1. ELECBOOK CLASSICS An Inquiry into theNature and Causes ofTHE WEALTHOF NATIONS Adam Smith

2. ELECBOOK CLASSICS ebc0072. Adam Smith: Wealth of NationsThis file is free for individual use only. It must not be altered or resold. Organisations wishing to use it must first obtain a licence. Low cost licenses are available. Contact us through our web site The Electric Book Co 1998 The Electric Book Company Ltd 20 Cambridge Drive, London SE12 8AJ, UK www.elecbook.com

3. This page intentionally blank

4. An Inquiry Into the Natureand Causes of theWealth of Nations Adam Smith

5. The Wealth of Nations: Book 1 4 Contents Click on page number to go to ChapterIntroduction and Plan of the Work ....................................................12Book One: Of The Causes Of Improvement In TheProductive Powers Of Labour, And Of The OrderAccording To Which Its Produce Is NaturallyDistributed Among The Different Ranks Of The People ...............16Chapter 1. Of the Division of Labour ................................................17Chapter II. Of the Principle which gives occasion tothe Division of Labour..........................................................................29Chapter III. That the Division of Labour is limited bythe Extent of the Market......................................................................35Chapter IV. Of the Origin and Use of Money...................................41Chapter V. Of the Real and Nominal Price ofCommodities, or their Price in Labour, and their Pricein Money.................................................................................................50Chapter VI.Of the Component Parts of the Price ofCommodities..........................................................................................73Chapter VII. Of the Natural and Market Price ofCommodities..........................................................................................83Chapter VIII. Of the Wages of Labour ............................................96Chapter IX. Of the Profits of Stock ................................................127Chapter X. Of Wages and Profit in the differentAdam Smith ElecBook Classics

6. The Wealth of Nations: Book 1 5Employments of Labour and Stock .................................................142 PART 1.......................................................................................................... 143 Inequalities arising from the Nature of the Employments themselves................................................................................................. 143 PART 2.......................................................................................................... 169 Inequalities by the Policy of Europe........................................................... 169Chapter XI. Of the Rent of Land .....................................................203 PART 1.......................................................................................................... 206 Of the Produce of Land which always affords Rent .................................... 206 PART 2.......................................................................................................... 227 Of the Produce of Land which sometimes does, and sometimes does not, afford Rent ................................................................................. 227 PART 3.......................................................................................................... 245 Of the Variations in the Proportion between the respective Values of that Sort of Produce which always affords Rent, and of that which sometimes does and sometimes does not afford Rent ................. 245 Digression Concerning The Variations In The Value Of Silver During The Course Of The Four Last Centuries ..................................... 248 First Period.......................................................................................... 248 Second Period ...................................................................................... 267 Third Period ........................................................................................ 269 Variations In The Proportion Between The Respective Values Of Gold And Silver ............................................................................... 292Adam Smith ElecBook Classics

7. The Wealth of Nations: Book 1 6 Grounds Of The Suspicion That The Value Of Silver Still Continues To Decrease.......................................................................... 299 Different Effects Of The Progress Of Improvement Upon Three Different Sorts Of Rude Produce.................................................. 301 First Sort.............................................................................................. 301 Second Sort.......................................................................................... 304 Third Sort............................................................................................ 317 Conclusion Of The Digression Concerning The Variations In The Value Of Silver .............................................................................. 330 Effects Of The Progress Of Improvement Upon The Real Price Of Manufactures........................................................................... 337 Conclusion Of The Chapter ................................................................... 344Book Two: Of the Nature, Accumulation, andEmployment of Stock ........................................................................359Chapter I. Of the Division of Stock..................................................363Chapter II. Of Money Considered as a ParticularBranch of the General Stock of the Society, or of theExpense of Maintaining the National Capital ................................374Chapter III. Of the Accumulation of Capital, or ofProductive and Unproductive Labour ............................................438Chapter IV. Of Stock Lent at Interest.............................................465Chapter V. Of the Different Employment of Capitals...................477Adam Smith ElecBook Classics

8. The Wealth of Nations: Book 1 7Book Three: Of the Different Progress of Opulence inDifferent Nations ................................................................................499Chapter I. Of the Natural Progress of Opulence ...........................500Chapter II. Of the Discouragement of Agriculture inthe ancient State of Europe after the Fall of the RomanEmpire ..................................................................................................507Chapter III. Of the Rise and Progress of Cities andTowns after the Fall of the Roman Empire ....................................523Chapter IV. How the Commerce of the TownsContributed to the Improvement of the Country..........................538Book Four: Of Systems of Political Economy ................................556Introduction.........................................................................................557Chapter I. Of the Principle of the Commercial, orMercantile System ..............................................................................558Chapter II. Of Restraints upon the Importation fromForeign Countries of such Goods as can be produced atHome.....................................................................................................589Chapter III. Of the extraordinary Restraints upon theImportation of Goods of almost all kinds from thoseCountries with which the Balance is supposed to bedisadvantageous..................................................................................617 PART 1.......................................................................................................... 617 Of the Unreasonableness of those Restraints even upon the Principles of the Commercial System ......................................................... 617Adam Smith ElecBook Classics

9. The Wealth of Nations: Book 1 8 Digression Concerning Banks Of Deposit, Particularly Concerning That Of Amsterdam ............................................................ 625 PART 2.......................................................................................................... 639 Of the Unreasonableness of those extraordinary Restraints upon other Principles.......................................................................................... 639Chapter IV. Of Drawbacks................................................................654Chapter V.Of Bounties ......................................................................662 DIGRESSION CONCERNING THE CORN TRADE AND CORN LAWS ....................................................................................... 686Chapter VI. Of Treaties of Commerce ............................................715Chapter VII. Of Colonies...................................................................732 PART 1.......................................................................................................... 732 Of the Motives for establishing new Colonies ............................................ 732 PART 2.......................................................................................................... 744 Causes of Prosperity of New Colonies........................................................ 744 PART 3.......................................................................................................... 780 Of the Advantages which Europe has derived from the Discovery of America, and from that of a Passage to the East Indies by the Cape of Good Hope ................................................................................... 780Chapter VIII. Conclusion of the Mercantile System ....................852Chapter IX. Of the Agricultural Systems, or of thoseSystems of Political Economy which represent theProduce of Land as either the sole or the principalSource of the Revenue and Wealth every Country........................880Adam Smith ElecBook Classics

10. The Wealth of Nations: Book 1 9Appendix ..............................................................................................917Book Five: Of the Revenue of the Sovereign orCommonwealth ...................................................................................921Chapter I. Of the Expenses of the Sovereign orCommonwealth ...................................................................................922 PART 1.......................................................................................................... 922 Of the Expense of Defence......................................................................... 922 PART 2.......................................................................................................... 946 Of the Expense of Justice........................................................................... 946 PART 3.......................................................................................................... 963 Of the Expense of Public Works and Public Institutions ............................. 963 ARTICLE 1.................................................................................................... 964 Of the Public Works and Institutions for facilitating the Commerce of the Society And, first, of those which are necessary for facilitating Commerce in general. ......................................... 964 Of the Public Works and Institutions which are necessary for facilitating particular Branches of Commerce. ............................................ 976 ARTICLE II ..................................................................................................1013 Of the Expense of the Institutions for the Education of Youth....................1013 ARTICLE III.................................................................................................1049 Of the Expense of the Institutions for the Instruction of People of all Ages....................................................................................................1049Adam Smith ElecBook Classics

11. The Wealth of Nations: Book 1 10 PART 4.........................................................................................................1088 Of the Expense of Supporting the Dignity of the Sovereign .......................1088 CONCLUSION ....................................................................................1088Chapter II. Of the Sources of the General or PublicRevenue of the Society.....................................................................1091 PART 1.........................................................................................................1091 Of the Funds or Sources of Revenue which may peculiarly belong to the Sovereign or Commonwealth ...............................................1091 PART 2.........................................................................................................1103 Of Taxes ..................................................................................................1103 ARTICLE I ...................................................................................................1107 Taxes upon Rent. Taxes upon the Rent of Land.........................................1107 Taxes which are proportioned, not to the Rent, but to the Produce of Land...................................................................................1119 Taxes upon the Rent of Houses .............................................................1124 ARTICLE II ..................................................................................................1135 Taxes on Profit, or upon the Revenue arising from Stock...........................1135 Taxes upon as Profit of particular Employments ...................................1142 Appendix to ARTICLES I and II. ...................................................................1151 Taxes upon the Capital Value of Land, Houses, and Stock.........................1151 ARTICLE III.................................................................................................1159 Taxes upon the Wages of Labour ..............................................................1159Adam Smith ElecBook Classics

12. The Wealth of Nations: Book 1 11 ARTICLE IV .................................................................................................1164 Taxes which, it is intended, should fall indifferently upon every different Species of Revenue.....................................................................1164 Capitation Taxes ..................................................................................1164 Taxes upon Consumable Commodities ..................................................1167Chapter III. Of Public Debts ..........................................................1222Adam Smith ElecBook Classics

13. The Wealth of Nations: Book 1 12 Introduction and Plan of the WorkT he annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes, andwhich consist always either in the immediate produce of thatlabour, or in what is purchased with that produce from othernations. According therefore as this produce, or what is purchased withit, bears a greater or smaller proportion to the number of thosewho are to consume it, the nation will be better or worse suppliedwith all the necessaries and conveniences for which it hasoccasion. But this proportion must in every nation be regulated by twodifferent circumstances; first, by the skill, dexterity, and judgmentwith which its labour is generally applied; and, secondly, by theproportion between the number of those who are employed inuseful labour, and that of those who are not so employed.Whatever be the soil, climate, or extent of territory of anyparticular nation, the abundance or scantiness of its annual supplymust, in that particular situation, depend upon those twocircumstances. The abundance or scantiness of this supply, too, seems todepend more upon the former of those two circumstances thanupon the latter. Among the savage nations of hunters and fishers,every individual who is able to work, is more or less employed inuseful labour, and endeavours to provide, as well as he can, theAdam Smith ElecBook Classics

14. The Wealth of Nations: Book 1 13necessaries and conveniences of life, for himself, or such of hisfamily or tribe as are either too old, or too young, or too infirm togo a hunting and fishing. Such nations, however, are so miserablypoor that, from mere want, they are frequently reduced, or, atleast, think themselves reduced, to the necessity sometimes ofdirectly destroying, and sometimes of abandoning their infants,their old people, and those afflicted with lingering diseases, toperish with hunger, or to be devoured by wild beasts. Amongcivilised and thriving nations, on the contrary, though a greatnumber of people do not labour at all, many of whom consume theproduce of ten times, frequently of a hundred times more labourthan the greater part of those who work; yet the produce of thewhole labour of the society is so great that all are often abundantlysupplied, and a workman, even of the lowest and poorest order, ifhe is frugal and industrious, may enjoy a greater share of thenecessaries and conveniences of life than it is possible for anysavage to acquire. The causes of this improvement, in the productive powers oflabour, and the order, according to which its produce is naturallydistributed among the different ranks and conditions of men in thesociety, make the subject of the first book of this Inquiry. Whatever be the actual state of the skill, dexterity, andjudgment with which labour is applied in any nation, theabundance or scantiness of its annual supply must depend, duringthe continuance of that state, upon the proportion between thenumber of those who are annually employed in useful labour, andthat of those who are not so employed. The number of useful andproductive labourers, it will hereafter appear, is everywhere inproportion to the quantity of capital stock which is employed inAdam Smith ElecBook Classics

15. The Wealth of Nations: Book 1 14setting them to work, and to the particular way in which it is soemployed. The second book, therefore, treats of the nature ofcapital stock, of the manner in which it is gradually accumulated,and of the different quantities of labour which it puts into motion,according to the different ways in which it is employed. Nations tolerably well advanced as to skill, dexterity, andjudgment, in the application of labour, have followed verydifferent plans in the general conduct or direction of it; thoseplans have not all been equally favourable to the greatness of itsproduce. The policy of some nations has given extraordinaryencouragement to the industry of the country; that of others to theindustry of towns. Scarce any nation has dealt equally andimpartially with every sort of industry. Since the downfall of theRoman empire, the policy of Europe has been more favourable toarts, manufactures, and commerce, the industry of towns, than toagriculture, the industry of the country. The circumstances whichseem to have introduced and established this policy are explainedin the third book. Though those different plans were, perhaps, first introduced bythe private interests and prejudices of particular orders of men,without any regard to, or foresight of, their consequences upon thegeneral welfare of the society; yet they have given occasion to verydifferent theories of political economy; of which some magnify theimportance of that industry which is carried on in towns, others ofthat which is carried on in the country. Those theories have had aconsiderable influence, not only upon the opinions of men oflearning, but upon the public conduct of princes and sovereignstates. I have endeavoured, in the fourth book, to explain, as fullyand distinctly as I can, those different theories, and the principalAdam Smith ElecBook Classics

16. The Wealth of Nations: Book 1 15effects which they have produced in different ages and nations. To explain in what has consisted the revenue of the great bodyof the people, or what has been the nature of those funds which, indifferent ages and nations, have supplied their annualconsumption, is the object of these four first books. The fifth andlast book treats of the revenue of the sovereign, or commonwealth.In this book I have endeavoured to show, first, what are thenecessary expenses of the sovereign, or commonwealth; which ofthose expenses ought to be defrayed by the general contribution ofthe whole society; and which of them by that of some particularpart only, or of some particular members of it: secondly, what arethe different methods in which the whole society may be made tocontribute towards defraying the expenses incumbent on thewhole society, and what are the principal advantages andinconveniences of each of those methods: and, thirdly and lastly,what are the reasons and causes which have induced almost allmodern governments to mortgage some part of this revenue, or tocontract debts, and what have been the effects of those debts uponthe real wealth, the annual produce of the land and labour of thesociety.Adam Smith ElecBook Classics

17. The Wealth of Nations: Book 1 16 Book One OF THE CAUSES OF IMPROVEMENT IN THE PRODUCTIVE POWERS OF LABOUR, AND OF THE ORDER ACCORDING TO WHICH ITS PRODUCE IS NATURALLY DISTRIBUTED AMONG THE DIFFERENT RANKS OF THE PEOPLEAdam Smith ElecBook Classics

18. The Wealth of Nations: Book 1 17 Chapter I Of the Division of LabourT he greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied,seem to have been the effects of the division of labour. The effects of the division of labour, in the general business ofsociety, will be more easily understood by considering in whatmanner it operates in some particular manufactures. It iscommonly supposed to be carried furthest in some very triflingones; not perhaps that it really is carried further in them than inothers of more importance: but in those trifling manufactureswhich are destined to supply the small wants of but a smallnumber of people, the whole number of workmen mustnecessarily be small; and those employed in every different branchof the work can often be collected into the same workhouse, andplaced at once under the view of the spectator. In those greatmanufactures, on the contrary, which are destined to supply thegreat wants of the great body of the people, every different branchof the work employs so great a number of workmen that it isimpossible to collect them all into the same workhouse. We canseldom see more, at one time, than those employed in one singlebranch. Though in such manufactures, therefore, the work mayreally be divided into a much greater number of parts than inthose of a more trifling nature, the division is not near so obvious,and has accordingly been much less observed.Adam Smith ElecBook Classics

19. The Wealth of Nations: Book 1 18 To take an example, therefore, from a very triflingmanufacture; but one in which the division of labour has beenvery often taken notice of, the trade of the pin-maker; a workmannot educated to this business (which the division of labour hasrendered a distinct trade), nor acquainted with the use of themachinery employed in it (to the invention of which the samedivision of labour has probably given occasion), could scarce,perhaps, with his utmost industry, make one pin in a day, andcertainly could not make twenty. But in the way in which thisbusiness is now carried on, not only the whole work is a peculiartrade, but it is divided into a number of branches, of which thegreater part are likewise peculiar trades. One man draws out thewire, another straights it, a third cuts it, a fourth points it, a fifthgrinds it at the top for receiving the head; to make the headrequires two or three distinct operations; to put it on is a peculiarbusiness, to whiten the pins is another; it is even a trade by itselfto put them into the paper; and the important business of makinga pin is, in this manner, divided into about eighteen distinctoperations, which, in some manufactories, are all performed bydistinct hands, though in others the same man will sometimesperform two or three of them. I have seen a small manufactory ofthis kind where ten men only were employed, and where some ofthem consequently performed two or three distinct operations.But though they were very poor, and therefore but indifferentlyaccommodated with the necessary machinery, they could, whenthey exerted themselves, make among them about twelve poundsof pins in a day. There are in a pound upwards of four thousandpins of a middling size. Those ten persons, therefore, could makeamong them upwards of forty-eight thousand pins in a day. EachAdam Smith ElecBook Classics

20. The Wealth of Nations: Book 1 19person, therefore, making a tenth part of forty-eight thousandpins, might be considered as making four thousand eight hundredpins in a day. But if they had all wrought separately andindependently, and without any of them having been educated tothis peculiar business, they certainly could not each of them havemade twenty, perhaps not one pin in a day; that is, certainly, notthe two hundred and fortieth, perhaps not the four thousand eighthundredth part of what they are at present capable of performing,in consequence of a proper division and combination of theirdifferent operations. In every other art and manufacture, the effects of the division oflabour are similar to what they are in this very trifling one;though, in many of them, the labour can neither be so muchsubdivided, nor reduced to so great a simplicity of operation. Thedivision of labour, however, so far as it can be introduced,occasions, in every art, a proportionable increase of the productivepowers of labour. The separation of different trades andemployments from one another seems to have taken place inconsequence of this advantage. This separation, too, is generallycalled furthest in those countries which enjoy the highest degreeof industry and improvement; what is the work of one man in arude state of society being generally that of several in an improvedone. In every improved society, the farmer is generally nothing buta farmer; the manufacturer, nothing but a manufacturer. Thelabour, too, which is necessary to produce any one completemanufacture is almost always divided among a great number ofhands. How many different trades are employed in each branch ofthe linen and woollen manufactures from the growers of the flaxand the wool, to the bleachers and smoothers of the linen, or to theAdam Smith ElecBook Classics

21. The Wealth of Nations: Book 1 20dyers and dressers of the cloth! The nature of agriculture, indeed,does not admit of so many subdivisions of labour, nor of socomplete a separation of one business from another, asmanufactures. It is impossible to separate so entirely the businessof the grazier from that of the corn-farmer as the trade of thecarpenter is commonly separated from that of the smith. Thespinner is almost always a distinct person from the weaver; butthe ploughman, the harrower, the sower of the seed, and thereaper of the corn, are often the same. The occasions for those different sorts of labour returning withthe different seasons of the year, it is impossible that one manshould be constantly employed in any one of them. Thisimpossibility of making so complete and entire a separation of allthe different branches of labour employed in agriculture isperhaps the reason why the improvement of the productivepowers of labour in this art does not always keep pace with theirimprovement in manufactures. The most opulent nations, indeed,generally excel all their neighbours in agriculture as well as inmanufactures; but they are commonly more distinguished by theirsuperiority in the latter than in the former. Their lands are ingeneral better cultivated, and having more labour and expensebestowed upon them, produce more in proportion to the extentand natural fertility of the ground. But this superiority of produceis seldom much more than in proportion to the superiority oflabour and expense. In agriculture, the labour of the rich countryis not always much more productive than that of the poor; or, atleast, it is never so much more productive as it commonly is inmanufactures. The corn of the rich country, therefore, will notalways, in the same degree of goodness, come cheaper to marketAdam Smith ElecBook Classics

22. The Wealth of Nations: Book 1 21than that of the poor. The corn of Poland, in the same degree ofgoodness, is as cheap as that of France, notwithstanding thesuperior opulence and improvement of the latter country. Thecorn of France is, in the corn provinces, fully as good, and in mostyears nearly about the same price with the corn of England,though, in opulence and improvement, France is perhaps inferiorto England. The corn-lands of England, however, are bettercultivated than those of France, and the corn-lands of France aresaid to be much better cultivated than those of Poland. But thoughthe poor country, notwithstanding the inferiority of its cultivation,can, in some measure, rival the rich in the cheapness andgoodness of its corn, it can pretend to no such competition in itsmanufactures; at least if those manufactures suit the soil, climate,and situation of the rich country. The silks of France are betterand cheaper than those of England, because the silk manufacture,at least under the present high duties upon the importation of rawsilk, does not so well suit the climate of England as that of France.But the hardware and the coarse woollens of England are beyondall comparison superior to those of France, and much cheaper tooin the same degree of goodness. In Poland there are said to bescarce any manufactures of any kind, a few of those coarserhousehold manufactures excepted, without which no country canwell subsist. This great increase of the quantity of work which, inconsequence of the division of labour, the same number of peopleare capable of performing, is owing to three differentcircumstances; first, to the increase of dexterity in every particularworkman; secondly, to the saving of the time which is commonlylost in passing from one species of work to another; and lastly, toAdam Smith ElecBook Classics

23. The Wealth of Nations: Book 1 22the invention of a great number of machines which facilitate andabridge labour, and enable one man to do the work of many. First, the improvement of the dexterity of the workmannecessarily increases the quantity of the work he can perform; andthe division of labour, by reducing every mans business to someone simple operation, and by making this operation the soleemployment of his life, necessarily increased very much dexterityof the workman. A common smith, who, though accustomed tohandle the hammer, has never been used to make nails, if uponsome particular occasion he is obliged to attempt it, will scarce, Iam assured, be able to make above two or three hundred nails in aday, and those too very bad ones. A smith who has beenaccustomed to make nails, but whose sole or principal businesshas not been that of a nailer, can seldom with his utmost diligencemake more than eight hundred or a thousand nails in a day. I haveseen several boys under twenty years of age who had neverexercised any other trade but that of making nails, and who, whenthey exerted themselves, could make, each of them, upwards oftwo thousand three hundred nails in a day. The making of a nail,however, is by no means one of the simplest operations. The sameperson blows the bellows, stirs or mends the fire as there isoccasion, heats the iron, and forges every part of the nail: inforging the head too he is obliged to change his tools. The differentoperations into which the making of a pin, or of a metal button, issubdivided, are all of them much more simple, and the dexterity ofthe person, of whose life it has been the sole business to performthem, is usually much greater. The rapidity with which some ofthe operations of those manufacturers are performed, exceedswhat the human hand could, by those who had never seen them,Adam Smith ElecBook Classics

24. The Wealth of Nations: Book 1 23be supposed capable of acquiring. Secondly, the advantage which is gained by saving the timecommonly lost in passing from one sort of work to another is muchgreater than we should at first view be apt to imagine it. It isimpossible to pass very quickly from one kind of work to anotherthat is carried on in a different place and with quite different tools.A country weaver, who cultivates a small farm, must lose a gooddeal of time in passing from his loom to the field, and from thefield to his loom. When the two trades can be carried on in thesame workhouse, the loss of time is no doubt much less. It is evenin this case, however, very considerable. A man commonlysaunters a little in turning his hand from one sort of employmentto another. When he first begins the new work he is seldom verykeen and hearty; his mind, as they say, does not go to it, and forsome time he rather trifles than applies to good purpose. Thehabit of sauntering and of indolent careless application, which isnaturally, or rather necessarily acquired by every countryworkman who is obliged to change his work and his tools everyhalf hour, and to apply his hand in twenty different ways almostevery day of his life, renders him almost always slothful and lazy,and incapable of any vigorous application even on the mostpressing occasions. Independent, therefore, of his deficiency inpoint of dexterity, this cause alone must always reduceconsiderably the quantity of work which he is capable ofperforming. Thirdly, and lastly, everybody must be sensible how muchlabour is facilitated and abridged by the application of propermachinery. It is unnecessary to give any example. I shall onlyobserve, therefore, that the invention of all those machines byAdam Smith ElecBook Classics

25. The Wealth of Nations: Book 1 24which labour is so much facilitated and abridged seems to havebeen originally owing to the division of labour. Men are muchmore likely to discover easier and readier methods of attaining anyobject when the whole attention of their minds is directed towardsthat single object than when it is dissipated among a great varietyof things. But in consequence of the division of labour, the wholeof every mans attention comes naturally to be directed towardssome one very simple object. It is naturally to be expected,therefore, that some one or other of those who are employed ineach particular branch of labour should soon find out easier andreadier methods of performing their own particular work,wherever the nature of it admits of such improvement. A greatpart of the machines made use of in those manufactures in whichlabour is most subdivided, were originally the inventions ofcommon workmen, who, being each of them employed in somevery simple operation, naturally turned their thoughts towardsfinding out easier and readier methods of performing it. Whoeverhas been much accustomed to visit such manufactures mustfrequently have been shown very pretty machines, which were theinventions of such workmen in order to facilitate and quickentheir particular part of the work. In the first fire-engines, a boywas constantly employed to open and shut alternately thecommunication between the boiler and the cylinder, according asthe piston either ascended or descended. One of those boys, wholoved to play with his companions, observed that, by tying a stringfrom the handle of the valve which opened this communication toanother part of the machine, the valve would open and shutwithout his assistance, and leave him at liberty to divert himselfwith his playfellows. One of the greatest improvements that hasAdam Smith ElecBook Classics

26. The Wealth of Nations: Book 1 25been made upon this machine, since it was first invented, was inthis manner the discovery of a boy who wanted to save his ownlabour. All the improvements in machinery, however, have by nomeans been the inventions of those who had occasion to use themachines. Many improvements have been made by the ingenuityof the makers of the machines, when to make them became thebusiness of a peculiar trade; and some by that of those who arecalled philosophers or men of speculation, whose trade it is not todo anything, but to observe everything; and who, upon thataccount, are often capable of combining together the powers of themost distant and dissimilar objects. In the progress of society,philosophy or speculation becomes, like every other employment,the principal or sole trade and occupation of a particular class ofcitizens. Like every other employment too, it is subdivided into agreat number of different branches, each of which affordsoccupation to a peculiar tribe or class of philosophers; and thissubdivision of employment in philosophy, as well as in every otherbusiness, improves dexterity, and saves time. Each individualbecomes more expert in his own peculiar branch, more work isdone upon the whole, and the quantity of science is considerablyincreased by it. It is the great multiplication of the productions of all thedifferent arts, in consequence of the division of labour, whichoccasions, in a well-governed society, that universal opulencewhich extends itself to the lowest ranks of the people. Everyworkman has a great quantity of his own work to dispose ofbeyond what he himself has occasion for; and every otherworkman being exactly in the same situation, he is enabled toAdam Smith ElecBook Classics

27. The Wealth of Nations: Book 1 26exchange a great quantity of his own goods for a great quantity, or,what comes to the same thing, for the price of a great quantity oftheirs. He supplies them abundantly with what they have occasionfor, and they accommodate him as amply with what he hasoccasion for, and a general plenty diffuses itself through all thedifferent ranks of the society. Observe the accommodation of the most common artificer orday-labourer in a civilised and thriving country, and you willperceive that the number of people of whose industry a part,though but a small part, has been employed in procuring him thisaccommodation, exceeds all computation. The woollen coat, forexample, which covers the day-labourer, as coarse and rough as itmay appear, is the produce of the joint labour of a great multitudeof workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver,the fuller, the dresser, with many others, must all join theirdifferent arts in order to complete even this homely production.How many merchants and carriers, besides, must have beenemployed in transporting the materials from some of thoseworkmen to others who often live in a very distant part of thecountry! How much commerce and navigation in particular, howmany ship-builders, sailors, sail-makers, rope-makers, must havebeen employed in order to bring together the different drugs madeuse of by the dyer, which often come from the remotest corners ofthe world! What a variety of labour, too, is necessary in order toproduce the tools of the meanest of those workmen! To saynothing of such complicated machines as the ship of the sailor, themill of the fuller, or even the loom of the weaver, let us consideronly what a variety of labour is requisite in order to form that veryAdam Smith ElecBook Classics

28. The Wealth of Nations: Book 1 27simple machine, the shears with which the shepherd clips thewool. The miner, the builder of the furnace for smelting the ore,the seller of the timber, the burner of the charcoal to be made useof in the smelting-house, the brick-maker, the brick-layer, theworkmen who attend the furnace, the mill-wright, the forger, thesmith, must all of them join their different arts in order to producethem. Were we to examine, in the same manner, all the differentparts of his dress and household furniture, the coarse linen shirtwhich he wears next his skin, the shoes which cover his feet, thebed which he lies on, and all the different parts which compose it,the kitchen-grate at which he prepares his victuals, the coalswhich he makes use of for that purpose, dug from the bowels ofthe earth, and brought to him perhaps by a long sea and a longland carriage, all the other utensils of his kitchen, all the furnitureof his table, the knives and forks, the earthen or pewter platesupon which he serves up and divides his victuals, the differenthands employed in preparing his bread and his beer, the glasswindow which lets in the heat and the light, and keeps out thewind and the rain, with all the knowledge and art requisite forpreparing that beautiful and happy invention, without which thesenorthern parts of the world could scarce have afforded a verycomfortable habitation, together with the tools of all the differentworkmen employed in producing those different conveniences; ifwe examine, I say, all these things, and consider what a variety oflabour is employed about each of them, we shall be sensible that,without the assistance and co-operation of many thousands, thevery meanest person in a civilised country could not be provided,even according to what we very falsely imagine the easy andsimple manner in which he is commonly accommodated.Adam Smith ElecBook Classics

29. The Wealth of Nations: Book 1 28Compared, indeed, with the more extravagant luxury of the great,his accommodation must no doubt appear extremely simple andeasy; and yet it may be true, perhaps, that the accommodation of aEuropean prince does not always so much exceed that of anindustrious and frugal peasant as the accommodation of the latterexceeds that of many an African king, the absolute master of thelives and liberties of ten thousand naked savages.Adam Smith ElecBook Classics

30. The Wealth of Nations: Book 1 29 Chapter II Of the Principle which gives occasion to the Division of LabourT his division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to whichit gives occasion. It is the necessary, though very slow and gradualconsequence of a certain propensity in human nature which has inview no such extensive utility; the propensity to truck, barter, andexchange one thing for another. Whether this propensity be one of those original principles inhuman nature of which no further account can be given; orwhether, as seems more probable, it be the necessary consequenceof the faculties of reason and speech, it belongs not to our presentsubject to inquire. It is common to all men, and to be found in noother race of animals, which seem to know neither this nor anyother species of contracts. Two greyhounds, in running down thesame hare, have sometimes the appearance of acting in some sortof concert. Each turns her towards his companion, or endeavoursto intercept her when his companion turns her towards himself.This, however, is not the effect of any contract, but of theaccidental concurrence of their passions in the same object at thatparticular time. Nobody ever saw a dog make a fair and deliberateexchange of one bone for another with another dog. Nobody eversaw one animal by its gestures and natural cries signify to another,this is mine, that yours; I am willing to give this for that. When anAdam Smith ElecBook Classics

31. The Wealth of Nations: Book 1 30animal wants to obtain something either of a man or of anotheranimal, it has no other means of persuasion but to gain the favourof those whose service it requires. A puppy fawns upon its dam,and a spaniel endeavours by a thousand attractions to engage theattention of its master who is at dinner, when it wants to be fed byhim. Man sometimes uses the same arts with his brethren, andwhen he has no other means of engaging them to act according tohis inclinations, endeavours by every servile and fawningattention to obtain their good will. He has not time, however, to dothis upon every occasion. In civilised society he stands at all timesin need of the co-operation and assistance of great multitudes,while his whole life is scarce sufficient to gain the friendship of afew persons. In almost every other race of animals each individual, when it isgrown up to maturity, is entirely independent, and in its naturalstate has occasion for the assistance of no other living creature.But man has almost constant occasion for the help of his brethren,and it is in vain for him to expect it from their benevolence only.He will be more likely to prevail if he can interest their self-love inhis favour, and show them that it is for their own advantage to dofor him what he requires of them. Whoever offers to another abargain of any kind, proposes to do this. Give me that which Iwant, and you shall have this which you want, is the meaning ofevery such offer; and it is in this manner that we obtain from oneanother the far greater part of those good offices which we standin need of. It is not from the benevolence of the butcher, thebrewer, or the baker that we expect our dinner, but from theirregard to their own interest. We address ourselves, not to theirhumanity but to their self-love, and never talk to them of our ownAdam Smith ElecBook Classics

32. The Wealth of Nations: Book 1 31necessities but of their advantages. Nobody but a beggar choosesto depend chiefly upon the benevolence of his fellow-citizens.Even a beggar does not depend upon it entirely. The charity ofwell-disposed people, indeed, supplies him with the whole fund ofhis subsistence. But though this principle ultimately provides himwith all the necessaries of life which he has occasion for, it neitherdoes nor can provide him with them as he has occasion for them.The greater part of his occasional wants are supplied in the samemanner as those of other people, by treaty, by barter, and bypurchase. With the money which one man gives him he purchasesfood. The old clothes which another bestows upon him heexchanges for other old clothes which suit him better, or forlodging, or for food, or for money, with which he can buy eitherfood, clothes, or lodging, as he has occasion. As it is by treaty, by barter, and by purchase that we obtainfrom one another the greater part of those mutual good officeswhich we stand in need of, so it is this same trucking dispositionwhich originally gives occasion to the division of labour. In a tribeof hunters or shepherds a particular person makes bows andarrows, for example, with more readiness and dexterity than anyother. He frequently exchanges them for cattle or for venison withhis companions; and he finds at last that he can in this manner getmore cattle and venison than if he himself went to the field tocatch them. From a regard to his own interest, therefore, themaking of bows and arrows grows to be his chief business, and hebecomes a sort of armourer. Another excels in making the framesand covers of their little huts or movable houses. He is accustomedto be of use in this way to his neighbours, who reward him in thesame manner with cattle and with venison, till at last he finds it hisAdam Smith ElecBook Classics

33. The Wealth of Nations: Book 1 32interest to dedicate himself entirely to this employment, and tobecome a sort of house-carpenter. In the same manner a thirdbecomes a smith or a brazier, a fourth a tanner or dresser of hidesor skins, the principal part of the nothing of savages. And thus thecertainty of being able to exchange all that surplus part of theproduce of his own labour, which is over and above his ownconsumption, for such parts of the produce of other mens labouras he may have occasion for, encourages every man to applyhimself to a particular occupation, and to cultivate and bring toperfection whatever talent or genius he may possess for thatparticular species of business. The difference of natural talents in different men is, in reality,much less than we are aware of; and the very different geniuswhich appears to distinguish men of different professions, whengrown up to maturity, is not upon many occasions so much thecause as the effect of the division of labour. The differencebetween the most dissimilar characters, between a philosopherand a common street porter, for example, seems to arise not somuch from nature as from habit, custom, and education. Whenthey came into the world, and for the first six or eight years oftheir existence, they were perhaps very much alike, and neithertheir parents nor playfellows could perceive any remarkabledifference. About that age, or soon after, they come to beemployed in very different occupations. The difference of talentscomes then to be taken notice of, and widens by degrees, till at lastthe vanity of the philosopher is willing to acknowledge scarce anyresemblance. But without the disposition to truck, barter, andexchange, every man must have procured to himself everynecessary and conveniency of life which he wanted. All must haveAdam Smith ElecBook Classics

34. The Wealth of Nations: Book 1 33had the same duties to perform, and the same work to do, andthere could have been no such difference of employment as couldalone give occasion to any great difference of talents. As it is this disposition which forms that difference of talents, soremarkable among men of different professions, so it is this samedisposition which renders that difference useful. Many tribes ofanimals acknowledged to be all of the same species derive fromnature a much more remarkable distinction of genius, than what,antecedent to custom and education, appears to take place amongmen. By nature a philosopher is not in genius and disposition half sodifferent from a street porter, as a mastiff is from a greyhound, ora greyhound from a spaniel, or this last from a shepherds dog.Those different tribes of animals, however, though all of the samespecies, are of scarce any use to one another. The strength of themastiff is not, in the least, supported either by the swiftness of thegreyhound, or by the sagacity of the spaniel, or by the docility ofthe shepherds dog. The effects of those different geniuses andtalents, for want of the power or disposition to barter andexchange, cannot be brought into a common stock, and do not inthe least contribute to the better accommodation and conveniencyof the species. Each animal is still obliged to support and defenditself, separately and independently, and derives no sort ofadvantage from that variety of talents with which nature hasdistinguished its fellows. Among men, on the contrary, the mostdissimilar geniuses are of use to one another; the differentproduces of their respective talents, by the general disposition totruck, barter, and exchange, being brought, as it were, into acommon stock, where every man may purchase whatever part ofAdam Smith ElecBook Classics

35. The Wealth of Nations: Book 1 34the produce of other mens talents he has occasion for.Adam Smith ElecBook Classics

36. The Wealth of Nations: Book 1 35 Chapter III That the Division of Labour is limited by the Extent of the MarketA a it is the power of exchanging that gives occasion to the division of labour, so the extent of this division must always be limited by the extent of that power, or, in otherwords, by the extent of the market. When the market is very small,no person can have any encouragement to dedicate himselfentirely to one employment, for want of the power to exchange allthat surplus part of the produce of his own labour, which is overand above his own consumption, for such parts of the produce ofother mens labour as he has occasion for. There are some sorts of industry, even of the lowest kind, whichcan be carried on nowhere but in a great town. A porter, forexample, can find employment and subsistence in no other place.A village is by much too narrow a sphere for him; even an ordinarymarket town is scarce large enough to afford him constantoccupation. In the lone houses and very small villages which arescattered about in so desert a country as the Highlands ofScotland, every farmer must be butcher, baker and brewer for hisown family. In such situations we can scarce expect to find even a smith, acarpenter, or a mason, within less than twenty miles of another ofthe same trade. The scattered families that live at eight or tenmiles distance from the nearest of them must learn to performthemselves a great number of little pieces of work, for which, inAdam Smith ElecBook Classics

37. The Wealth of Nations: Book 1 36more populous countries, they would call in the assistance of thoseworkmen. Country workmen are almost everywhere obliged toapply themselves to all the different branches of industry thathave so much affinity to one another as to be employed about thesame sort of materials. A country carpenter deals in every sort ofwork that is made of wood: a country smith in every sort of workthat is made of iron. The former is not only a carpenter, but ajoiner, a cabinet-maker, and even a carver in wood, as well as awheel-wright, a plough-wright, a cart and waggon maker. Theemployments of the latter are still more various. It is impossiblethere should be such a trade as even that of a nailer in the remoteand inland parts of the Highlands of Scotland. Such a workman atthe rate of a thousand nails a day, and three hundred workingdays in the year, will make three hundred thousand nails in theyear. But in such a situation it would be impossible to dispose ofone thousand, that is, of one days work in the year. As by means of water-carriage a more extensive market isopened to every sort of industry than what land-carriage alone canafford it, so it is upon the sea-coast, and along the banks ofnavigable rivers, that industry of every kind naturally begins tosubdivide and improve itself, and it is frequently not till a longtime after that those improvements extend themselves to theinland parts of the country. A broad-wheeled waggon, attended bytwo men, and drawn by eight horses, in about six weeks timecarries and brings back between London and Edinburgh near fourton weight of goods. In about the same time a ship navigated bysix or eight men, and sailing between the ports of London andLeith, frequently carries and brings back two hundred ton weightof goods. Six or eight men, therefore, by the help of water-Adam Smith ElecBook Classics

38. The Wealth of Nations: Book 1 37carriage, can carry and bring back in the same time the samequantity of goods between London and Edinburgh, as fifty broad-wheeled waggons, attended by a hundred men, and drawn by fourhundred horses. Upon two hundred tons of goods, therefore,carried by the cheapest land-carriage from London to Edinburgh,there must be charged the maintenance of a hundred men forthree weeks, and both the maintenance, and, what is nearly equalto the maintenance, the wear and tear of four hundred horses aswell as of fifty great waggons. Whereas, upon the same quantity ofgoods carried by water, there is to be charged only themaintenance of six or eight men, and the wear and tear of a ship oftwo hundred tons burden, together with the value of the superiorrisk, or the difference of the insurance between land and water-carriage. Were there no other communication between those twoplaces, therefore, but by land-carriage, as no goods could betransported from the one to the other, except such whose pricewas very considerable in proportion to their weight, they couldcarry on but a small part of that commerce which at presentsubsists between them, and consequently could give but a smallpart of that encouragement which they at present mutually affordto each others industry. There could be little or no commerce ofany kind between the distant parts of the world. What goods couldbear the expense of land-carriage between London and Calcutta?Or if there were any so precious as to be able to support thisexpense, with what safety could they be transported through theterritories of so many barbarous nations? Those two cities,however, at present carry on a very considerable commerce witheach other, and by mutually affording a market, give a good deal ofencouragement to each others industry.Adam Smith ElecBook Classics

39. The Wealth of Nations: Book 1 38 Since such, therefore, are the advantages of water-carriage, it isnatural that the first improvements of art and industry should bemade where this conveniency opens the whole world for a marketto the produce of every sort of labour, and that they should alwaysbe much later in extending themselves into the inland parts of thecountry. The inland parts of the country can for a long time haveno other market for the greater part of their goods, but the countrywhich lies round about them, and separates them from the sea-coast, and the great navigable rivers. The extent of their market,therefore, must for a long time be in proportion to the riches andpopulousness of that country, and consequently theirimprovement must always be posterior to the improvement of thatcountry. In our North American colonies the plantations haveconstantly followed either the sea-coast or the banks of thenavigable rivers, and have scarce anywhere extended themselvesto any considerable distance from both. The nations that, according to the best authenticated history,appear to have been first civilised, were those that dwelt round thecoast of the Mediterranean Sea. That sea, by far the greatest inletthat is known in the world, having no tides, nor consequently anywaves except such as are caused by the wind only, was, by thesmoothness of its surface, as well as by the multitude of its islands,and the proximity of its neighbouring shores, extremelyfavourable to the infant navigation of the world; when, from theirignorance of the compass, men were afraid to quit the view of thecoast, and from the imperfection of the art of shipbuilding, toabandon themselves to the boisterous waves of the ocean. To passbeyond the pillars of Hercules, that is, to sail out of the Straits ofGibraltar, was, in the ancient world, long considered as a mostAdam Smith ElecBook Classics

40. The Wealth of Nations: Book 1 39wonderful and dangerous exploit of navigation. It was late beforeeven the Phoenicians and Carthaginians, the most skilfulnavigators and ship-builders of those old times, attempted it, andthey were for a long time the only nations that did attempt it. Of all the countries on the coast of the Mediterranean Sea,Egypt seems to have been the first in which either agriculture ormanufactures were cultivated and improved to any considerabledegree. Upper Egypt extends itself nowhere above a few milesfrom the Nile, and in Lower Egypt that great river breaks itselfinto many different canals, which, with the assistance of a little art,seem to have afforded a communication by water-carriage, notonly between all the great towns, but between all the considerablevillages, and even to many farmhouses in the country; nearly inthe same manner as the Rhine and the Maas do in Holland atpresent. The extent and easiness of this inland navigation wasprobably one of the principal causes of the early improvement ofEgypt. The improvements in agriculture and manufactures seemlikewise to have been of very great antiquity in the provinces ofBengal, in the East Indies, and in some of the eastern provinces ofChina; though the great extent of this antiquity is notauthenticated by any histories of whose authority we, in this partof the world, are well assured. In Bengal the Ganges and severalother great rivers form a great number of navigable canals in thesame manner as the Nile does in Egypt. In the Eastern provincesof China too, several great rivers form, by their different branches,a multitude of canals, and by communicating with one anotherafford an inland navigation much more extensive than that eitherof the Nile or the Ganges, or perhaps than both of them putAdam Smith ElecBook Classics

41. The Wealth of Nations: Book 1 40together. It is remarkable that neither the ancient Egyptians, northe Indians, nor the Chinese, encouraged foreign commerce, butseem all to have derived their great opulence from this inlandnavigation. All the inland parts of Africa, and all that part of Asia which liesany considerable way north of the Euxine and Caspian seas, theancient Scythia, the modern Tartary and Siberia, seem in all agesof the world to have been in the same barbarous and uncivilisedstate in which we find them at present. The Sea of Tartary is thefrozen ocean which admits of no navigation, and though some ofthe greatest rivers in the world run through that country, they areat too great a distance from one another to carry commerce andcommunication through the greater part of it. There are in Africanone of those great inlets, such as the Baltic and Adriatic seas inEurope, the Mediterranean and Euxine seas in both Europe andAsia, and the gulfs of Arabia, Persia, India, Bengal, and Siam, inAsia, to carry maritime commerce into the interior parts of thatgreat continent: and the great rivers of Africa are at too great adistance from one another to give occasion to any considerableinland navigation. The commerce besides which any nation cancarry on by means of a river which does not break itself into anygreat number of branches or canals, and which runs into anotherterritory before it reaches the sea, can never be very considerable;because it is always in the power of the nations who possess thatother territory to obstruct the communication between the uppercountry and the sea. The navigation of the Danube is of very littleuse to the different states of Bavaria, Austria and Hungary, incomparison of what it would be if any of them possessed the wholeof its course till it falls into the Black Sea.Adam Smith ElecBook Classics

42. The Wealth of Nations: Book 1 41 Chapter IV Of the Origin and Use of MoneyW hen the division of labour has been once thoroughly established, it is but a very small part of a mans wants which the produce of his own labour can supply. Hesupplies the far greater part of them by exchanging that surpluspart of the produce of his own labour, which is over and above hisown consumption, for such parts of the produce of other menslabour as he has occasion for. Every man thus lives by exchanging,or becomes in some measure a merchant, and the society itselfgrows to be what is properly a commercial society. But when the division of labour first began to take place, thispower of exchanging must frequently have been very muchclogged and embarrassed in its operations. One man, we shallsuppose, has more of a certain commodity than he himself hasoccasion for, while another has less. The former consequentlywould be glad to dispose of, and the latter to purchase, a part ofthis superfluity. But if this latter should chance to have nothingthat the former stands in need of, no exchange can be madebetween them. The butcher has more meat in his shop than hehimself can consume, and the brewer and the baker would each ofthem be willing to purchase a part of it. But they have nothing tooffer in exchange, except the different productions of theirrespective trades, and the butcher is already provided with all thebread and beer which he has immediate occasion for. Noexchange can, in this case, be made between them. He cannot beAdam Smith ElecBook Classics

43. The Wealth of Nations: Book 1 42their merchant, nor they his customers; and they are all of themthus mutually less serviceable to one another. In order to avoid theinconveniency of such situations, every prudent man in everyperiod of society, after the first establishment of the division oflabour, must naturally have endeavoured to manage his affairs insuch a manner as to have at all times by him, besides the peculiarproduce of his own industry, a certain quantity of some onecommodity or other, such as he imagined few people would belikely to refuse in exchange for the produce of their industry. Many different commodities, it is probable, were successivelyboth thought of and employed for this purpose. In the rude ages ofsociety, cattle are said to have been the common instrument ofcommerce; and, though they must have been a most inconvenientone, yet in old times we find things were frequently valuedaccording to the number of cattle which had been given inexchange for them. The armour of Diomede, says Homer, cost onlynine oxen; but that of Glaucus cost an hundred oxen. Salt is said tobe the common instrument of commerce and exchanges inAbyssinia; a species of shells in some parts of the coast of India;dried cod at Newfoundland; tobacco in Virginia; sugar in some ofour West India colonies; hides or dressed leather in some othercountries; and there is at this day a village in Scotland where it isnot uncommon, I am told, for a workman to carry nails instead ofmoney to the bakers shop or the alehouse. In all countries, however, men seem at last to have beendetermined by irresistible reasons to give the preference, for thisemployment, to metals above every other commodity. Metals cannot only be kept with as little loss as any other commodity, scarceanything being less perishable than they are, but they canAdam Smith ElecBook Classics

44. The Wealth of Nations: Book 1 43likewise, without any loss, be divided into any number of parts, asby fusion those parts can easily be reunited again; a quality whichno other equally durable commodities possess, and which morethan any other quality renders them fit to be the instruments ofcommerce and circulation. The man who wanted to buy salt, for example, and had nothingbut cattle to give in exchange for it, must have been obliged to buysalt to the value of a whole ox, or a whole sheep at a time. He couldseldom buy less than this, because what he was to give for it couldseldom be divided without loss; and if he had a mind to buy more,he must, for the same reasons, have been obliged to buy double ortriple the quantity, the value, to wit, of two or three oxen, or of twoor three sheep. If, on the contrary, instead of sheep or oxen, hehad metals to give in exchange for it, he could easily proportionthe quantity of the metal to the precise quantity of the commoditywhich he had immediate occasion for. Different metals have been made use of by different nations forthis purpose. Iron was the common instrument of commerceamong the ancient Spartans; copper among the ancient Romans;and gold and silver among all rich and commercial nations. Those metals seem originally to have been made use of for thispurpose in rude bars, without any stamp or coinage. Thus we aretold by Pliny,1 upon the authority of Timaeus, an ancient historian,that, till the time of Servius Tullius, the Romans had no coinedmoney, but made use of unstamped bars of copper, to purchasewhatever they had occasion for. These bars, therefore, performedat this time the function of money.1 Historia naturalis, xxxiii, 3.Adam Smith ElecBook Classics

45. The Wealth of Nations: Book 1 44 The use of metals in this rude state was attended with two veryconsiderable inconveniencies; first, with the trouble of weighing;and, secondly, with that of assaying them. In the precious metals,where a small difference in the quantity makes a great differencein the value, even the business of weighing, with proper exactness,requires at least very accurate weights and scales. The weighing ofgold in particular is an operation of some nicety. In the coarsermetals, indeed, where a small error would be of little consequence,less accuracy would, no doubt, be necessary. Yet we should find itexcessively troublesome, if every time a poor man had occasioneither to buy or sell a farthings worth of goods, he was obliged toweigh the farthing. The operation of assaying is still more difficult,still more tedious, and, unless a part of the metal is fairly melted inthe crucible, with proper dissolvents, any conclusion that can bedrawn from it, is extremely uncertain. Before the institution ofcoined money, however, unless they went through this tedious anddifficult operation, people must always have been liable to thegrossest frauds and impositions, and instead of a pound weight ofpure silver, or pure copper, might receive in exchange for theirgoods an adulterated composition of the coarsest and cheapestmaterials, which had, however, in their outward appearance, beenmade to resemble those metals. To prevent such abuses, tofacilitate exchanges, and thereby to encourage all sorts of industryand commerce, it has been found necessary, in all countries thathave made any considerable advances towards improvement, toaffix a public stamp upon certain quantities of such particularmetals as were in those countries commonly made use of topurchase goods. Hence the origin of coined money, and of thosepublic offices called mints; institutions exactly of the same natureAdam Smith ElecBook Classics

46. The Wealth of Nations: Book 1 45with those of the aulnagers and stamp-masters of woollen andlinen cloth. All of them are equally meant to ascertain, by means ofa public stamp, the quantity and uniform goodness of thosedifferent commodities when brought to market. The first public stamps of this kind that were affixed to thecurrent metals, seem in many cases to have been intended toascertain, what it was both most difficult and most important toascertain, the goodness or fineness of the metal, and to haveresembled the sterling mark which is at present affixed to plateand bars of silver, or the Spanish mark which is sometimes affixedto ingots of gold, and which being struck only upon one side of thepiece, and not covering the whole surface, ascertains the fineness,but not the weight of the metal. Abraham weighs to Ephron thefour hundred shekels of silver which he had agreed to pay for thefield of Machpelah. They are said, however, to be the currentmoney of the merchant, and yet are received by weight and not bytale, in the same manner as ingots of gold and bars of silver are atpresent. The revenues of the ancient Saxon kings of England aresaid to have been paid, not in money but in kind, that is, in victualsand provisions of all sorts. William the Conqueror introduced thecustom of paying them in money. This money, however, was, for along time, received at the exchequer, by weight and not by tale. The inconveniency and difficulty of weighing those metals withexactness gave occasion to the institution of coins, of which thestamp, covering entirely both sides of the piece and sometimes theedges too, was supposed to ascertain not only the fineness, but theweight of the metal. Such coins, therefore, were received by tale asat present, without the trouble of weighing. The denominations of those coins seem originally to haveAdam Smith ElecBook Classics

47. The Wealth of Nations: Book 1 46expressed the weight or quantity of metal contained in them. Inthe time of Servius Tullius, who first coined money at Rome, theRoman as or pondo contained a Roman pound of good copper. Itwas divided in the same manner as our Troyes pound, into twelveounces, each of which contained a real ounce of good copper. TheEnglish pound sterling, in the time of Edward I, contained apound, Tower weight, of silver, of a known fineness. The Towerpound seems to have been something more than the Romanpound, and something less than the Troyes pound. This last wasnot introduced into the mint of England till the 18th of Henry VIII.The French livre contained in the time of Charlemagne a pound,Troyes weight, of silver of a known fineness. The fair of Troyes inChampaign was at that time frequented by all the nations ofEurope, and the weights and measures of so famous a marketwere generally known and esteemed. The Scots money poundcontained, from the time of Alexander the First to that of RobertBruce, a pound of silver of the same weight and fineness with theEnglish pound sterling. English, French, and Scots pennies, too,contained all of them originally a real pennyweight of silver, thetwentieth part of an ounce, and the two-hundred-and-fortieth partof a pound. The shilling too seems originally to have been thedenomination of a weight. When wheat is at twelve shillings thequarter, says an ancient statute of Henry III, then wastel bread of afarthing shall weigh eleven shillings and four pence. Theproportion, however, between the shilling and either the penny onthe one hand, or the pound on the other, seems not to have beenso constant and uniform as that between the penny and thepound. During the first race of the kings of France, the French souor shilling appears upon different occasions to have contained five,Adam Smith ElecBook Classics

48. The Wealth of Nations: Book 1 47twelve, twenty, and forty pennies. Among the ancient Saxons ashilling appears at one time to have contained only five pennies,and it is not improbable that it may have been as variable amongthem as among their neighbours, the ancient Franks. From the time of Charlemagne among the French, and fromthat of William the Conqueror among the English, the proportionbetween the pound, the shilling, and the penny, seems to havebeen uniformly the same as at present, though the value of eachhas been very different. For in every country of the world, Ibelieve, the avarice and injustice of princes and sovereign states,abusing the confidence of their subjects, have by degreesdiminished the real quantity of metal, which had been originallycontained in their coins. The Roman as, in the latter ages of theRepublic, was reduced to the twenty-fourth part of its originalvalue, and, instead of weighing a pound, came to weigh only halfan ounce. The English pound and penny contain at present abouta third only; the Scots pound and penny about a thirty-sixth; andthe French pound and penny about a sixty-sixth part of theiroriginal value. By means of those operations the princes andsovereign states which performed them were enabled, inappearance, to pay their debts and to fulfil their engagements witha smaller quantity of silver than would otherwise have beenrequisite. It was indeed in appearance only; for their creditorswere really defrauded of a part of what was due to them. All otherdebtors in the state were allowed the same privilege, and mightpay with the same nominal sum of the new and debased coinwhatever they had borrowed in the old. Such operations,therefore, have always proved favourable to the debtor, andruinous to the creditor, and have sometimes produced a greaterAdam Smith ElecBook Classics

49. The Wealth of Nations: Book 1 48and more universal revolution in the fortunes of private persons,than could have been occasioned by a very great public calamity. It is in this manner that money has become in all civilisednations the universal instrument of commerce, by the interventionof which goods of all kinds are bought and sold, or exchanged forone another. What are the rules which men naturally observe in exchangingthem either for money or for one another, I shall now proceed toexamine. These rules determine what may be called the relative orexchangeable value of goods. The word value, it is to be observed, has two differentmeanings, and sometimes expresses the utility of some particularobject, and sometimes the power of purchasing other goods whichthe possession of that object conveys. The one may be calledvalue in use; the other, value in exchange. The things whichhave the greatest value in use have frequently little or no value inexchange; and, on the contrary, those which have the greatestvalue in exchange have frequently little or no value in use.Nothing is more useful than water: but it will purchase scarceanything; scarce anything can be had in exchange for it. Adiamond, on the contrary, has scarce any value in use; but a verygreat quantity of other goods may frequently be had in exchangefor it. In order to investigate the principles which regulate theexchangeable value of commodities, I shall endeavour to show: First, what is the real measure of this exchangeable value; or,wherein consists the real price of all commodities. Secondly, what are the different parts of which this real price iscomposed or made up.Adam Smith ElecBook Classics

50. The Wealth of Nations: Book 1 49 And, lastly, what are the different circumstances whichsometimes raise some or all of these different parts of price above,and sometimes sink them below their natural or ordinary rate; or,what are the causes which sometimes hinder the market price,that is, the actual price of commodities, from coinciding exactlywith what may be called their natural price. I shall endeavour to explain, as fully and distinctly as I can,those three subjects in the three following chapters, for which Imust very earnestly entreat both the patience and attention of thereader: his patience in order to examine a detail which mayperhaps in some places appear unnecessarily tedious; and hisattention in order to understand what may, perhaps, after thefullest explication which I am capable of giving of it, appear still insome degree obscure. I am always willing to run some hazard ofbeing tedious in order to be sure that I am perspicuous; and aftertaking the utmost pains that I can to be perspicuous, someobscurity may still appear to remain upon a subject in its ownnature extremely abstracted.Adam Smith ElecBook Classics

51. The Wealth of Nations: Book 1 50 Chapter V Of the Real and Nominal Price of Commodities, or their Price in Labour, and their Price in MoneyE