almost incredible, when compared 
 with all that a single individual could possibly perform in 
 the same length of time. 
 
 II. Division of labour increases the dexterity and skill 
 of workmen. — Every man works best and quickest in his 
 own business ; and the reason is, that constant practice 
 has taught him the best ways of work. The more unremit- 
 ting his application and undivided his attention, the better 
 workman will he become. It is the principle of the di- 
 vision of labour to give each individual a separate and dis- 
 tinct kind of work, and to keep him constantly busy at that 
 alone. It must be evident, then, that such division of la- 
 bour will afford the best opportunity for each labourer to 
 become dexterous and skilful, in his own peculiar depart- 
 ment. 
 
 2* 
 
IS principles or 
 
 The aid which production receives from the division of 
 labour in the two respects just mentioned, is strikingly ex- 
 emplified by Dr. Smith, in the case of a pin manufactory. 
 The workmen employed in it, perform, each of them, only 
 one part of the labour of making a pin. One draws the 
 wire, another cuts it, another sharpens the points. The 
 head of the pin requires two or three distinct operations, 
 each performed by a different individual. In this manu- 
 factory, 48,000 pins could be made in a day by ten labour- 
 ers. But if each person engaged, were to be employed in 
 making complete and perfect pins, as many as he could, 
 he would not finish more than about 20 per day ; and the 
 ten workmen, without division of labour, would then pro- 
 duce, daily, but 200, in the place of 48,000 with it ! 
 
 III. Division of labour leads to the invention op ma- 
 chinery. — By being much employed in a particular kind of 
 work, a person soon finds out the parts of it most difficult 
 or tedious to perform. Nothing is more natural, than that 
 as he discovers them, he should endeavour to invent some- 
 thing to render them less laborious. With the clear idea 
 of what the difficulty is, which his frequent experience of 
 it must give, who can be more likely to find a way to reme- 
 dy it 1 Even if not difficult, 3'et as few things are nearer 
 a man's thoughts than himself and his business, he should 
 be the first to discover any means of saving even easy la- 
 bour. Yet it must not be supposed, that the invention or 
 improvement of machinery is effected only by the workmen 
 and labourers who employ it. Division of labour among 
 scientific men, has oftentimes rendered them, in this re- 
 spect, great benefactors to the labouring classes. The 
 study and investigation of the different sciences being dis- 
 tributed among them, and the energies of each being di- 
 rected to production in a particular one, they acquire a 
 skill and proficiency in particular departments, and such 
 familiarity with details and with experimental inquiries, 
 that practical uses and adaptations, of great importance, 
 often suggest themselves. The ability, however, which 
 immaterial wealth affords its possessors of aiding in mate- 
 rial production, arises in a way entirely different from that 
 of the labourer. The knowledge which scientific men ac- 
 quire, of original principles of motion, equilibrium, resist- 
 ance, &c, affords them ideas concerning the invention and 
 improvement of machinery, which acts and proceeds ac- 
 cording to these principles; while the workman derives his 
 notions of invention or improvement, from an observation 
 of machines themselves, and of their operations. More- 
 over, the reasoning of the philosopher or man of science, is 
 generally directed to inventions or improvements upon a 
 
POLITICAL ECONOMY. 19 
 
 broader scale; while division of employment among work- 
 men, confining their attention to single operations of la- 
 bour, has a tendency to extend invention and improve- 
 ment to all the separate branches into which an occupa- 
 tion may be divided. 
 
 Division of labour is limited by the extent of the market. — 
 In view of the great assistance which production derives 
 from the division of labour, it is a natural and proper ques- 
 tion, is there any limit to its subdivisions? To illustrate 
 the manner in which the extent of the market operates as 
 this limit, let us take the above instance from Dr. Smith. 
 It was there stated that ten workmen could manufacture 
 48,000 pins in a day. Suppose that the market demand for 
 pins, was only for 30,000 a day. Then, each day that the 
 pin manufacturer kept his establishment, with its full com- 
 plement of workmen, in operation, he would make 18,000 
 more pins than the market demanded ; or in other words, 
 than he could find sale for. Now it is evident, he must re- 
 duce the division of labour, in his manufactory, sufficiently 
 to limit his production to the market demand, or have a 
 large amount of unproductive capital constantly accumula- 
 ting upon his hands. In like manner, this principle regu- 
 lates division of labour in other employments, and in ge- 
 neral. 
 
 The most general division of labour, is that which may be 
 considered as existing between the different nations of the 
 world. By particular characteristics of soil or climate, 
 different countries are adapted to the growth and manu- 
 facture of different commodities. The spices of the East 
 Indies cannot be made to grow to any extent in many 
 parts of the United States, nor can they be advantageous- 
 ly produced in Europe. The cultivation of them, and their 
 manufacture into useful articles, is accordingly left to 
 the inhabitants of those countries and islands; and we may 
 look upon such, as their portion of the divided labour of 
 the world. Thus, also, each nation has some particular 
 occupation which more than any other employs its indus- 
 try. The cultivation of the vine, in France ; the manufac- 
 ture of cloths and coarse woollens, in England ; the cul- 
 ture of tobacco and rice, and manufacture of sugar and 
 molasses from the sugar cane, in America, are similar al- 
 lotments of nature. Taking them in view, with the com- 
 merce and traffic which the exchange of them produces, 
 and which heeds not distance or danger, we may look 
 upon mankind as one mighty and industrious multitude, 
 Dusied in the production of various commodities, for their 
 common comfort and use, and mutual enjoyment. 
 
20 principles of 
 
 Thirdly, Cafital. 
 
 The most simple state of existence which we can sup- 
 pose, is, when bare sustenance is the object of industry. 
 If ever an individual, or a society of the human species, did 
 exist in such a state, it is evident that it could not be of 
 long duration. A little more labour, for a single day, than 
 was necessary, would procure enough upon which to sub- 
 sist at least some portion of the day ensuing ; and men 
 would soon find it for their advantage, to work diligently 
 for a season, that they might have enough whereupon to 
 sustain life, at another, when indisposed or incapacitated 
 for labour. The surplus means of support which they 
 might acquire for such a purpose, would be their first ac- 
 cumulation of capital. 
 
 In advanced stages of society, capital puts on a variety 
 of appearances. With many persons, it is the clothes 
 they wear and the money they possess; with the farmer, 
 it may be his land and implements of husbandry ; with 
 a mechanic or manufacturer, his shop, tools, machinery, 
 and raw stuff he is to work upon; with a merchant, his 
 goods and warehouse, and ships on the ocean. In gene- 
 ral, it is the wealth which an individual possesses, as the 
 product of former industry. 
 
 All such wealth may be arranged in two classes: — 
 
 I. Fixed, and 
 
 II. Circulating capital. 
 
 I. Fixed Capital consists of the tools, machinery, and 
 buildings, which the business of any individual may re- 
 quire. They are called fixed, because they do not change 
 place, and seldom owners, but are kept uniformly busy and 
 in use by the producer to whose division of labour they 
 belong. 
 
 II. Circulating Capital consists of the provisions, the 
 money, the raw materials, &c. which are necessary before- 
 hand and continuously to the producer. It is called circu- 
 lating, because it is employed in paying wages or is con- 
 sumed in support; because it is worked upon and is sold ; 
 and in general, because it is constantly changing shape 
 and owners. 
 
 To the former of these classes, (but of a peculiar kind,) 
 it should be remembered, that the capital of a mental or 
 immaterial producer belongs. From such capital — a ca- 
 pacity of affording necessaries, uses, conveniences, and 
 pleasures, in immaterial forms — yielding its profits in the 
 shape of wages for services, the immaterial producer de- 
 rives his subsistence. His capacity as related to wealth 
 may be considered as a fixed and untransferable fund, 
 whose original value is equivalent to the time and expense 
 
POLITICAL ECONOMY. 21 
 
 it cost to acquire it; in other words, which were given by 
 its possessor in exchange for it ; and whose present worth 
 is equal to that of an actual investment of money, yielding 
 an equal revenue. 
 
 Division of labour cannot take place until after an accu- 
 mulation of capital. The possibility of a division of labour 
 which capital affords, is the first great benefit resulting 
 from it to the production of wealth. In the words of Dr. 
 Smith, before labour can be divided, " a stock of goods 
 of different kinds must be stored up somewhere, sufficient 
 to maintain the labourer, and to supply him with the ma- 
 terials and tools for carrying on his work. A weaver, for 
 example, could not apply himself entirely to his peculiar 
 business, unless there was beforehand stored up some- 
 where, either in his own possession, or in that of some 
 other person, a stock sufficient for his maintenance, and 
 for supplying him with the materials and implements re- 
 quired to carry on his work, till he has not only completed, 
 but sold his web. This accumulation must evidently be pre- 
 vious to his applying himself for so long a time to a peculiar 
 business." (Wealth of Nations, vol. I. p. 408.) 
 
 The possession of fixed and circulating capital facili- 
 tates the production of wealth, in three other ways, besides 
 affording the possibility of division of labour. 
 
 I. By enabling us to produce what could not have been 
 produced without it. 
 
 II. By saving labour in the production of commodities. 
 
 III. By enabling us to do work better and more advan- 
 tageously. 
 
 I. How it enables us to produce what, without it, could 
 not have been produced, is every day illustrated about us. 
 Take the instance of a shoemaker. You do not find him 
 spending the chief portion of his time in the field and gar- 
 den, cultivating grain and vegetables upon which he and 
 his family may subsist. He spends no time in fashioning 
 his own clothing; yet provisions and clothing are among 
 the necessaries of life. He is enabled thus to disregard 
 them as immediate objects of his industry, only because 
 he already possesses them, or has money wherewith, as 
 he needs, he may purchase them. They are so much circu- 
 lating capital upon his hands ; and nothing can be plainer, 
 than that their previous possession is indispensable, that he 
 may be uniformly busied in his own department of produc- 
 tion. And further, in that department, what could he ac- 
 complish without his shop to work in, his awl, his thread, 
 and hammer, and pincers, to work with ? How would the 
 agriculturist cultivate his fields, if deprived of his plough 
 and spade, and other implements of husbandry? Without 
 
22 PRINCIPLES OF 
 
 his knowledge of the human frame, and of the diseases to 
 which it is liable, what cure could the physician effect ? All 
 these are fixed capital, without which, production, if not 
 entirely hindered, would clearly be impeded and confined. 
 
 II. Capital saves labour in the production of commodities, 
 by the various machines and tools which constitute a part 
 of fixed capital. In former times, before the invention of 
 the art of printing, every copy of a book was, of necessity, 
 written by hand; and it is easy to imagine, how laborious 
 must have been the undertaking, to write even ten copies, 
 of what we call an octavo volume. Now, by means of 
 types and the press, the machinery and fixed capital of the 
 publisher, a hundred or a thousand copies of such a vo- 
 lume may be produced in a very short time, comparatively, 
 and with not more than one-tenth the labour required to 
 transcribe a single copy in manuscript. Every stocking 
 used formerly to be knit by hand : but now, by the aid of a 
 machine, a single producer can more easily manufacture 
 ten pairs of stockings, than without its aid, he could knit a 
 single one. Not only does capital, in these and other simi- 
 lar instances, benefit the producer, by saving his time and 
 labour, but also, since it facilitates production, it decreases 
 the price of the articles to the consumer, and renders them 
 cheap and of easy purchase. 
 
 III. Work can be done belter and more expeditiously by 
 the assistance of capital; as is also instanced in most 
 kinds of machinery. " Cotton, for example," in the words 
 of Mr. McCulloch, " might be spun by the hand ; but the 
 admirable machines invented by Hargraves, Arkwrighr, 
 and others, besides enabling us to spin a hundred or a 
 thousand times as much yarn as could be spun by means 
 of a common spindle, have also improved its quality and 
 given it a degree of fineness and evenness, or equality in 
 its parts, which was never previously attained. A painter 
 would occupy months, or it might be years, in painting 
 with a brush the cottons, or printed cloths, used in the 
 hanging of a single room ; and it would be very difficult, 
 if not impossible, for the best artist to give the same per- 
 fect identity to his figures that is given to them by the 
 machinery now made use of for that purpose." 
 
 In view of the great facilities which the possession and 
 employment of capital affords to the production of wealth, 
 some writers have very justly considered the capacity of 
 accumulating and making use of it, as one of the great 
 distinguishing features between man and the brute. 
 
 Concerning the means of accumulating capital, it will 
 only be necessary to say, that whatever tends to the pro- 
 duction of wealth in general, leads, indirectly, to its accu- 
 
POLITICAL ECONOMY. 23 
 
 rrtulation. For capital is only a part of wealth — that part 
 produced by former industry, which was not consumed by 
 the producer in his support or otherwise, but was saved 
 for re-investment, and remains with him, as the means of 
 increasing his future production. The operations of na- 
 ture and industry are the agents which produce all wealth, 
 capital included ; and it is parsimony or frugality only, 
 which will induce the producer to deduct the least amount 
 for the expense of his support and maintenance, and add 
 the greater to the amount of capital he already possesses. 
 To live below your income, is the sure practical method of 
 increasing your capital : and the degree of increase is in- 
 versely proportional to the economy of expenditure. 
 
 Section IV. — General considerations on the production op 
 
 WEALTH. 
 
 We have thus considered wealth, as owing its produc- 
 tion to the combined agency of nature and industry, and 
 have examined the circumstances under which these 
 agents are most productive. Good government we found 
 to be important to both — affording security of person and 
 property, and thence leading man to make the most he is 
 able, of the operations of nature, and bestow most of his 
 own labour. Division of labour, we have shown to be 
 a powerful aid to production in three respects ; and, final- 
 ly, we have pointed out the great advantages to be de- 
 rived from the possession and employment of capital. 
 Before dismissing this branch of our subject, it will be of 
 use to consider some subjects of a general nature relating 
 to it. 
 
 1. What class, engaged in production, is most necessary, 
 that a nation may become wealthy? The wealth of a soci- 
 ety being made up of the wealth of the individuals who 
 compose it, and agriculturists, manufacturers, and mer- 
 chants, being constantly busy in production, it is natural 
 to inquire, who does the most? 
 
 The criterion of wealth, as has been said, is exchange- 
 able value. The agriculturist bestows his labour directly, 
 in giving such value to what the operations of nature will 
 produce. He prepares the earth for the reception of the 
 seed ; deposites it, and afterwards collects what it may bring 
 forth. When secured, it is a part of wealth. And why ? 
 Why does it possess exchangeable value? Not because it 
 possesses any immediate usefulness, as it then is, or any 
 fitness for final consumption. The only reason is, that, 
 mediately, it will acquire such consumable or final utility, 
 after passing through the hands of the miller and the baker. 
 
24 PIUNCIPLES OP 
 
 The cotton in the hands of a planter, is not bought because 
 it can be worn in its raw state, but because the maker of 
 cloths stands ready to manufacture it into cloth. It is so, 
 generally, with other commodities which an agriculturist 
 produces. The labour which he bestows, and the opera- 
 tions of nature aiding it, do not cause them to grow up and 
 ripen, with their ultimate and consumable utility; but that 
 utility they obtain afterwards, by the industry of the other 
 classes of society. And the reason why such raw mate- 
 rials possess exchangeability, before the additional indus- 
 try is expended upon them, is, because it is supposed that 
 the other classes of producers, in their respective depart- 
 ments and divisions of labour, will afterwards bestoto their 
 industry upon them. Lying in the shop of the manufac- 
 turer, a hundred pieces of cloth, or a thousand pairs of 
 shoes, have no utility to give them value; a merchant is 
 expected to cany them to a place, where they are wanted, 
 and will be bought. From hence, then, we derive an idea 
 very different from the one with which we commenced. 
 Since there were three different classes engaged in the 
 production of wealth, it seemed very possible that one or 
 another contributed most largely towards it. But we now 
 find, that commodities in general possess exchangeable value 
 and are parts of wealth, because the industry of all the three 
 classes, cither has been, or it is supposed will be, expended 
 itpon them; and it is not agriculture, nor manufactures, nor 
 commerce, which produces the most wealth, but it is all of 
 them, which produce any wealth. 
 
 In civilized society, the preceding is a necessary result 
 of the division of labour. The surplus produce of an agri- 
 culturist above his own wants, could be worth little, except 
 there were others to manufacture it; and a manufacturer 
 would be compensated for but a small portion of his la- 
 bour, except there were merchants to buy his goods and 
 re-sell them, at the times, and in the places, when and 
 where they were demanded. 
 
 There is yet another question, connected with this branch 
 of our subject, which is more practical, and to the self-in- 
 terest of an individual, more important. 
 
 2. In which one of the divisions of labour may capital and 
 industry be most profitably invested? We have before learn- 
 ed what capital is: that it is of two kinds, fixed and circu- 
 lating; the one being the machinery and accommodations 
 requisite to carry on a business; the other the provisions, 
 raw materials, money, &c, necessary beforehand, to work 
 upon, and for support. For the sake of simplicity, let us 
 suppose an individual with a capital of 1000 dollars in mo- 
 ney. Had he better buy land, and stock, and be industrious 
 
roUTICAL ECONOMY. 25 
 
 as a farmer ; or would it not be more profitable for him, to 
 obtain some kind of machinery and become a manufac- 
 turer ; or would he attain to pecuniary independence soon- 
 er, by obtaining a small stock of goods, and as a retail 
 merchant disposing of them ; or if he had larger capital, 
 would it not be more for his interest to buy ships, and trade 
 with foreign countries ? How is it to be known, in which 
 one of these divisions of labour it is most profitable to en- 
 gage? Dr. Adam Smith would seem to prefer agriculture ; 
 for, says he, "No equal quantity of productive labour or 
 capital employed in manufactures, can ever occasion so 
 great a reproduction as if it were employed in agriculture. 
 In manufacture, nature does nothing, man does all, and the 
 reproduction must always be proportional to the strength 
 of the agents that occasion it. * * * Of all the ways in 
 which a capital can be employed, it (i. e. agriculture) is by 
 far the most advantageous to the Society." (W. of N. vol. 
 II. p. 53.) 
 
 But, as political economists since his day have main- 
 tained, the idea of this seems ill-founded. Nature does not 
 assist man in agriculture alone ; she is as great an aid, and 
 even a greater, in manufactures. In the words of Mr. Mc- 
 Culloch, " The powers of water and wind which move our 
 machinery, support our ships and impel them over the 
 deep — the pressure of the atmosphere and the elasticity of 
 steam, which enable us to work the most stupendous en- 
 gines, are they not the spontaneous gifts of nature? * * * 
 There are no limits to the bounty of nature in manufac- 
 tures, but there are limits, and not very remote ones, to her 
 bounty in agriculture. Lands of the first quality are speed- 
 ily exhausted, and it is impossible to apply capital indefi- 
 nitely, even to the best soils, without obtaining from it a 
 constantly diminishing rate of profit." (Article from the 
 Ency'a, pp. 94, 95, Amer. edit.) 
 
 Similar remarks are applicable to commerce. The ocean 
 can never fail to be a thoroughfare for commerce ; and 
 whatever or how frequent soever may be the trader's use 
 of the winds of heaven, their power and efficacy as means 
 of value, will remain unaltered. The proper conclusion 
 then is, that there are no necessary and, inherent character- 
 istics in any division of laborer, which render it more profit- 
 able than others. Nature assists in each if them, and in a 
 degree so nearly equal, as to afford no reasonable ground 
 for distinction. 
 
 Yet do not consider this as settling the question, or as 
 
 saying that capital may not, and does not, yield higher 
 
 profits in one occupation than in another. The foregoing 
 
 remarks relate to employments when considered abstract- 
 
 3 
 
26 PRINCIPLES OF 
 
 ly and free from the influence of peculiar circumstances. 
 Governments may interfere with production, and occasion 
 a rise of profit, in particular business^ above the natural 
 level. Besides, every employment is influenced, more or 
 less, by the contingencies of the time and place, in and at 
 which it may be engaged. For example, a merchant who 
 should bring his wares and merchandise into a district of 
 country where there were no other merchants to compete 
 with him, but which was yet thickly peopled enough to af- 
 ford a market, would undoubtedly sell more, and realize 
 higher profits, than other merchants settled in places where 
 there were many to divide the business, and, by competi- 
 tion, reduce their rates of profit. So also in agriculture 
 and manufactures: many circumstances, entirely distinct 
 and separate from the nature of the employments them- 
 selves, will influence their profitableness at any given place 
 or period. Hence, then, may be deduced the general rule, 
 answering to the question proposed: The particular rate 
 of profit of the time and period, alone determines the value 
 of any occupation, as a means of investing capital and in- 
 dustry. 
 
 PART II. 
 
 THE DISTRIBUTION OF WEALTH. 
 
 Section I. — An outline of the distribution of wealth. 
 
 We now suppose a community to have produced w r ealth, 
 by the means and various operations, the principles of 
 which have been explained. How, we inquire, may this 
 wealth be distributed in such manner, that each industrious 
 individual may obtain his just and proper share? 
 
 In commencing the subject of production, the producers 
 of material wealth were divided into three great classes, 
 agriculturists, manufacturers, and merchants. Let us re- 
 examine these divisions. 
 
 The whole number of those engaged in agriculture we 
 find to be composed, 1st, of the owners of land, or land- 
 lords ; 2d, of the farmers or workers of it, who employ 
 capital; 3d, of the labourers assisting. 
 
POLITICAL ECONOMY. 27 
 
 In like manner, those employed in manufacture are com- 
 posed, 1st, of the capitalists, or owners and employers of 
 establishments and their machinery ; 2d, of the master- 
 workmen, and labourers who assist in the different opera- 
 tions. 
 
 So, also, in mercantile dealings we discover, 1st, the 
 capitalists or merchants, who own the goods and mer- 
 chandise, and other fixed and circulating capital ; 2d, the 
 hired assistants and clerks who transact the various bu- 
 siness. 
 
 All those employed in these divisions of labour may then 
 be reduced to three classes : 
 
 1. Landlords, or owners of land. 
 
 2. Capitalists^ or employers of capital. 
 
 3. Labourers, or those who afford assistance. 
 There is yet another class in community, connected 
 
 with material production ; those who possess capital, and 
 do not themselves employ it, but loan or lend it to others 
 at a certain fixed rate or premium, called interest. These 
 may be styled, 
 
 4. Capitalists, or loaners of capital. 
 
 Every individual who is the producer of material wealth 
 in community, derives his income in one or another of 
 these ways ; and among all who do, the wealth of com- 
 munity, except the portions of immaterial producers, is 
 shared. 
 
 The share of the landlord is called rent. 
 
 The share of the capitalist is called profit or interest. 
 
 The share of the labourer is called wages. 
 We shall now proceed to consider the principles which 
 affect the amounts, and variations of the amounts, of the 
 shares of these classes, commencing with the class of 
 labourers. 
 
 Section II. — The class of labourers. 
 
 As the first general principle with regard to this class of 
 producers, it may be stated that, all things considered, 
 wages in the various employments cf industry are equal. 
 By this, it is not meant that the actual amount paid to la- 
 bourers, in ah occupations is the same ; that a day la- 
 bourer at digging a trench, receives the same amount for 
 his wages as a journeyman tailor: but that variations in 
 the amount of wages, arise from difference in employ- 
 ments, as to their ease, difficulty, &c. and that, allowing 
 for this difference, wages are equal. Thus, suppose any 
 two employments, the operations of one of which are twice 
 as easy to perform as those of the other, and that two in- 
 
28 PRINCIPLES OP 
 
 dividuals are engaged in them for a single day. The one 
 whose industry is employed in operations easy to perform, 
 will not probably receive so much, by one half in amount, 
 for his wages, as the other, who has been busied the same 
 length of time in difficult operations. The reason is, not 
 that the same amount of labour from one of these indivi- 
 duals is worth any more than it is from the other, but be- 
 cause, from the nature of the employments, a day's work 
 in the one was just twice as difficult as a day's labour in 
 the other ; and therefore, was in truth, as regards the in- 
 dividual, equivalent to the labour of two days in the other, 
 and at such rate deserved compensation. Such difference 
 in the ease or difficulty of employments, consists in the 
 following particulars: different degrees of hardship to be 
 endured ; as of a sailor on the ocean, and a sailor upon an 
 inland lake; different degrees of expense and education ne- 
 cessary beforehand ; as of a manufacturer of shoes and a 
 professor in a college; different degrees of skill, ingenuity, 
 and talent, requisite for different kinds of labour; as of a 
 member of congress and a carpenter; different degrees of 
 permanency and surety of business ; as of a brick-mason, 
 who can only work in fair weather, and a basket maker, 
 whose occupation at all times is within doors ; different 
 degrees of confidence and, trust reposed, and responsibility 
 assumed, as of a goldsmith and a cobbler ; different degrees 
 of respect and disgrace belonging to different employments, 
 as of an opera dancer, who is highly paid because person- 
 ally despised, and of the clergy, whose salaries, though 
 often exceedingly small, are yet considered as counterba- 
 lanced by the affection and respect in which they are held 
 as individuals. 
 
 All these differences in the nature of employments, make 
 variations corresponding in the amounts paid for service 
 in them during equal lengths of time. Yet the rate of wa- 
 ges for all of them is the same, and these very variations 
 are the means of equality. Thus, if a common day la- 
 bourer, whose services are worth less than six cents an 
 hour, should receive the same amount with an office scriv- 
 ener, who can earn, if a superior penman, twenty-five cents 
 an hour, there would evidently be an inequality in their 
 wages : for while the one does nothing which an ordinary 
 able-bodied individual cannot do, and has been at no ex- 
 pense to fit himself for his division of labour, the other has, 
 perhaps, expended much time and money in learning to 
 write well, and possesses a capacity which comparatively 
 few others do possess. 
 
 If at any time, by any unusual influence, the wages 
 of an employment rise above that equality with others. 
 
POLITICAL ECONOMY. 29 
 
 which a consideration of its nature will prove it to possess, 
 there will be so great an influx of labourers into it, as that 
 their competition will infallibly reduce its wages to their 
 former level. So, also, should the wages of an occupation 
 fall below this level, labourers will desert it for one more 
 profitable, and the competition of employers for the service 
 of those remaining, will again bring their wages up to, if 
 not above that equality. 
 
 In old and thickly peopled countries, ordinary or day 
 labourers can obtain but little, if any more for their ser- 
 vice, than their support. The price of provisions and the 
 demand for labour, are the ruling principles of their wages. 
 If provisions are cheap, and there is no increased demand 
 for work, their wages will be at their lowest rate, a little 
 more than the cost of subsistence. If the price of provi- 
 sions rises, they must charge enough more for their labour 
 to meet the increase. So, also, the price of provisions re- 
 maining the same, should there be an increased demand 
 for their labour, as during the construction of a canal or 
 other public work, the competition among employers will 
 raise their wages. If the demand decrease, the competi- 
 tion among labourers for employment, will reduce their 
 wages. These two influences may operate singly or to- 
 gether ; and their effect will be proportionate. 
 
 Except from the influence of a rise or fall of the wages 
 of ordinary labourers, the wages of workmen in other de- 
 partments of industry are subject to little fluctuation. And 
 this results from the fact, as before explained, that they 
 depend upon the natures of their employments, as they 
 appear when referred to the occupation of ordinary labour- 
 ers, as the standard by which their differences of ease and 
 difficulty are to be estimated. 
 
 Section III. — The class of capitalists. 
 
 Capitalists are of two kinds: 
 
 I. Those who invest and employ capital in production, 
 
 II. Those who loan or lend it at interest. 
 
 I. Employees of capital. — The share of wealth accruing 
 to this class of men, as before said, is styled profit. It is 
 composed, 1st, of the interest upon the capital employed, 
 and 2d, of the compensation to the employer for his per- 
 sonal service, and management of it. A similar general 
 principle is true with regard to profits, and was stated con- 
 cerning wages. 
 
 The profits of capital in different employments, all things 
 considered, are equal. — It was before explained, how differ^ 
 ent degrees of ease or difficulty, made corresponding va? 
 3* 
 
30 PRINCIPLES OP 
 
 nations in amount, of the wages of employments, yet did 
 not change the rates of wages : in like manner is it with 
 their profits, and the general rate of profit. A capitalist in 
 one occupation, will undoubtedly receive a larger actual 
 amount in the shape of profit, than his fellow capitalist in 
 another; yet upon examination, it will be found that the 
 natures of the two employments differ, either in risk, or 
 certainty, or in some other particular; and that this differ- 
 ence considered, the profits, as well as wages, of the one, 
 are equal to those of the other. In the words of Mr. Mc- 
 Culloch, " A gunpowder manufacturer, for example, must 
 obtain as much profit, over and above the profit obtained 
 from the capital engaged in the securest businesses, as will 
 suffice to guaranty or ensure his capital from the extraor- 
 dinary risk to which it is exposed, in a business of such 
 extreme hazard. If the gunpowder manufacturer were to 
 obtain more than this rate, additional capital would be at- 
 tracted to his business, and were he to obtain less, he would 
 withdraw his capital from it. * * * It is by this common 
 standard, that the wages and profits of particular business- 
 es are always regulated ; they can never diverge consi- 
 derably from it; they have a constant tendency to equaliza- 
 tion, and may, in all theoretical inquiries, be supposed, 
 without occasioning any error of consequence, exactly to 
 coincide." (Article from Encyc'a, p. 110, Amer. edit.) 
 
 II. Loaners of capital. — The revenue which accrues to 
 the loaners of capital, is called interest. It has relation 
 simply to money, and is governed by laws entirely distinct 
 from those which regulate rent and profit. When the in- 
 terest upon other capital than money is spoken of, the in- 
 terest upon its value expressed in money is to be under- 
 stood. It may be considered as the price of money in mar- 
 ket, and its value for the time being, as circulating capital 
 facilitating and necessary for production. It is composed 
 of two parts : 1st, a premium for the value of money in 
 use ; and 2d, a premium for the risk of lending it. 
 
 Interest is always less than profit upon capital ; or ra- 
 ther, it is more properly a part of profit. For the employer 
 of capital receives as part of the price of his products, both 
 the interest upon the capital which he employs, and also a 
 compensation for the personal use and management of it; 
 and these two constitute his profit. While the loaner of 
 capital, surrendering to another the further management 
 and the investment of the money which he loans, requires 
 from him, only a premium for the accommodation, and 
 for the risk in having lent it. The amounts, in which the 
 profits of capital in particular employments exceed its 
 regular and uniform interest for the time being, are, as be- 
 
POLITICAL ECONOMY. 31 
 
 fore explained, when all things are considered, equal ; yet 
 vary according to the natures of employments, to obtain 
 this equality. 
 
 Governments have commonly thought it expedient to 
 limit the rate of interest. The chief reason has been, lest 
 the loaners of money should require too much for the risk 
 of lending, and by monopolizing, be enabled to give a false 
 value to it in market; and thus, reducing the profits of its 
 employers, discourage and impede production. But why 
 not, for similar reasons, limit the price of provisions ? 
 The value of money, like that of other commodities, and 
 the risk of lending it, vary with the circumstances of time, 
 and place, and person ; like other commodities, therefore, 
 it should be left to find its own level. 
 
 It is not a long time, since the reaping of interest from 
 capital, has been set free from an erroneous prejudice. 
 Since the capitalist, whose revenue was interest, did not 
 himself labour, but loaned his money most commonly upon 
 perfect securities only, his gains were looked upon with a 
 jealous eye, and loaded with opprobrious epithets. But the 
 light thrown upon matters of this kind by the science of 
 political economy, has effectually manifested the injustice 
 of such an idea. Capital which is loaned, generally speak- 
 ing, is loaned for purposes of production. It is an accom- 
 modation from those who have, to those who have not the 
 requisite for extensive production; and busies individuals 
 as master producers, who, except they can obtain it, must 
 remain in the capacity of labourers or assistant producers. 
 That the owner of capital should derive his subsistence by 
 affording such accommodations, is not only honest and 
 reputable, but one of the most honourable of occupations. 
 
 Section IV. — The class of landlords 
 
 Upon rent, the share of wealth belonging to landlords, 
 there have been two opinions. Dr. Smith considered rent 
 as a component of the price of the produce of land, and at- 
 tributed the rise in the price of raw produce, as society ad- 
 vanced, to the circumstance, that workers of land charged 
 the consumer additionally, with the rent of the land from 
 which they produced it. A contrary opinion has been 
 ably, and as we think, conclusively advocated by Mr. Ri- 
 cardo and Mr. Malthus and other later political economists. 
 They maintain that rent never is a component of price, and 
 that instead of being the cause of high prices, in the ad- 
 vance of society, it is their plain and necessary effect. 
 
 Definition of rent. — Rent is properly defined, that por- 
 tion of produce or of its value, which the worker of soil pays 
 
32 PRINCIPLES OF 
 
 to the landlord or owner of it, for the use of its natural and 
 inherent powers. The tenant of an improved farm does not 
 pay simple rent of land. The houses and other buildings, 
 and the improvements generally, upon and about it, are so 
 much fixed capital, the interest paid for the use of which, 
 should not be confounded with rent of land. To arrive at 
 a correct estimate of the rent only, the interest of the mo- 
 ney invested in these improvements, should be deducted 
 from the whole amount which the tenant pays, and the re- 
 mainder will be simple rent. Let it be remembered also, 
 that there is a ground rent of the soil upon w T hich a build- 
 ing or improvement is located, always equal in amount, to 
 the rent which would be paid, if the same portion of soil 
 was cultivated. 
 
 Nature, origin, and cause of rent. — At the first settlement 
 of a country, no poor lands are cultivated. The expendi- 
 ture of capital and labour necessary for production from 
 them, is met by no demand affecting price, sufficient to 
 warrant cultivation. The best land only, is tilled ; owner- 
 ship is little regarded, and as with the emigrants or squat- 
 ters upon the western sections of our own country, a fertile 
 spot attracts attention, and without the license or know- 
 ledge of its owner, is made a home. Even then, the price 
 of the produce of that spot, among the very scanty popula- 
 tion, and with the poor facilities for getting it to market, 
 will hardly pay the cultivator the cost of his easy produc- 
 tion. Afterwards, however, while the country is being set- 
 tled and its population is increasing, the means of subsist- 
 ence rise in value, exactly in proportion to the increased 
 demand ; labour, which before could not be obtained, may 
 now be procured at high wages, and the advanced market 
 price of grain soon warrants a resort to the cultivation of 
 lands of inferior or second rate productiveness. As soon 
 as this is the case, the proprietors of the most fertile lands 
 claim ownership of their property, and demand all the in- 
 crease of price which the settler now obtains, as a rent for 
 use of the soil. Meanwhile, the farmers of the second rate 
 lands continue to cultivate without paying rent. But the 
 yet continuing increase of population, and the rising price 
 of grain, demand and warrant a resort to the lands yet in- 
 ferior and of third rate fertility. The owners of land of the 
 second quality now demand their rent, while the cultivators 
 of the third quality continue their production and pay no rent. 
 And such is the proceeding until, finally, all lands capable 
 of it, are brought under cultivation, and all pay rent except 
 the poorest ; the cultivator of which cannot obtain a price 
 for his produce more than sufficient to pay his wages, and 
 yield him ordinary profit; affording him no surplus above 
 
POLITICAL ECONOMY. 33 
 
 wages and profit, which he can pay to a landlord as rent. 
 Yet it was supposed, that the market price of raw produce 
 had increased sufficiently, to warrant his tillage of such 
 poor land, and secure to him, besides the wages paid, a 
 regular and even business profit. It is plain, then, that 
 while he thus realizes only this usual profit of business ope- 
 ration, the other farmers of the same number of acres, 
 but of more fertile soil, will obtain different surpluses ac- 
 cording to the different fertilities, in which they Mill realize 
 different proportionate amounts over and above ordinary 
 profits. And now, since all these fanners, as well of the 
 best as of the inferior soils, are but capitalists, and without 
 regard to the different fertilities and in accordance with 
 the law of profits, must obtain but equal proceeds from 
 farming capital; these surpluses which arise, are not pro- 
 fits, and have no relation to them, but are rent, and. are the 
 shares of produce which belong to the landlords, or ownera 
 of the soils, as distinguished from their own shares, as 
 farmers, or employers of capital upon them. 
 
 To illustrate the foregoing doctrines: if an individual 
 who cultivates ten acres of ground, which yield him one hun- 
 dred and twenty bushels of grain to the acre, can obtain a 
 price for his whole yearly produce — say two hundred bush- 
 els — sufficient to pay back the wages he gave the labourers 
 who assisted him in producing it, and yield him profits 
 upon the capital he employed and expended, then, another 
 individual, whose ten acres, from superior fertility, yield 
 him thirty bushels to the acre, will evidently obtain in the 
 aggregate produce of that number of acres, a much greater 
 quantity of grain than will suffice for an equal compensa- 
 tion. This difference, one hundred bushels or its value in 
 money, he can pay to an owner of the land as rent, and 
 yet realize equal profits with the other producer. Suppose 
 now, that the poorest land in cultivation in any country, is 
 that which yields ten bushels of wheat to the acre. It is 
 required to know what is the rent which should be paid 
 for the use of twenty acres of wheat land, yielding twenty- 
 five bushels upon an average to the acre. From twenty 
 acres of the poorest land cultivated, yielding ten bushels 
 to the acre, a farmer can obtain two hundred bushels. The 
 price of this two hundred bushels, according to supposition, 
 will pay him for the cost of working the land, and yield 
 him profits equal to those of other capitalists. But the 
 cultivator of the twenty acres which yield twenty-five bush- 
 els to the acre, will produce five hundred bushels ; and since, 
 according to our supposition, an agriculturist could re- 
 alize ordinary profits, if, by the same expenditure of capital 
 and labour which produces this five hundred bushels, he 
 
34 PRINCIPLES OP 
 
 obtained only two hundred bushels, there will be in the 
 hands of this producer three hundred bushels over and 
 above wages and ordinary profits : it is the rent of twenty 
 acres of that quality of land, which, under the supposed 
 circumstances, a tenant might pay to a landlord, and yet 
 be prosperous as a producer. 
 
 In view of all this, then, rent is to be considered as the 
 surplus produce of lands of different degrees of fertility, 
 over that of the poorest land under cultivation : being caused 
 by the different qualities of soils : having its origin in the 
 advance of society : and being of a nature peculiar to itself 
 distinct from price, although not independent of it, and dif- 
 ferent from the other ways of the distribution of wealth. 
 
 Rent of land is a subject which does not possess the gene- 
 ral interest and importance in our own country, that it 
 does in many others. We have, as yet, so large an extent 
 of territory, compared with our population, that the price 
 of land, in general, is low, and farmers are most of them 
 enabled to be freeholders. It is seldom that we notice 
 among us, a landlord overgrown in wealth and influence, 
 from the rents of an extensive tract of land, which nume- 
 rous tenants are farming. But in England, and France, 
 and among other long established nations, it is by no 
 means uncommon. For the farmers, who work the soil, 
 and the landlords, who are the proprietors of it, for the 
 most part, in advanced stages of society, become two sepa- 
 rate and distinct classes ; and rent of land, as the means 
 of subsistence and revenue to the most expensive class, is 
 a way to distribution for a large portion of wealth. 
 
 Section V. — Of price, or the means of realizing the wa- 
 ges OF LABOUR AND PROFIT OF CAPITAL, EXPENDED AND EM- 
 PLOYED IN PRODUCTION. 
 
 We have endeavoured, in the three last sections, to make 
 manifest the nature and general distinguishing properties 
 of the shares of wealth accruing to the three great classes 
 of producers — labourers, capitalists, and landlords. It is 
 next in order to inquire, by what means do these classes 
 obtain or realize their respective revenues? 
 
 It has been shown, in the preceding section, that rent, 
 the revenue of landlords, is a certain determinable portion 
 of produce, or of its value, paid by the farmer to the owner 
 of soil. In the payment of such portions, landlords realize 
 their revenue. 
 
 Capitalists and labourers realize their respective shares 
 of the wealth jointly produced, in a manner entirely differ- 
 ent. If the capitalist pays rent, his share, and the shares 
 
Political economy. 35 
 
 also of the labourers engaged with him, will be found, after 
 the rent has been deducted, in the remnant of the price ob- 
 tained for the commodities which he and they have pro- 
 duced. If he pays no rent, these shares will be found in 
 the whole trice, without any deduction. For illustration, 
 suppose an agriculturist who rents thirty acres of im- 
 proved land for two hundred dollars, or two hundred 
 bushels of wheat, yearly; the market price of wheat being 
 supposed one dollar per bushel. This land will yield him, 
 perhaps, twenty bushels of wheat to the acre. His whole 
 crop, then, for a single year will be six hundred bushels, 
 and the whole price which he will receive for it, will be six 
 hundred dollars. Now deducting his rent of two hundred 
 dollars, he will realize or obtain the wages which he paid 
 his labourers, and his own profits as a capitalist in the 
 remainder: that is to say, when rent is paid, wages and 
 profits are realized in what remains after deducting the 
 rent, or share of the landlord, from the aggregate price of 
 products. 
 
 To instance another employment, where no rent is paid: 
 Suppose a manufacturer has hired labourers to work in his 
 cloth manufactory, and has invested therein a sufficient 
 amount of capita) for all purposes of production. In the 
 course of some days, suppose that he and his workmen, 
 with the aid of his capital, have produced a number of 
 yards or pieces of cloth. To enable him at all to go on 
 with his manufactory, it is necessary when he sells his cloth, 
 that he shall receive from the purchaser enough to dis- 
 charge the wages of his workmen, return the cost of his 
 own support and of the other capital he consumed in and 
 during the manufacture, with the interest or price for the 
 use, and wear and tear, of his machinery. This would 
 barely enable him to live by his own support, and afford- 
 ing him no profit, or compensation for his own services, leave 
 him no richer after the production, than before it. There 
 are some employments, the price of whose produce will 
 sometimes do no more : but in general, such is by no means 
 the case. Besides paying the wages of workmen and meet- 
 ing all the necessary expenses, the price of the commodi- 
 ties of most of the divisions of labour, should and does af- 
 ford a surplus or profit to the capitalist. Unless an em- 
 ployment is such, that community are willing to pay a price 
 for its commodities high enough to include such profit, an 
 individual will leave it for another; and it will remain com- 
 paratively deserted, until the demand for its articles shall 
 give them a price, which will thus realize both profits and 
 wages, and lead capitalists into it anew. 
 
 Thus, then, it is clearly manifest, that since the prices of 
 
36 PRINCIPLES at 1 
 
 commodities are the means whereby capitalists and la- 
 bourers realize their respective shares of wealth, the price 
 6/ a thing must always be composed of, and be equal to, the 
 wages of labour and profits of capital expended and em- 
 ployed in its production. 
 
 Such price is called natural price, or cost of production. 
 In this view, cost of production is the great regulator of 
 exchangeable value. The price of a commodity can never 
 sink permanently below it: for then, either the capitalist or 
 the labourer must incur loss ; the one in his wages, or the 
 other in his profits; either of which happening, will hinder 
 further production. Yet though it be the clear limit, below 
 which, as a general rule, it is impossible for price to fall, 
 still another principle has operation, and exerts an influ- 
 ence very frequently to raise prices to different degrees 
 above this limit of decrease. This second principle is- 
 called, 
 
 Market price, depending upon the demand and supply 
 of the market. If many individuals have articles of tho 
 same kind which they offer and wish to sell; that is to say, 
 if there is a large supply in market, the competition among 
 sellers will reduce price to its limit, the cost of production. 
 If, on the contrary, the market is scantily supplied with an 
 article in demand, the competition among buyers will ena- 
 ble the seller to obtain more than the mere cost of his pro- 
 duction. The price of the commodity when thus varied, is 
 its market price. Market price, then, changes according 
 to the scantiness of the supply and the strength of the de- 
 mand ; and they operate sometimes singly, and sometimes 
 together ; always with proportionate effects. 
 
 Real and nominal price. Political economists commonly 
 make two other distinctions of price, real and nominal. 
 Real price supposes a community without money, and is 
 the value of a thing expressed by the amount of labour which 
 was expended to obtain it. Nominal price is the value of 
 an article expressed in money. Thus, the nominal price of 
 a pound of tea may be one dollar, while its real price is the 
 amount of labour expended in its production. In early 
 ages, and before the introduction of money, it is plain that 
 real prices would be the only expressions of value. 
 
 Section VI. — The effect of a rise or fall of wages upon 
 
 PRICE IN GENERAL, AND UPON PROFTT3 IN PARTICULAR. 
 
 It was shown in the last section, that certain portions or 
 proportional shares of the price of commodities were the 
 wages of workmen, who assisted capitalists in producing 
 them, and that the remainders, after deducting these wages, 
 
POLITICAL ECONOMY. 37 
 
 would be the profits of capitalists. Let it constantly be 
 kept in view, that by the word price, as there used, and as 
 used in the following discussion, is only meant nominal or 
 money price; and that too, whether it may be composed 
 of the costs of production, or may be market price, more 
 or less than the costs of production. It is now remarked, 
 that the proportional shares or wages of workmen, have a 
 tendency to increase with the advance of society, though 
 sometimes, from the influence of extraordinary causes, 
 they may diminish. In the section on labourers, it was 
 stated that the price of provisions and demand for their la- 
 bour, were regulating principles of the wages of ordinary 
 labourers. While treating of rent, it was shown, that as 
 population increases and presses on the means of subsist- 
 ence, the value or price of these means increases, and re- 
 sort is made to the cultivation of lands of inferior fertility. 
 Therefore 1 , the wages of ordinary labourers, as influenced 
 by the high price of the means of support, will also in- 
 crease, permanently and by degrees, as society advances: 
 and if their wages increase permanently, those of other 
 classes of labourers will rise also: for every rise of wages 
 must be general, to preserve the equality of wages. In like 
 manner, the wages of employments in general will fall, if, 
 from an unusual plenty of provisions and reduction of their 
 price, the wages of ordinary labourers decrease. 
 
 Now it is important to inquire, what influence will such 
 a rise or fall of wages, or such an increase or diminution 
 of the shares of price belonging to labourers, have upon 
 price itself, and upon the other components of it, the profits 
 or shares of capitalists? 
 
 To simplify this inquiry, involving the celebrated pro- 
 blem of Ricardo, and of all the subjects of political econo- 
 my, perhaps the most abstruse and difficult, let us consider 
 employments in two different views: 1st. Under a suppo- 
 sition, that the commodities of each of them required equal 
 and the same durations of labour for their production; and 
 2d. As they really are, requiring different durations of la- 
 bour, according to the nature of their commodities. 
 
 1st. If it were true, that throughout the world, it required 
 no longer duration of labour to produce one commodity 
 than to produce another, although the wages paid to la- 
 bourers for equal duration of their labour might be differ- 
 ent, according to the natures of employments, yet a gene- 
 ral rise in the wages of all would affect capitalists, or those 
 who paid them, equally ; and affecting all capitalists alike, 
 the prices of their commodities would remain unchanged. For 
 if one capitalist should raise the price of his commodities, 
 and allege as his reason, that he was obliged to give an 
 4 
 
38 PRINCIPLES OF 
 
 increased share to the labourer as his wages, and that 
 therefore he must increase his price to enable him to have 
 left the usual share or profit for himself, other capitalists 
 would allege that the rise of wages had affected them also, 
 equally with him ; and that therefore they must have equal- 
 ly increased prices. But this- could benefit no one; for al- 
 though the price of his articles was increased, yet one capi- 
 talist could obtain no more of the articles of another in ex- 
 change for his own, than he had always done; inasmuch 
 as the prices of the others would be increased equally with 
 his own. In like manner, by a fall of wages; all capital- 
 ists would be affected alike, and their prices, therefore, re- 
 main the same. 
 
 But prices remaining the same, and the shares of labour- 
 ers in them being increased, the remainders or profits must 
 decrease. In like manner, these shares being decreased, 
 profits must increase. Under this supposition, then, it is 
 certain that a rise or fall of wages will not affect price, and 
 therefore must vary profits inversely ; that is, when wages 
 rise, profits will fall ; and when wages fall, profits will rise, 
 
 2d. Such, however, is not the case in the world. Differ- 
 ent commodities require different durations oflabourtobe 
 spent upon them, and the proportion of price belonging to 
 the labourer, does not simply depend upon the nature of 
 his employment, but also upon the duration of his labour 
 upon its commodities. A rise or fall of wages will there- 
 fore affect capitalists, or those who pay wages, unequally. 
 A producer of commodities which require two days' labour 
 to be spent upon each one of them by hired workmen, will 
 be affected in the price of each commodity, just twice as 
 much, by a rise or fall of wages, as another producer, who 
 requires only one day's labour to be spent upon each one 
 of his commodities. For, suppose each of them to hire only 
 one labourer, and that a rise of wages is ten cents on every 
 day's work. Now, while the former capitalist must take 
 out for his labourer a share of the price of each one of his 
 commodities, 20 cts. greater than he had before taken, the 
 latter, having to pay from the price of a single one of his 
 commodities only one day's labour, increases the share 
 which pays it by 10 cts. only. So long, therefore, as the prices 
 of the commodities of these two producers remain the same 
 after the rise of wages, that they were before it, they will 
 be unequally affected; the one more by 10 cts. on the nomi- 
 nal price of each one of his commodities, than the other. 
 They must, therefore, vary their prices to become equally 
 affected. To effect the adjustment in the present instance, 
 the price of the commodities of the former capitalist, whose 
 employment required the longest duration of labour, would 
 
POLITICAL ECONOMY. 39 
 
 increase 5 cts. ; those of the latter, decrease 5 cts. ; and 
 thus, the 10 cts. or difference of effect, which the rise of 
 wages had upon them, be equally apportioned. In a man- 
 ner precisely similar, the effect which a rise of wages will 
 have upon the price of commodities in other employments, 
 requiring different durations of labour, maybe discovered. 
 Supposing any two employments, the commodities of one 
 of which require a third, or a sixth, or a tenth, or any other 
 degree longer duration of labour than those of the other, 
 the rise and fall of price occasioned by a rise or fall of 
 wages, may be determined. A fall of wages, however, will 
 be observed to produce the same effect with their rise, ex- 
 cept in a reverse order. In view, therefore, of the effect of 
 a fluctuation of wages upon the price of the commodities 
 of all different employments, taken collectively, the follow- 
 ing general rule is given: — 
 
 Taking a certain commodity as a standard, all commodi- 
 ties produced by a greater duration of labour than its pro- 
 duction requires, will rise in price when wages rise ; and all 
 those produced by a. less duration of labour will, fall in price ; 
 and conversely, when wages are reduced. 
 
 Gold and silver should be, either of them, this standard ; 
 for, being produced alike with other commodities, by capi- 
 tal and labour, and being the common measures and ex- 
 pressions for the nominal prices of other commodities, the 
 duration of labour required for their production, it is ob- 
 vious, will determine the effect which such fluctuations of 
 wages exert, relatively, upon the nominal prices of com- 
 modities in general. 
 
 It is clear, then, that a rise or fall of wages will have an 
 influence to increase the price of some commodities and 
 diminish that of others, according as the production of 
 them requires longer or shorter durations of labour than 
 the production of their values in gold or silver. It will be 
 remembered, that after a rise or fall of wages producing 
 such effects, the relative value and the real prices of com- 
 modities do not. change. Not a single article will buy more, 
 or exchange for less of another, than it did previously ; and 
 that it might not, was the very reason why nominal prices 
 varied. The relative values or prices of commodities be- 
 ing then thus preserved, and the shares of labourers in 
 those values being increased or diminished, it is certain 
 that the other shares of them, profits, must vary. To re- 
 cur to our former example; the price of the commodities 
 of the first producer, who hired two days' labour, it was 
 shown would rise 5 cts., after an increase of 10 cts. upon 
 a day's wages; and those of the second, requiring half the 
 duration of labour, would fall 5 cts. in price. Yet although 
 
40 PRINCIPLES OP 
 
 the price of the former rises 5 cts., it is 20 cts. which the 
 rise of wages obliges him to pay, as the increase of the 
 Share of that price belonging to his labourer; passing the 
 increase of 5 cts. upon price towards it, there is yet 15 cts. 
 left: this 15 cts. must be taken from his own profits, and 
 will cause them to decrease in such an amount. So, also, 
 the latter capitalist paying 10 cts. more to his workman as 
 the increase of his share of the price of each one of his 
 commodities, and that price itself being reduced 5 cts., it is 
 evident that the remaining share, or his profits, must de- 
 crease 15 cts. An examination of similar cases will pre- 
 sent us with similar results. So, then, it is absolutely cer- 
 tain, that profits always vary inversely as wages : that is, 
 when wages rise, profits will fall; and when wages fall, 
 ■profits will rise. 
 
 It is often a subject of inquiry among observing men, 
 wh)' profits constantly and gradually decrease as a nation 
 grows older. The above principle concerning the influ- 
 ence of wages upon profits, will fully serve as its answer. 
 It has already been shown, that as the population of a 
 country increases, resort must be made to poor lands for 
 means of subsistence ; and that the price of the products 
 of the poorest land under cultivation, which pays no rent, 
 determines the price of the produce of all others. The 
 price, then, of the means of subsistence in old countries is 
 high, and continues to rise as their population increases. 
 But wages are influenced by this price ; as it increases, 
 they must increase, and when wages rise, profits will fall. 
 So, then, the decrease of profits in advanced periods of soci- 
 ety is owing, remotely, to the necessity of resorting to the cul- 
 tivation of lands of inferior fertility ; but, directly, to the 
 increased amounts which labourers require as their wages. 
 
 Section VII. — General remarks concerning price, and op 
 
 MONOPOLIES. 
 
 It is a plain deduction from the principle already con- 
 sidered, that although no single individual can effect a 
 change in the price of commodities, but it requires a gene- 
 ral cause so to do, yet any individual may vary his own 
 peculiar gains, without disturbing the general equality of 
 profits. The way of effecting this, is to incur the least 
 possible expense for labour, acting as much as possible in 
 the double capacity of capitalist and labourer. Yet this 
 must not be understood as advising a curtailed and narrow 
 business ; or as inculcating the opinion, that it is of more 
 advantage to produce but little, and hiring no labour, which 
 would have enabled to produce more, receive gains in that 
 
POLITICAL ECONOMY. 41 
 
 little, both as capitalist and labourer. For it is evident, 
 that a person in trade whose sales were not extensive, 
 though he should make high profits on each single article, 
 yet would be a gainer in no greater degree than one 
 whose dealings were extensive, with smaller profits on 
 single articles. In this respect lies the difference between 
 the wholesale and the retail merchants. Either of them, 
 by prudence and frugality, may make and save enough to 
 render them wealthy; although the profits of the one upon 
 a particular commodity may be at a large per centage be- 
 low those of the other. The reason is, that the wholesale 
 dealer sells, at a small profit, so many more articles than 
 the dealer in retail, that the aggregate gain for any given 
 length of time, will be found equal, if not much the greater. 
 We have hitherto uniformly considered price as left to 
 itself, with no restraints imposed, or influences exercised, 
 except those which are naturally inseparable from it, and 
 attendant. Monopolies are unnatural and acquired powers 
 over it, possessed by an individual or individuals, and fre- 
 quently derived from governments. A monopoly may be 
 defined, the sole 'power, right, or authority to carry on a bu- 
 siness of a particular kind. Monopolists, then, by the 
 nature of their privileges, having no competitors in fur- 
 nishing the supply and meeting the demand of the market 
 in the articles of their particular business, are enabled to 
 obtain almost any price above the cost of production, 
 which they please to affix. Hence, then, while they gain 
 as producers, community in general will lose as consumers. 
 Such is the true statement of the influence of all business 
 monopolies. We might enlarge, and enter into their origin 
 and history ; but we are content to dismiss them, only 
 suggesting them as subjects for further investigation. In 
 the mean time it may be believed, that perfect equality and 
 freedom in the commonwealth of business, is just as much 
 required for its full prosperity and advancement, as it is 
 for man in his social and political capacity. The best, 
 says Adam Smith, that governments can do for the pro- 
 ducers of wealth is to let them entirely alone. The self- 
 interest of individuals will incite them to seek out the most 
 profitable employments, and engage most savingly therein; 
 and since the wealth of community is only the wealth of 
 individuals who compose it, each one left to his own en- 
 deavours, will direct his own private economy more in 
 accordance with trie best systems of political economy than 
 the wisest government can do for him. 
 4* 
 
42 PRINCIPLES OF 
 
 PART III. 
 
 THE EXCHANGE OF WEALTH. 
 
 Section I. — Of exchange in general — of barter — of the 
 
 PRECIOUS METALS AS USED FOR MONEY. 
 
 How wealth is produced lias been shown ; the manner 
 in which it is distributed, so that each individual connected 
 with its production, may obtain his just and proper share 
 has been considered ; it is next proper to inquire, after the 
 several shares have been allotted, what is the most con- 
 venient way by which to exchange a share or portion of a 
 share of one producer, for the share or portion of the 
 share of another? The most simple and direct way is by 
 barter. 
 
 Barter may be defined the exchange of any two com- 
 modities, neither of which is money. For equal values, 
 barter is undoubtedly as good and convenient a way of 
 exchange as any ; but if it were the only way, great diffi- 
 culties would arise. Thus, suppose a shoemaker wishes 
 to obtain a piece of meat from a butcher, and that there is 
 no medium of exchange by which he may obtain it, and 
 therefore he is obliged to give for it a pair of shoes in bar- 
 ter. The pair of shoes are worth more than the meat 
 which he wants ; yet he is obliged to take their whole value 
 in meat, or to take less than their value. Perhaps, he will 
 be unable to obtain any meat for them ; the butcher may 
 not be in want of shoes, but may be obliged to exchange 
 his meat for something else which he needs. From diffi- 
 culties like these, men would soon be led to invent a better 
 Avay of exchange : — that way is by money. 
 
 Monexj had its origin from the inconvenience of barter. 
 The idea of establishing one commodity as a common 
 equivalent in exchange for all others, is of early date. 
 Among the ancient Greeks, oxen were this common equiva- 
 lent. The money, or wampum, of the Indians who for- 
 merly inhabited this country, was a string or belt of beads, 
 varying in length and number according to the value of an 
 article in exchange. Various other commodities, in different 
 countries and at different times, have been used as money. 
 To most of them, however, the same objections are appli- 
 cable. If oxen are considered as money, the purchaser 
 must always buy an ox's worth, or become the creditor of 
 

 POLITICAL ECONOMY. 43 
 
 him from whom he purchases. A string of beads, passing 
 through many hands, will soon lose value by the wear; 
 and there is a similar unfitness in most other commodities 
 which can be mentioned. 
 
 But the precious metals are liable to no such objections. 
 From their scarcity and beauty of appearance the posses- 
 sion of them, even as metals, would be highly gratifying to 
 the vanity of man. But when their durability was consi- 
 dered, and their capability of division into small parts, with- 
 out destroying that durability, they must have appeared 
 eminently fitted to become the common medium of ex- 
 change. Such they have universally become ; and the use 
 of them for such purposes, may be traced backward to a 
 very early age. 
 
 Silver has always been considered less valuable than 
 gold; and the reason is, that its ore is found more plenti- 
 fully, and the cost of producing the metal is less. If the 
 ore of gold could be found as plentifully as that of silver, 
 and it required no greater expenditure of capital and la- 
 bour to manufacture the metal, there is no reason to believe 
 that there would be any standard difference in their value. 
 For very small amounts, it is usual to substitute copper or 
 other coarse metals in the place of gold or silver ; for al- 
 though a penny's value might be represented in silver or 
 gold, yet such a value in silver, or more particularly in gold, 
 would be so minute and trifling as to be inconvenient. 
 
 Gold and silver being commodities produced by capital 
 and labour, and being of use among men as ornaments or 
 as money, evidently must possess exchangeable utility, 
 and therefore, be components of wealth. They are on that 
 account articles of commerce, and are imported and ex- 
 ported, bought and sold, like other commodities. 
 
 Governments, for the accommodation of their respective 
 communities, and for the prevention of counterfeit and 
 adulterated metal, have usually taken it upon themselves 
 to buy the bullion or raw metal from its producers, and to 
 issue from their establishments, called mints, coined gold, 
 and silver, and copper, of different denominations, accord- 
 ing as any increase of wealth shall require an increase of 
 money to circulate it. The coins of different countries 
 are designated by different devices or national emblems, 
 commonly expressed upon the face of the coin; yet any 
 two coins, of whatever country, exchanging for equal va- 
 lues, should contain equal quantities of actual metal. 
 
 Section II. — Of paper money — its nature, advantages, and 
 
 DISADVANTAGES. 
 
 We have learned the history of exchange until the in- 
 
44 PRINCIPLES OF 
 
 vention of paper money, which remains to be considered. 
 Gold and silver, it will be remembered, possess exchange- 
 able value, not so much from any consumable utility be- 
 longing to them, as because they are fitted naturally to 
 serve as the instruments or common medium of exchange. 
 An individual who receives a gold or silver coin, seldom 
 thinks of keeping it by him, and turning it to an ornament, 
 or appropriating it to some final use or consumption; but 
 it is his intention, sooner or later, to exchange the coin, 
 and buy something with it which he desires. Such being 
 the main utility of gold and silver, it is plain that any thing 
 else, which could acquire the same power of exchanging 
 for other commodities generally, would also possess the 
 same value in that respect as gold and silver. Paper 
 monejr acquires the same power, and therefore answers the 
 same purpose in a community with coined money, and 
 the reason is the following: — Instead of carrying a value 
 in itself, it promises a value ; and so long as the issue or 
 issuers of the promise are believed ready and able to fulfil 
 it, it is just as valuable, and will pass just as current among 
 individuals who have that belief, as the thing promised, or 
 the real value, provided, as is the case with gold and silver, 
 it is not wanted for final use or consumption. 
 
 Such, then, is the principle of all paper raonej^ ; it is a 
 credited promise taken in place of the thing promised. A 
 bank note for five dollars promises to pay that amount of 
 gold or silver. You will as readily receive the bill as the 
 coin, because you feel certain that should you have any 
 necessity, or even a wish for the coin, at the banking office 
 at any time, you may obtain it. 
 
 That no paper money or promissory notes may circulate 
 in a community, which are not properly responsible for the 
 amounts promised, governments commonly take it upon 
 themselves to limit the right of issuing them to certain 
 chartered institutions, called banks. These banks are un- 
 der the control of companies of responsible individuals, 
 among whom is apportioned their stock or capital. To 
 enter into detail concerning their character or operations, 
 would be beyond the limits ofthisessay; we suggest them, 
 also, as subjects for further investigation. 
 
 I. The advantages of a paper currency are reducible to 
 two heads : 
 
 1st, It is cheaper, and 2d, It is more convenient than a 
 metal currency. 
 
 1. It is cheaper. — Gold and silver commonly are pro- 
 duced by much labour, and with large expenditure of capi- 
 tal. The price which is charged for them when produced, 
 must meet these expenses, and the nation which coins them 
 
POLITICAL ECONOMY. 45 
 
 into money, must pay this price for whatever amount it 
 may coin. Now if the main purposes, which it would an- 
 swer when coined, may be fulfilled by paper, it being easy 
 and cheap of production, a heavy national expenditure is 
 removed by a substitution. This will be most clearly per- 
 ceived at the first introduction of a paper currency into a 
 community, and afterwards also, when an increase of 
 wealth shall require an increase of money to circulate it. 
 Thus, suppose 50 millions of dollars to be the amount of 
 gold and silver, circulating the property of any communi- 
 ty at any given time. Let 40 millions of paper money be 
 introduced; 10 millions of specie is sufficient to meet in- 
 cidental requirements of the payment of the paper prom- 
 ises. There is now in this community 90 millions of mo- 
 ney; but 50 millions are all which the circulation of its 
 property requires ; therefore, there is a surplus of 40 mil- 
 lions over and above its wants. Gold and silver money, 
 it was before shown, are articles of commerce : this com- 
 munity can dispense with 40 millions of their money, and 
 the 40 millions of coin will therefore seek a foreign market, 
 and exchange there for consumable wealth. Thus then, 
 this community, by introducing a paper substitute for 40 
 millions of its specie, may become 40 millions richer in the 
 useful things and luxuries of life. Next suppose the same 
 community, in a certain time, to have increased in wealth 
 to such a degree, as to require 10 millions more of money 
 to circulate the increase. Now unless paper is used in the 
 place of metal, 10 million dollars' worth of gold and silver 
 must be bought and paid for ; but if paper money is substi- 
 tuted, the increase of wealth will be circulated at the com- 
 paratively trifling expense of enough coin to meet occa- 
 sional demands of payment by the holders of notes, and 
 the cost of the paper and its preparation. 
 
 2. It is more convenient. — The transporting of large sums of 
 metal money from place to place, is no small inconvenience. 
 Not only so, but a large quantity of metal is more open to 
 robbery and theft, than a corresponding value in paper mo- 
 ney, which is of small bulk and easily concealed. More- 
 over, banks, in various ways, are great accommodations to 
 merchants, brokers, and other business members of com- 
 munity. By a mutual correspondence and understanding, 
 they are enabled to transact business for each other with 
 community in general, and thus afford great facilities to 
 exchange. 
 
 II. A paper currency is not without its evils. — It may be 
 remarked, however, that they are not so much those of ne- 
 cessity, as the result of an imprudent and over-anxious 
 self-interest, or an inexcusable carelessness in bankers. 
 
46 PRINCIPLES OP 
 
 Since governments resign the issuing of money to incor- 
 porated companies, these companies must necessarily 
 make new issues, according as the advance of community 
 in wealth requires. An increased or a new circulation of 
 their notes, is an increase of profit to them ; so that, blind- 
 ed by their interest, they are too apt to issue more notes 
 than the circulation requires. In every such case, there is 
 more money in community than is wanted ; but promisso- 
 ry paper notes cannot be exported to foreign countries, 
 and buy their values, as gold and silver might have done ; 
 they are worth nothing except at home, where the issuers 
 of them are believed to be responsible for the amounts 
 which they promise. Hence then, there is a call upon the 
 company for the specie, instead of which their promises 
 have been received. If the over-issue is a large amount, 
 and the banking company have not a corresponding 
 amount of specie on hand to meet it, they must infallibly 
 become insolvent or bankrupt, and all the money issued 
 by them, worth little or nothing. Confidence in their abi- 
 lity to pay their notes, will vanish ; and hence, great evils 
 will ensue to the community who are the holders of them. 
 The labourer especially, whose -wages were paid in the 
 bills of the company, has lost his hard earnings, and will 
 suffer most severely in his thankless industry. The only 
 safeguards against these evils, are government regulations, 
 and care and watchfulness on the part of bankers, as re- 
 gards their issues. 
 
 Paper money also, is much more liable to be successfully 
 counterfeited, than that which is metallic. And while 
 scarce a single careful individual need lose by false coin, 
 many of those even moderately skilful in detection, may 
 be deceived and imposed upon by counterfeited notes. 
 
 Before leaving the subject of exchange, it will not be 
 amiss to repeat in a few words, the nature, and general uses 
 of money. Wealth is produced in the forms of various use- 
 ful, necessary, and agreeable commodities. Parts or 
 shares of these commodities belong to all individuals con- 
 nected with their production. Money is a commodity 
 known and acknowledged among men as a common equi- 
 valent, or medium of exchange for all other commodities. 
 When, therefore, individuals concerned in the production of 
 wealth, obtain their respective shares of it expressed in 
 money, they have them in such forms as will enable them 
 to expend, invest, or consume them, in the manner most 
 agreeable. It is on this account, that the landlord most 
 commonly requires his rent to be paid to him, not in the 
 actual surplus of produce which the fertility of his land af- 
 fords, but in money. For the same reason, the loaner of 
 
POLITICAL ECONOMY. 47 
 
 money requires its interest to be paid to him in money ; 
 the labourer requires his wages in money ; and finally, 
 the employer of capital, who pays these individuals their 
 several shares in money, that he may do so, and that he 
 may receive his own profits in like shape, requires the con- 
 sumer and purchaser of his commodities to pay him their 
 price in money. Thus it is that money becomes the me- 
 thod of estimating all values ; and it is evident, that there 
 must always be, in a community, an amount of it at least 
 sufficient to express the revenues of its various members. 
 
 PART IV. 
 
 THE CONSUMPTION OF WEALTH 
 
 It has been shown, how and by what agents the wealth 
 of a nation is primarily produced; the manner in which it 
 is distributed, affording subsistence and enjoyment to eve- 
 ry individual connected with its production ; and the me- 
 diums through which, after its distribution, it may be ex- 
 changed : it remains yet to consider the final use or con- 
 sumption to which it is appropriated, and the principles 
 which regulate it during the cessation and change of its 
 value. 
 
 Section I.— Nature op consumption in general — productive 
 
 AND UNPRODUCTIVE CONSUMPTION. 
 
 Consumption of wealth is the precise opposite and ob- 
 ject of its production. Production is the imparting or ob- 
 taining the utility which gives exchangeable value ; con- 
 sumption is the appropriation and destruction of that uti- 
 lity. If there were no consumers, there would surely be no 
 producers. According as the former increase their de- 
 mand for the products composing wealth, the latter multi- 
 ply industry and engage new capital in producing them. 
 In the present state of society, it may be said that there are 
 no limits either to production or consumption. For in gene- 
 ral, any surplus of commodities produced in a community 
 above its own wants, finds ready markets in foreign coun- 
 tries ; and the extent of the world's consumption may al- 
 
48 PRINCIPLES OF 
 
 ways be considered as equal to the aggregate of its pro- 
 duction. 
 
 Consumption is of two kinds : — 
 
 I. Productive consumption, or consumption for purposes 
 of reproduction. 
 
 II. Unproductive consumption, or consumption with no 
 purpose of reproduction. 
 
 I. Productive consumption relates to raw materials and 
 products undergoing processes of manufacture. A miller, 
 for example, after he has bought wheat of a former, pours 
 it into the machine which contains the grinding stones. 
 After it has been ground between them^and undergone 
 several processes of separation and sifting, it appears in 
 several shapes ; the largest portion of it is flour. The mil- 
 ler, by the operation, has been a consumer of the farmer's 
 wheat; as a grain it no longer has existence. But by 
 consuming, he has reproduced it in the new article of flour. 
 Similar to this is the consumption of other raw materials 
 and products in stages of manufacture; of iron by the 
 smith ; of wool by the cloth maker; of timber by the car- 
 penter. Such consumption is productive, because a new 
 article is produced by it, with an increased value. Since, 
 then, all the commodities composing wealth are either un- 
 manufactured products or manufactured articles, and pro- 
 ductive consumption is the consumption of the former, it 
 remains only to examine the consumption of manufactured 
 articles. 
 
 II. Unproductive consumption, or the consumption of manu- 
 factured commodities, is the precise opposite of productive 
 consumption. The one is a change, the other a destruc- 
 tion of value; the one is mediate, the other is final; and 
 the one is the suggestion of human enterprise, while the 
 other is the requirement of nature. Man requires food to 
 support life, and clothing and shelter to protect him from 
 the inclemencies of season and climate. Yet when pos- 
 sessed of these, and although surrounded by the necessa- 
 ries of existence, his nature is not satisfied. His desires 
 are restless; they grow weary of a needed and customary 
 gratification, and wander forth in quest of something, not 
 merely necessary, but directly useful and agreeable. Once 
 aroused by their action from indolence and inactivity, each 
 succeeding step is not simply an advance towards success, 
 but an incitement to new exertion. — And only such is the 
 brief history of human enterprise : for when its objects are 
 attained, and luxury hath blended with comfort, it is the 
 work of but an hour, to consume the value which had 
 growth of many years. And so it will continue. When 
 we, the subjects of enjoyment, shall be perishing, as the 
 
POLITICAL ECONOMY. 49 
 
 objects of it long since wasted, our children will follow, 
 with the same eager and anxious face, the flickering and 
 forecast lights of those same desires which burned within 
 our bosoms. And they too will waste life upon the means 
 of life, and in their turn sleep with us. And this is not 
 merely a saddening thought, but it is pregnant with real 
 consequence. It may teach us, that he who lies down to 
 rest with his forefathers, conscious that from choice he 
 has produced nothing which hath not, like himself, an ele- 
 ment of decay, and that his life was as a flame, fed only 
 by what it consumed, and is now extinguished in the 
 ashes, hath scarce a right to claim the pittance of his burial 
 place. 
 
 In the difference existing between the two kinds of con- 
 sumption, a test is afforded, whereby to determine the de- 
 cline or advance, or stationary condition of a nation as to 
 wealth. If all the raw materials which its agriculturists 
 produce are consumed by its own manufactures, and all 
 the commodities which they reproduce are consumed at 
 home ; that is to say, if, out of all its wealth, there exists 
 no surplus over and above its own wants and consumption, 
 that nation is not advancing in wealth. But if there is such 
 a surplus exported to foreign countries, and bringing back 
 their surplus products or money in return, the nation is 
 advancing in wealth. As with the production of a private 
 man, its capital and labour yield more than enough for the 
 support of its large family; and proportional to the amount 
 of that surplus is the degree of its pecuniary advancement. 
 If its revenue is less than its expenditure, or its production 
 less than its consumption, in proportion to the degree of its 
 inferiority will national poverty increase, and its people 
 become wretched and destitute. 
 
 The foregoing considerations apply to the consumption 
 of wealth in general, without regard to the particular agents 
 of consumption. These agents are three in number: the 
 nation at home, foreign nations, and governments. The 
 nation at home consumes by far the largest portion of its 
 own wealth. Its consumption is both productive and un- 
 productive, as before explained ; and the test above given 
 imbodies its controlling principle. In the following sec- 
 tions, we shall consider the consumption which is effected 
 by foreigners and by government. 
 
 Section II. — Consumption by foreign nations, and of com 
 merce. 
 
 Among the many benefits which have resulted to man- 
 kind from the reduction of navigation to a science, the 
 5 
 
50 PRINCIPLES OF 
 
 facility which it affords of exchanging the surplus wealth 
 of a community for surpluses produced by other nations, 
 is by no means of the least important. Nations whose 
 barbarity in antecedent times was equal to their poverty, 
 and who needed for consumption even more than their la- 
 bour produced, are now most highly civilized and wealthy. 
 And few causes have had more influence in creating the 
 change, than commercial advantages. Great Britain is a 
 conspicuous example. During the zenith-time of Roman 
 grandeur, it was only known of Britain that she was a dis- 
 tant island of considerable magnitude, whose savage popu- 
 lation made strenuous resistance to the aggressions of 
 Caesar. In the half-naked, fierce and brutal Britannia, 
 who could recognise the courageous and accomplished 
 Englishman, noted for his wealth, his intelligence, and 
 power? His products may be found in almost every quar- 
 ter of the world, and the sails of his ships whiten every 
 ocean on the globe. It is true that the immediate cause 
 of this change was an increase, both in the amount and in 
 the productiveness of industry: yet the main-spring and 
 the moving power of that increase has been, the safety and 
 facility of modern navigation. It afforded the certainty of a 
 market, and that certainty only was needed for the intro- 
 duction of an extensive division of labour, and the conse- 
 quent accumulation of great capital and surplus resources 
 for foreign consumption. 
 
 In view of the important advantages which a people de- 
 rive from the disposal of their surplus products by foreign 
 commerce, governments have not unfrequently been in- 
 duced to encourage a special production of particular 
 commodities for foreign exportations. They have com- 
 monly made selections of those, the production of which 
 they considered most easy, peculiar, or profitable to their 
 respective nations, and have endeavoured to secure the 
 supposed advantages of such policy, by two methods; 
 
 1. By prohibitions of the importation of the selected 
 commodity ; and 
 
 2. By bounties to their own citizens for its exportation. 
 
 1. Prohibitions have been of two kinds : Actual prohibi- 
 tions by law, and implied prohibitions by tariffs or duties. 
 The former are definite, and render importation illegal and 
 criminal. The latter, however, operate differently; — to 
 illustrate which, let us select an example. When a trader 
 brings a freight of English goods from Great Britain to 
 New York, at the custom house in that city he must pay 
 a certain amount, according to the kind and quality of his 
 goods, for the privilege of selling them in America. This 
 amount is composed of individual charges upon separate 
 
POLITICAL ECONOMY. 51 
 
 articles, which charges are regulated by law, and are called 
 duties. If they are small, he will be enabled to offer his 
 cargo at fair prices for sale; but if the duties are high, 
 there is a virtual prohibition of the sale of his articles. For 
 the duties will always enter into the market price of his 
 commodities, and increase them by their amount. Hence, 
 then, the price of the foreign merchant becomes artificial, 
 and is increased in proportion to the amount of the duties 
 above cost of production and market value. Home pro- 
 ducers of the same commodities are from hence, even 
 though they may pay higher wages, and their general cost 
 of production is greater, enabled to undersell him and de- 
 stroy his trade. 
 
 It is in this manner that high duties or tariffs operate 
 as prohibitions of the importation of the foreign articles 
 upon which they are imposed ; and their immediate effect 
 will be to encourage home manufacturers in their produc- 
 tion of similar articles, and eventually to lead resident 
 merchants to export all the surplus of production, and 
 secure an extensive traffic in them. 
 
 2. Bounties are actual payments to a trader, if he will 
 export from his own to foreign countries a particular kind 
 of commodity. England has given bounties upon the ex- 
 portation of grain. Her government, deeming the growth 
 of grain most profitable to her people, paid them if they 
 would produce the greatest surplus possible above their 
 own wants, and send it to foreign markets. 
 
 As to the general effect of prohibitions and bounties, it is 
 remarked, thai at the first establishment of a new branch 
 of industry with a nation, its commodities must, necessa- 
 rily, have a greater cost of production than in a country 
 where they have long been produced. Long experience 
 discovers the cheapest ways of work, besides introducing 
 greater division of labour, and thereby increasing the skill 
 and dexterity of workmen. Moreover, the cost of ma- 
 chinery is greater, and the wages of labour higher, for an 
 employment at its first introduction. Hence, then, of two 
 countries, both of which are employing capital and labour 
 in production of the same kind, that one will have advan- 
 tage which is the oldest producer. And the advantage 
 will be realized in the fact that their profits are only equal 
 with different prices. But if, on this account, the nation 
 at disadvantage should prohibit the importation of the 
 commodities of the other nation, either actually or by a 
 high tariff upon them, it would plainly be the loser. For 
 all the difference of price between the home manufactured 
 and the foreign article, it may gain by purchasing the 
 
52 PRINCIPLES OF 
 
 foreign and not the domestic product. And where lies 
 the difference to a community, whether the articles which 
 it consumes are of domestic or foreign production ? Why 
 is it not a serious injury when governments compel the 
 purchase of domestic articles, at a higher price than the 
 price of foreign ones? Whether advantages in times of 
 war, or in other respects, are gained to a community by 
 this forced consumption, sufficient to outweigh the evils of 
 it, is yet a question. To discuss it fully would be impossi- 
 ble within the limits of this essay, and an incomplete con- 
 sideration of it, relating as it does entirely to practice, 
 would be unsatisfactory, and perhaps a source of error. 
 Expressing our opinion, therefore, that the advantages of a 
 system of protective duties are not sufficient to counter- 
 balance its attendant evils, we leave it, also, as a subject 
 for further consideration. 
 
 A bounty upon the exportation of products of a particu- 
 lar kind, seems to suppose that without it, they would not 
 be produced for exportation. Nothing is moie certain 
 than that, as general rules, each individual producer is the 
 best judge of his own interest, and that the interest of indi- 
 viduals is the public interest. By the establishment of 
 bounties, governments seem to imply that their own is the 
 better judgment. So soon as it is in reality profitable to 
 produce any commodity, in particular, for foreign con- 
 sumption, those who possess land and capital will not fail 
 to discover it ; and any attempt to force its production be- 
 forehand is plainly useless, if not highly injurious. And, 
 moreover, since a government can only derive its funds 
 from the earnings of its people, to tax industry in general, 
 to pay bounties "to one branch of it in particular, seems 
 strangely unwarrantable. 
 
 The restraining and encouraging systems above consi- 
 dered are fast passing to general disrepute. Great Britain, 
 and France, and other foreign countries, have made faithful 
 experiments in them. From the result of their experiments, 
 together with the influence of the comparatively new doc- 
 trines of political economy, the United States have entered 
 into such a policy to but small extent. Yet for purposes 
 of revenue, and as a retaliation upon other countries, as 
 well as for the encouragement of manufacturers, they have 
 established a tariff upon some foreign goods. These duties 
 are, however, so low, that while they afford much revenue, 
 they do not operate, in any degree, as a prohibition of im- 
 portation. To light tariffs, for purposes of taxation and 
 revenue, there appears to be no well founded objection. 
 
POLITICAL ECONOMY. 53 
 
 Section III. — Consumption by government. 
 
 The following is a brief analysis of this branch of our 
 subject, as considered by Dr. Smith, in his usual compre- 
 hensive and philosophical manner. The consumption of 
 government consists of the requirements for, 
 
 I. The expense of defence. 
 
 II. The expense of justice. 
 
 III. The expense of public works and public institutions. 
 Public works belong to two classes : — 
 
 1. Those for facilitating the commerce of society in 
 general ; and, 
 
 2. Those for facilitating particular branches of it. 
 Public institutions are of two kinds : — 
 
 1. Those for the education and benefit of youth; and, 
 
 2. Those for the education and benefit of community 
 in general, and of the poor in particular. 
 
 IV. The expense of maintaining the dignity of govern- 
 ment. 
 
 We shall endeavour briefly to discuss the several points 
 of this analysis. 
 
 I. The expense of defence is the expense of armies and 
 navies, of forts, arsenals, military schools, and the like. 
 It has always hitherto proved necessary, that a nation 
 should provide some permanent means whereby to defend 
 its rights, when withholden or invaded by other nations. 
 With regard to soldiery, there are two theories, as well as 
 two systems of practice. They are, either to maintain large 
 standing armies in constant readiness for any emergency, 
 or to oblige each individual, not incompetent, to prepare 
 and hold himself ready for military service. A standing 
 army, whose sole business it is to acquire and exercise 
 the art of war, must become better soldiers than mechanics 
 and labourers and other citizens, called from their trades 
 and occupations, and occasionally, or even frequently, dis- 
 ciplined as a militia. To maintain a standing army is a 
 great expense, varying according to its numbers and the 
 rate of pay ; to require from the people of a state many 
 days of their time for the musters and discipline of militia, 
 is so many days of labour interrupted, and indirectly, 
 therefore, no small tax. Whether the competency and ef- 
 ficiency of a standing army, as a means of public defence, 
 is sufficient to warrant its much greater expense, and to 
 counterbalance evils of a political nature, which are apt to 
 spring from its existence, remains a question. It ought 
 principally to be determined by the posture of a nation's 
 affairs, and the urgency of its necessity of defence. At the 
 present day, however, to a nation whose policy is in ac- 
 5* 
 
54 PRINCIPLES OF 
 
 cordance with the principles of justice and of right, the 
 maintenance of either, though stiil a matter of high im- 
 portance, is by no means the necessity it once was. And 
 the reasons of the change are, that the principles of reli- 
 gion and morality have so far progressed ; the law, which 
 regulates the intercourse of nations, becomes so well defined 
 and systematized ; and the science of political economy, 
 as a new orb rising on the common horizon, has dispensed 
 such happy influence, that war, with civilized nations, no 
 longer is a question of policy, but its justifiability has been 
 made to rest upon the grounds only of injured honour and 
 unquestionable necessity. 
 
 Navies are means of defence upon the ocean, and are 
 needed, alike in peace and in war, for the protection of 
 commerce. So long as pirates, the common enemies of 
 mankind, infest the seas, the propriety of the expense of 
 navies is evident. The propriety and degree of the ex- 
 pense of the other means of defence mentioned, it is plain, 
 will vary according to the pressure of occasion for them. 
 
 II. 7'Ae expense of justice. The law of a country would 
 have little force, if no means were taken to ensure obe- 
 dience, by punishing disobedience to it. These means 
 commonly are, to establish public, known, and acknow- 
 ledged tribunals, to which any offender shall be amenable. 
 It is evident from their nature and object, that the institu- 
 tions of justice, when impartial, are the great safeguards 
 of human society. But if at any time they knowingly con- 
 demn the innocent and not the guilty, and by evil influen- 
 ces become themselves corrupt and worthy of judgment, 
 instead of restraint, they are the indirect abettors and en- 
 couragers of crime. Such can seldom be the case, except 
 from the influence of interest. In general, there is implant- 
 ed in the human bosom an instinctive love of justice, which 
 will, of itself, cause impartial judgment, if no interest be 
 affected by the sentence. The effectual way of destroying 
 ihe probability of such interest, is to render the support of 
 judges and other officers of justice, entirely independent of 
 ihe persons on whom they may pronounce judgment. From 
 the plain advantage of such a regulation, modern govern- 
 ments have commonly taken the expense of justice into 
 their own hands, and consume, therefore, a considerable 
 portion of all that they acquire from the whole produce of 
 land and industry, for public purposes. 
 
 III. 1. Public works for facilitating the commerce of society 
 in general are, highways, roads, canals, &c. It is usual to 
 establish rates of toll for the use of such public works, and 
 the aggregate of tolls collected, it is intended, shall be suf- 
 ficient to keep them in constant and good repair, and pay 
 
POLITICAL ECONOMY. 55 
 
 the collectors and superintendents of them. Rates of toll 
 should be light; for if burdensome, they will discourage 
 the use of the public work, and thus interfere with the ob- 
 ject for which it was primarily constructed. It is import- 
 ant, therefore, before a public work is commenced, and 
 while the construction of it is yet a question, to be assured, 
 that although tolls for the use of it should be light, yet that 
 the convenience and frequency of its use will afford an 
 aggregate revenue, sufficient to disburse its expense. 
 
 2. Public works for facilitating particular branches of 
 commerce, form no part of the consumption of government 
 in this country. The government of Great Britain has, 
 however, not unfrequently followed such a policy. For the 
 benefit of the companies of traders to Hudson's Bay, to 
 India, and to Africa, much of the wealth of her subjects 
 generally, has been expended. In general, however, all 
 such partake of the nature of monopolies — wrong in prin- 
 ciple and pernicious in practice. 
 
 There are two kinds of public institutions: 
 
 1. Those for the benefit and education of youth. Assist- 
 ance to their people in the cost of educating their children 
 has commonly been, and now very generally is, a part of 
 the expense of governments. In bestowing this assistance, 
 two motives are commonly in view: — 1st, To render the 
 means of instruction cheap ; and 2d, To render them ef- 
 fectual, although cheap. 
 
 2. Institutions for the education and benefit of the commu- 
 nity generally, are the institutions of religion. In many 
 countries, their support has been a source of great expense 
 to governments. Modern public opinion, however, may be 
 said to have declared against numbering any such among 
 the items of public expenditure. The union of church 
 with state, particularly in our own country, is an odious 
 idea; and could the sentiments of the people of most other 
 countries in which it yet exists, have that entire decision 
 of public matters, which happily they here possess, there 
 is reason to believe that such a union would soon be un- 
 known among men. The proper support of religion is to 
 be derived from the voluntary contributions of those who 
 enjoy its benefits, as wages of labour to the ministers of 
 them, for productive service. It ought to be regulated, not 
 by any interference of government, but by the idea which 
 an individual may entertain of his duty to contribute. 
 
 Concerning public institutions for the particular benefit, 
 of the poor of a community, three great questions should 
 be examined : — 
 
 1. Whether it is the duty of government to provide such 
 institutions ; 
 
66 PRINCIPLES OP 
 
 2. Whether they do not indirectly encourage indolence 
 and pauperism ; 
 
 3. Whether the object of them will not be better accom 
 plished by leaving it to the private generosity and benevo- 
 lence of individuals. 
 
 These three questions are highly important and deeply 
 interesting ; but the limits of this essay forbid their con- 
 sideration. With reluctance, therefore, we leave them 
 also, as subjects for further investigation. 
 
 One thing, however, may be remarked ; that whenever 
 those supported in institutions of this kind are engaged in 
 occupations of industry, and their production exceeds 
 their consumption, instead of decreasing, they will evident- 
 ly add to the sum of public wealth. 
 
 IV. — The expense of maintaining the dignity of govern- 
 ment is required, for (strictly speaking) the unnecessary 
 cost of an extra style, splendour, or magnificence of pub- 
 lic buildings; of the high salaries of public officers, and in 
 general, of the unusual displays and pomp of governments. 
 Arbitrary monarchs usually require large portions of the 
 wealth of their subjects for such expenditures ; but govern- 
 ments more free in their nature, are in this respect com- 
 monly guided by the taste and manners of their people. 
 With a nation which has high notions of fashion and 
 splendour, the dignity of government may require large 
 expenditures; but with a people whose aim is worthiness 
 rather than show of greatness, though somewhat, it is yet 
 of inconsiderable extent. 
 
 The subject of government consumption is extensive, 
 and to discuss it fully, would require a long and special 
 treatise. Reconsidering the few leading ideas which have 
 been presented, it will be perceived that it is mostly of a 
 productive nature. All government expenses, save those 
 for the especial benefit of the poor and for maintaining its 
 own dignity, either directly, are the means of affording se- 
 curity of persons and property, before considered among 
 the circumstances facilitating production, or indirectly, are 
 conveniences and means of success to producers. Hence 
 then as a general rule, while the necessary consumption of 
 government is productive, public functionaries, for whose 
 wages a large portion of it is required, are productive Za- 
 bourers. 
 
 Section IV. — Of taxes. 
 
 We have last considered the expenses of different kinds, 
 which governments incur, as the means and conditions or 
 
POLITICAL ECONOMY. 57 
 
 the safety, protection, and advantage which they afford. 
 The next proper subject of inquiry is, how may such wealth 
 for the consumption of government be best obtained from 
 the great body of national wealth? It is clear, in the first 
 place, that since this body of wealth is composed of the 
 wealth of individuals, the portion for public expenditure 
 must be collected from individuals, and evidently, ought to 
 be apportioned among them in a just and equitable man- 
 ner. The part which it devolves upon any individual to 
 contribute, is called a tax. 
 
 Doct. Smith has given four almost self-evident princi- 
 ples, which should regulate alike the imposition and the 
 gathering in or collection of taxes. 
 
 I. Taxes should affect the different members of commu- 
 nity only in proportion to their different abilities to pay 
 them. For it is plainly reasonable, that the individual who 
 enjoys a large revenue under the protection of the state, 
 should contribute more to its suppport, than he whose re- 
 venue is small. 
 
 II. Taxes should be fixed and certain ; not arbitrary and 
 fluctuating. If they are not definitely settled, but are left 
 to the discretionary sense of tax-gatherers, or other offi- 
 cers of revenue, it is evident that great injustice and wrong 
 may ensue. 
 
 III. Such time and manner of paying in taxes should be 
 selected, as is most convenient to those taxed; it should 
 also be well understood and uniform. 
 
 IV. A tax should include as little else to be otherwise 
 appropriated than to the wants of government, as is in any 
 way possible. This maxim is violated when extravagant 
 fees are given to collectors of taxes. 
 
 These four maxims should regulate governments, uni- 
 formly, in the imposition and collection of taxes. As to its 
 subjects, taxation is of two kinds, special and general. A 
 special tax, is a tax imposed upon rent, or profit, or wages. 
 A general tax, is a tax designed to affect all producers in- 
 discriminately. We shall proceed to consider them in 
 order. 
 
 1. Taxes upon Rent. — It would seem that taxes upon rent, 
 when moderate, are accompanied with as little injury to 
 community, and are in as small degrees discouragements 
 to the increase of the produce of land and labour, as taxes, 
 from their nature, ever may be. The reason is plain, when 
 it is remembered that rent is a part of produce, or of its 
 value, paid to the owner of land after deducting the ordi- 
 nary profits and wages of farming industry. A tax, there- 
 fore, upon rent, is a tax upon a kind of revenue which ac- 
 crues to the landlord, without his labour and capital ex- 
 30* 
 
58 PRINCIPLES OF 
 
 pended to obtain it; and the yielding up a portion of it for 
 the use of government, will not affect price or the revenues 
 of community in general. Where an individual is an own- 
 er of land, and at the same time its worker, the rent which 
 he might afford to pay, may be assessed, and the tax levi- 
 ed proportionally. 
 
 2. Taxes upon Profits. — Profits, as before said, have two 
 components: interest upon the capital invested, and com- 
 pensation for the trouble and hazard of employing it. This 
 latter component alone can be affected by a tax. The 
 former must certainly accrue, or the business in which the 
 capital has been invested will be deserted. 
 
 To tax the profits of a single particular business, is, in 
 effect, to raise the price of its commodities. For if a por- 
 tion of its ordinary profits is surrendered to government, 
 the equality which those profits formerly held with other 
 profits, is destroyed, and price must rise to effect a restora- 
 tion. If, for example, government should tax a farmer one 
 tenth of his profits upon grain, he would undoubtedly add 
 one tenth of those profits to his price, when he sold to the 
 miller. This tax, therefore, would have no effect upon him. 
 Would it affect the miller? It would not; for his cost of 
 producing flour would be increased by it, and he would 
 add the same one tenth to the former price of flour. But 
 it would affect consumers of flour, or community in gene- 
 ral, and would be, in this respect, an excise tax. The idea, 
 then, of taxing, immediately, the profits of a single business 
 is futile ; for the effect wili fall upon community in general. 
 
 3. Taxes upon Wages. — Taxes upon wages have the ef- 
 fect to increase the wages taxed, and thus, price remain- 
 ing the same, reduce profits. 
 
 Suppose the usual daily wages of a common labourer to 
 be 75 cts., but that, by a government regulation, 5 cts. are 
 ordered to be paid as a daily tax. Now, 70 cts. will not 
 support a labourer, as he has been accustomed to main- 
 tain himself upon 75; and since he perceives his labour 
 wanted as much after the imposition of the tax as before it, 
 he will charge his employer 80 cts. for his daily labour, 
 and thus be enabled to retain his usual amount for support, 
 and yet pay the tax required of him. Hence, then, a tax 
 upon wages will not affect labourers ; but it will affect their 
 employers, reducing profits, their share of price, by an 
 amount equalling the tax. And therefore, an effectual way 
 of taxing profits in general, is, to tax wages in general. 
 
 4. Taxes by way of Excise, or General Taxes. — The 
 taxes of which we have hitherto spoken, are called special 
 taxes, because they are levied upon particular producers, 
 and are intended to be paid by them in person. Indirect 
 
POLITICAL ECONOMY. 59 
 
 or general taxes, are taxes not levied directly upon indi- 
 viduals, but upon commodities. Special taxes are paid with 
 reluctance, and seem to the payer as harsh and arbitrary 
 exactions, like withdrawing the amount required from in- 
 dividual funds, and bestowing it for the use of another. In- 
 direct taxes blend with the price of commodities, and few 
 individuals paying for an article whose price may be in- 
 creased by their imposition, even think that the cause of 
 the increase is a tax. Thus, suppose an excise tax to be 
 imposed upon every barrel of flour manufactured. This 
 tax will be charged by the miller in his price to the con- 
 sumer; and the consumer, when he pays the tax in such 
 shape, will find, in general, only a small increase of price, 
 and such as he has often before attributed to fluctuations 
 in market value. 
 
 There are two great classes of commodities upon which 
 this kind of tax may be imposed: the necessaries and the 
 luxuries of life. 
 
 By the necessaries of life are here meant, not simply those 
 commodities without which life cannot be supported; but 
 all those which habit and education have rendered indis- 
 pensable for comfort. It is for such, that labourers most 
 commonly exchange their wages. A tax, therefore, upon 
 these commodities, although in reality it affects all produ- 
 cers, will yet be burdensome upon the labouring classes. It 
 will increase the price of those necessaries for which wa- 
 ges are expended. If not very moderate, therefore, it will 
 have the same effects as a direct tax upon wages — to cause 
 them to increase, and profits to diminish, and thus, indus- 
 try to be discouraged and production seriously impeded. 
 
 Indirect, general taxes upon the luxuries of life, produce 
 no such effect. They are commodities mostly consumed 
 by the wealthy and independent members of community. 
 To tax this class of community is to tax those who are the 
 most able and proper subjects of taxation; and the wealth 
 drawn from them, and productively consumed by govern- 
 ment, in giving encouragement and security to industry in 
 general, though affording, on the whole, no positive good, 
 is yet only in a small degree injurious. 
 
 5. Taxes by way of Custom Duties. — Taxes in this form 
 are also of an indirect nature. The prominent principles 
 in regard to them, have already been pointed out. They 
 operate as a tax paid primarily by the importers of foreign 
 goods, but ultimately by the purchasers of them. Light 
 tariffs, particularly on foreign luxuries, are marked by the 
 same advantages as means of raising revenue, which give 
 superiority to excise taxes. 
 
60 PRINCIPLES OF POLITICAL ECONOMY. 
 
 Concerning the general effect of taxation, it is remarked, 
 that since it is the surrender of portions of private wealth, 
 which, if left in the hands of its producers, might have been 
 productive of immediate and new benefit to them, instead 
 of the general advantages to be derived from the public 
 good, it is necessarily, in a greater or less degree, a pri- 
 vate injury. But since it is a natural injury, and one in- 
 separable from the course of human society, it should be 
 the aim of governments to soften its appearances, and ren- 
 der it indirect, and, if possible, imperceptible. When the 
 expenditures of a government are so extensive as to ne- 
 cessitate a resort to the taxation of all commodities alike, 
 the necessaries of life included, a similar fall of profits, and 
 consequent discouragement of production, as was before 
 considered the necessary result of a resort to the cultiva- 
 tion of lands of inferior fertility, will ensue; and to the ef- 
 fect of taxation, as well as this latter cause, many of the 
 old countries of Europe must attribute their decay in wealth 
 and importance. 
 
New-York, January 1, 1837. 
 To appear in all February, or early in the month of March, 
 
 THE NEW MONTHLY MAGAZINE. 
 
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