Book 12018-10-23T05:39:41+00:00

THE WEALTH OF NATIONS : BOOK 1

CHAPTER 1: DIVISION OF LABOR

The greatest improvements in the productive power of labor, as well as the development of specialized skills, dexterity, and judgment, occur when there is division of labor (specialization).

Let us look at the example of a pin-maker. An unskilled tradesman could perhaps produce one pin a day. But if we divide the work involved into a number of different trades—one man draws out the wire, another straightens it, a third cuts it, a fourth points it, etc.—separating the production of the pin into about eighteen distinct operations, then ten men could produce 48,000 pins in a day.

There are three reasons for this exponential increase in productivity:

Firstly, this division of labor increases each workman’s dexterity; since each man is working on a sole task, his specialized knowledge of that task will grow, thus increasing his dexterity.

Secondly, division of labor in this way will save time for each worker. Since the worker is focusing on an individual task, he does not have to pass from one task to another in order to change tools, for example. This will save time and thus increase each worker’s productivity.

Thirdly, workers who spend large amounts of time on a single, repetitive operation often come up with ideas for machines to streamline the equipment and tools used, thus increasing productivity. Further improvements have been made thanks to the ingenuity of the manufacturers of these machines.

CHAPTER 2: THE PRINCIPLE WHICH GIVES OCCASION TO THE DIVISION OF LABOR

The division of labor came about as a result of our preference, as human beings, for bartering and exchanging items. Trading items is part of human nature, and common to every society.

Man will always need help from others. He will be more likely to receive that help, however, if he can turn others’ self-interest to his advantage, by showing them that there is something in it for them. The butcher, brewer and baker who sell us our dinner are not motivated to do so by kindness, but by their own self-interest.

Nobody but a beggar chooses to depend solely upon the benevolence of his fellow citizens. Most of our needs are met through bartering and purchasing. This is what originally gave rise to the introduction of division of labor.

CHAPTER 3: THE DIVISION OF LABOR IS LIMITED BY THE EXTENT OF THE MARKET

In areas in which the market is very small, the division of labor tends to be limited, with workers often needing to do several jobs rather than focusing on a single trade or task. In a small village, for example, a farmer will often act as the butcher, baker and brewer for his own family.

Let us compare the transportation of goods between London and Edinburgh by land versus by ship. By ship, it would take only six to eight men to transport the same quantity of goods as it would take 100 men, fifty wagons and 400 horses to transport by land. As for expenses, transporting 200 tons of goods by land from London to Edinburgh would incur costs for the upkeep of 100 men and 400 horses for three weeks, as well as the wear and tear to the fifty wagons. Expenses for transportation by water would be for the upkeep of only six to eight men and the wear and tear caused to the ship by the cargo. To this we must add the difference in insurance costs for transport via land versus water.

Plantations in North American colonies have consistently been planted along shorelines or riverbanks.

CHAPTER 4: THE ORIGIN AND USE OF MONEY

Once division of labor has been implemented within a society, the members of that society will start to trade.

When division of labor was first employed, initial experiences in trade and exchange must have been difficult and often impractical. One man has more of a commodity than he needs; another has less. The former would be glad to dispose of, and the latter to purchase—but if the latter has nothing the former needs, no exchange can be made.

In primitive society, for example, cattle were the common commodity used for commerce; in Abyssinia, it was salt. So the man who wished to buy salt but had nothing other than cattle to give in exchange would have been obliged to buy salt to the value of a whole ox.

This led to the idea of a common currency in the form of metal. This had its inconveniences, however, in terms of weighing and evaluating values. To prevent abuse, countries started to stamp specific quantities onto the metals—which later led to coinage and minting. Coins displayed a stamp on either side confirming the coin’s purity and weight.

The word “value” has two different meanings: it can refer to an object’s utility or its purchasing power. The former could be called “value in use;” the latter “value in exchange.” Water is valuable in the sense that it is essential to the preservation of life, but its purchasing power is very low.

CHAPTER 5: THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOR, AND THEIR PRICE IN MONEY

An individual’s wealth is determined by his capacity to provide for the wants and needs of human life. With division of labor, an individual man’s labor provides for only a portion of these wants and needs. As such, an individual’s wealth is in fact determined by the amount of labor he can afford to purchase.

The value of a commodity to a man who owns it but does not intend to use it himself is equal to the quantity of labor he can purchase with it. Labor is the real measure of the trading value of all commodities. The value of a commodity to a man who wants either to dispose of it or trade it for something else is the labor it can save him.

Although it is said that wealth is power, it does not follow that a wealthy individual is a powerful individual. He can acquire power by purchasing either labor or the commodities produced through labor. A man’s wealth is thus determined by the amount of other men’s labor he is able to purchase.

Although labor is the true determinant of a commodity’s value, it is in fact money which ultimately determines an item’s worth. This is because a commodity’s value is calculated according to its exchangeable value; i.e, the quantity of money—as opposed to the quantity of labor—for which it can be exchanged.

The amount of labor required to purchase a commodity remains constant, although this same amount of labor may purchase a greater or lesser quantity of commodities. It is the price of the commodity that changes, not the value of the labor. Though equal quantities of labor are always of equal value to the worker, to the person who employs him, the price of labor seems to vary, like that of all other things.

Labor, like all commodities, has a real and a nominal price. Its real price relates to the quantity of needs and wants it can purchase; its nominal price relates to the amount of money. The worker is rich or poor in proportion to the real—not the nominal—price of his labor.

The real price of a commodity will remain at the same value; the nominal price may vary considerably depending on fluctuations in the value of gold and silver.

Labor is the only universal measure of value, or the only standard by which we can compare the values of different commodities, at all times, and in all places.

Since it is the nominal or money price of goods that regulates almost anything to do with price, it is not surprising that this aspect is focused on more than real price.

It is difficult to accurately equate the price of labor. On the other hand, the price of a commodity such as corn, although not regularly recorded throughout history, is generally better known and frequently referred to by historians and other writers.

Commercial nations subsequently developed coins from the metals they used as currency: gold for larger payments, silver for purchases of moderate value, and copper, or some other coarse metal, for the smallest.

The Romans are said to have initially had nothing but copper money, which appears to have continued as the measure of value in that republic. The northern nations seem to have used silver from the outset, with silver coins still used in Britain in the time of the Saxons. There was little gold coined, however, until the time of Edward III, nor any copper till that of James I.

CHAPTER 6: THE COMPONENT PART OF THE PRICE OF COMMODITIES

In early society, it appears that the amount of labor required to purchase an object was the only basis for exchanging objects. As such, a product that took two days of labor to produce was worth double a product requiring one day of labor. The former would also be more valued due to the higher level of complexity and dexterity involved. In later society, labor requiring greater skill was acknowledged in the form of wages of labor.

Once stock is built up, some individuals invest it in employing workers, with a view to adding further value to their merchandise. The value these workmen add to the commodity is then used to pay their wages, with the remainder being profit on stock for the employer. The real value of the different component parts of price is measured by the amount of labor an individual can purchase. In addition, rent and profit are also components of the price of a commodity.

In every modern society, the price of a commodity reflects these three component parts. In the price of corn, for example, one part pays the rent of the landlord, another pays the wages and maintenance of the workers and animals, and the third is the profit made by the farmer. These three parts make up the whole price of corn. A fourth part is used to replenish the farmer’s stock or to compensate the wear and tear of his laboring animals and other farm equipment.

As a commodity undergoes more manufacturing processes, the part of the price which represents wages and profit increases in proportion to rent. In the process of manufacture, every subsequent profit is greater than the previous.

Wages, profit and rent are the three original sources of all revenue, as well as of all exchangeable value. All other revenue is ultimately derived from one of these sources.

CHAPTER 7: THE NATURAL AND MARKET PRICE OF COMMODITIES

In every society, there is an average rate for wages, profit, and rent, determined by the society’s circumstances and the nature of each employment. These average rates are known as natural rates. If the price of a commodity equals the total costs of its production, it is then sold for what is known as its “natural price”—or the cost incurred to bring it to market.

The actual price at which a commodity is sold is known as its market price. This is determined by the quantity of the commodity brought to market and the demand for that commodity. Those purchasing the commodity could be referred to as the “effectual demanders,” and their demand the “effectual demand,” since this demand may be sufficient to effectuate the bringing of the commodity to market.

If the quantity of a commodity brought to market falls short of the effectual demand, those wishing to purchase that commodity will be willing to pay more, and consequently the market price will rise.

If the quantity of a commodity brought to market exceeds the effectual demand, it cannot all be sold to those willing to pay the whole value; a portion will need to be sold to those wishing to pay less. This lower price will reduce the price of the whole, and as such the market price will fall.

The natural price of a commodity is the base price to which prices continually gravitate; despite the factors affecting them, prices will constantly return and align with the natural price.

The same number of agricultural workers may produce different quantities of a commodity each year. Only an average produce by an industry can be suited to effectual demand. Manufacturing secrets are often better kept than trade secrets. When an individual or trading company has a monopoly over the supply of a commodity, this is as effective as having a manufacturing or trade secret. This will generally raise the market price of a particular commodity above its natural price.

CHAPTER 8: THE WAGES OF LABOR

The wages of labor consist of what the labor produces.

As soon as land becomes private property, the landlord requests a share of the produce.

In the manufacturing trade, workmen need an employer to supply the materials, their wages and maintenance. The employer benefits from the value added to the materials by the workmen, and this is his profit.

Wages of labor are governed by the contract signed between the two parties, with workmen aiming to gain as much as possible, and employers aiming to give as little as possible. Under the law, employers are allowed to join forces, whereas workmen are not. There are no acts of parliament against joining forces to lower the price of work, but many against joining forces to raise it.

Wages cannot be reduced below a certain rate, even for the most menial types of labor. As a general guide, the lowest-paid workers must earn at least double the cost of their own maintenance in order to bring up two children. Since half of all children die before reaching adulthood, a man should aim to have at least four children, in the hope that two may live to that age. The upkeep for four children may be nearly equal to that for one man.

A wealthy man with an income high enough to cover the upkeep of his family will employ servants. An independent worker with sufficient stock to purchase the materials for his own work and pay for his upkeep will himself employ workers, in order to make a profit from their work.

A steady increase in a society’s revenue will result in a consistent rise in wages. Wages are significantly higher in North America than in Britain: in 1773, workers in the province of New York earned more than workers in London, despite the fact that provisions are much lower in North America than in Britain. North America, although not as rich as Britain, is heading faster towards the acquisition of wealth.

The most indicative sign of a country’s prosperity is the increase in number of inhabitants. The number of inhabitants in the British colonies in North America doubled within twenty years; labor in this region is so well rewarded that having numerous children was viewed as a source of prosperity rather than a burden to the parents. The price of bread and meat is the same throughout the United Kingdom, but wages in large towns are frequently twenty percent higher than those in surrounding, smaller towns. A poor workman who is able to afford the upkeep of his family in an area in which wages are low would be affluent if he lived in an area in which wages are high.

It is difficult to accurately ascertain wages of labor, since wages can differ even within the same workplace and for the same sort of labor, depending not only on the workers’ skills but also the employer’s fair-mindedness.

Over time, the real quantity of wants and needs that can be purchased with labor has increased in greater proportion than its money price. Grain is cheaper, potatoes cost half the price; turnips, carrots and cabbages are all widely produced. Improved manufacturing has led to widespread availability of good-quality, reasonably priced linen and woolen clothing, as well as cheaper and better-quality tools and equipment.

No society can flourish if the majority of its citizens are miserable. Those who employ and as such feed, clothe, and lodge the majority of a society’s people should have a share of the produce of their own labor, to ensure that they themselves are well-fed, clothed, and lodged.

Poverty does not prevent people from getting married—and, indeed, seems to go hand in hand with a higher number of children in families. A half-starved Highland woman will often have over twenty children, while wealthier women are often unable to conceive or are exhausted by two or three children. But poverty is not conducive to raising children; it is not uncommon for a mother who has given birth to twenty children to have only two of them alive. In some cases, half of children die before reaching the age of four—and in almost all cases before the age of ten. These high mortality rates are particularly prevalent amongst children of families from poorer backgrounds who cannot afford to care for them as well as their wealthier counterparts. Population figures are regulated by these deaths; on the other hand, the demand for men, as for any other commodity, regulates the production of men.

Men will always be more active in employment for which wages are high as opposed to low. The wages of labor are regulated by the demand for labor and sustenance costs. The demand for labor determines the quantity of needs and wants that a worker will be able to purchase, with wages of labor being determined by what is needed to purchase this quantity. In times of abundance, demand for labor increases and wages therefore increase; whereas in times of scarcity, wages will decrease.

CHAPTER 9: THE PROFITS OF STOCK

Fluctuations in profits of stock (assets) are influenced by the same factors that cause fluctuations in wages of labor and a society’s wealth; however, these factors affect one and the other very differently.

Increased stock (assets) will raise wages and lower profit. Competition between merchants tends to lower profit.

Although we can measure average wages, it is difficult to measure profits as they are affected by fluctuations in commodity prices as well as by competition. It may be possible, however, to estimate average profits of stock based on interest rates; as interest rates fluctuate, so do profits of stock.

Generally, more stock is required to trade within a large town than within a village. Profits in the large town will be lower than those in the village due to the higher number of competitors in the town. Wages will generally be higher in a large town than in a country village. In a thriving town, merchants with large amounts of stock often cannot find sufficient workmen and therefore bid against one another, which raises wages and lowers profits.

Wages of labor, interest rates, and consequently the profits of stock are higher in North American and West Indian colonies than they are in Britain. With more land than stock to cultivate, any stock employed in the purchase and improvement of such land must yield a very large profit; consequently, profitable employment enables the landowner to increase the number of staff he is able to pay a good wage.

The lowest rate of profit must always be more than sufficient to compensate for the occasional losses incurred when employing stock. This surplus amount is the only clear profit. In the case of borrowing money, the interest a borrower can afford to pay is measured according to the clear profit. The lowest interest rate must be more than sufficient to compensate for the occasional losses incurred by the lender.

Interest rates generally fluctuate in relation to this rate of clear profit, as profit rises or falls. In the case of a clear profit of 8% to 10%, it would be reasonable, in the case of a business loan, for half of it to go to interest.

The price of work tends to increase more in line with high profits than it does high wages. The rise of profit operates like compound interest; merchants often complain about the bad effects of high wages in terms of increased prices, yet say nothing about the bad effects of high profits.

CHAPTER 10: WAGES AND PROFIT IN THE DIFFERENT EMPLOYMENTS OF LABOR AND STOCK

The advantages and disadvantages of various employments of labor and stock, within a specific geographical area, are either equal or continually tend toward equality.

PART I: WAGES

Wages vary according to the level of difficulty or unpleasantness of an employ. A tailor, for example, earns less than a weaver since his work is much easier. A blacksmith seldom earns as much in twelve hours as a coal miner does in eight; his work is just as dirty but is less dangerous, is carried out in daylight, and above ground.

Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of labor. A pub landlord is exposed to the brutality of every drunkard—yet there is no other trade in which a small stock yields such a large profit.

Wages also vary according to the level of expense and difficulty involved in learning the business. When a business owner invests in expensive machinery, he expects to recover his investment as well as make a profit from the extraordinary work performed by the machine during its life cycle. A man trained for a job that requires extraordinary dexterity and skill, at the expense of time and effort on the part of the employer, may be compared to one of these expensive machines.

During an apprenticeship, the apprentice’s labor belongs to his master, but his upkeep is still the responsibility of his parents. The master is generally paid for teaching him his trade. It is reasonable, therefore, that the wages of skilled mechanics should be higher than those of general workers.

Employment is more constant in some trades than others. In manufacturing, for example, a journeyman can be pretty sure of finding employment throughout the year. A mason or bricklayer, on the other hand, cannot work during bad weather. Consequently, the bricklayer’s wage must be sufficient to ensure his subsistence during the idle periods. Wages vary according to the amount of trust which must be placed in an employee; for example, goldsmiths’ and jewelers’ wages are superior to those of many other employees, on account of the precious materials with which they are entrusted.

Wages also vary according to the probability or improbability of success in a job; for example, the probability of employment in mechanics’ trades is almost certain, whereas it is very uncertain in the liberal professions—for a lawyer the odds are 20:1 against success.

In order to succeed in the insurance business, premiums must be sufficient to compensate for losses, cover administrative and management costs, and guarantee a better profit than would have been made from an equal investment in another trade.

The ordinary rate of profit always rises more or less with the risk. It does not, however, seem to rise in proportion to it.

A pharmacist’s job is much more agreeable than that of a craftsman, and the trust placed in the former is of much greater importance. His profit, however, will generally be no more than the reasonable wages of labor.

Retail goods are generally much cheaper in major towns than in country villages. It costs no more to transport grocery goods to a major town than it does to a country village—but it costs a great deal more to transport corn and cattle.

Fortunes are sometimes made through speculation. The speculative merchant may be a corn merchant this year, a wine merchant the next, and so on. Although a speculator may make a considerable fortune with two or three successful speculations, he is just as likely to lose.

When an entrepreneur attempts to establish a new business, he first needs to attract workmen by offering higher wages than they might earn elsewhere in their trades. Setting up a new business always involves a certain amount of speculation, with the entrepreneur hoping to make extraordinary profits.

The demand for farm labor is greater during the hay-mowing and harvest periods than throughout the rest of the year, and consequently wages rise with the demand. During wartime, when fifty thousand or so sailors were forced from the merchant service into that of the king, the demand for sailors on merchant ships rose with their scarcity—as did their wages.

All commodities are subject to price fluctuations. In some employments, the same quantity of industry will always produce the same quantity of commodities; but there are other employments in which the same quantity of industry will not always produce the same quantity of commodities; for example, agriculture. The price of a commodity, therefore, can vary not only in line with demand, but in line with quantity. Speculators will buy commodities when they expect their prices to rise, and sell them when the price is likely to fall.

PART II: INEQUALITIES OCCASIONED BY POLICIES IN EUROPE

The (prevailing) policy in Europe causes inequalities in three ways:

  • by restraining competition in certain employments to a smaller number than would otherwise be likely to enter into them;
  • by increasing competition in others beyond what it naturally would be;
  • by obstructing the free circulation of labor and stock, both from employment to employment and from place to place.

First: The exclusive privileges of corporations restrain competition.

In order to practice a trade in a town, a person is required to have carried out an apprenticeship in that town, under a qualified master. Corporations’ bylaws regulate the number of apprentices any master is allowed to train, and the number of years each apprentice is required to serve. The intention is to restrain competition to a smaller number. In Europe, the general duration of an apprenticeship is seven years. The patrimony of a poor man lies in the strength and dexterity of his hands, and to hinder him from employing this strength and dexterity is a violation of human rights, both of the workman and of potential employers. Even the longest apprenticeship, however, does not provide security against fraud; customers are more reassured by a sterling mark on a plate or a stamp on linen and woolen goods than they are any apprenticeship qualification.

In order to prevent falls in prices, wages and profits, corporation laws have been implemented that restrain free competition. In Britain, anyone wishing to establish a corporation was required to obtain a charter from the king; it would appear that these charters were generally readily granted against payment of a fee. Towns were responsible for the inspection of all corporations within their jurisdiction, including the corporations’ bye-laws. Towns were governed by traders and skilled workers, and it was in their interests to ensure the market for their own particular industry did not become saturated.

A town’s inhabitants can easily join forces; even the most insignificant trades have been incorporated within a town. Trades employing only a few workers most readily form such unions: six wool-combers are necessary to keep a thousand spinners and weavers at work; by joining forces and thus eliminating the need for apprentices, they will have a monopoly over both the employment side and the manufacturing process, thus raising the price of their labor well above the average for their line of work.

The high duties imposed on foreign manufacturers and all goods imported by foreign merchants all serve the same purpose. Corporation laws enable people living in towns to raise their prices without having to worry about being undercut by free competition from their fellow countrymen. Further regulations also protect them against foreign competition.

Incorporation makes the act of the majority binding upon the whole. In free trade, this corporation can only be established with the unanimous consent of each trader, and only remains implemented for as long as each trader remains of the same mind. The majority of a corporation can enact bylaws, which limit competition more effectively and more sustainably than any voluntary combination.

Secondly, European policies, by increasing competition for some employments beyond what it naturally would be, cause inequality of an opposite kind.

Education and training in specific professions is considered important for the young, and private founders have established scholarships for this purpose, with the result that the numbers of people training in certain trades outnumber the jobs available. In Christian countries, the education of churchmen is paid for in this manner. The lengthy education required will not always result in a job, since many people are willing to work in a church voluntarily or accept a lower wage than such an education would otherwise have entitled them to; in this manner the competition of the poor takes away the reward of the rich.

In professions such as law and medicine, if an equal proportion of people were educated at the expense of the public, the competition would soon be so great that wages would drop. It might then not be worth self-aware father’s while to pay for his son’s education for either of these professions.

A teacher’s salary is generally nowhere near as high as that of a lawyer or physician, because the teaching profession is crowded with disadvantaged people who have been educated at public expense to enter the church, whereas lawyers and physicians have funded their own education.

Thirdly, European policy, by obstructing the free circulation of labor and stock, both from employment to employment and from place to place, results in some cases in inequality in terms of the advantages and disadvantages offered by different jobs.

The statute of apprenticeship obstructs the free circulation of labor from one employment to another, even in the same place. Corporations’ exclusive privileges obstruct circulation of labor from one place to another, even within the same trade. High wages are often paid to workmen in one business, while those in another business barely receive minimum wage. The tasks involved in certain trades are so similar that workers could easily exchange trades with one another if these absurd laws did not prevent it. The crafts of weaving plain linen and plain silk, for example, are almost entirely the same. That of weaving plain woolens is somewhat different—but the difference is so insignificant that a linen or silk weaver could easily be trained up within a few days.

Corporation laws hinder the free circulation of labor more than they do stock. It is much easier for a merchant to obtain authorization to trade in a town than it is for a poor tradesman to obtain work in it. In Britain after the destruction of the monasteries, it was enacted that every parish should be bound to provide for its own poor. When an independent workman carried his industry to a new parish, he was liable to be removed at the whim of the churchwarden.

CHAPTER 11: THE RENT OF LAND

Rent is the price paid for the use of land. Landowners endeavor to leave tenants with the smallest amount of money for their subsistence.

A landlord will charge rent for the land based on the potential productivity of that land, so any improvements made to the land by the tenant in fact increase the rent, as if they had been made by the landlord.

The rent paid by the tenant for using the land is based on what the tenant can afford to pay, making it a monopoly.

Wages and profit are the causes of high or low price; high or low rent is the effect of it.

PART I: THE PRODUCE OF LAND WHICH ALWAYS AFFORDS RENT

Food is always in demand. Land produces more than enough food to pay the tenant for his upkeep, with any remaining money being claimed by the landowner as rent. This rent goes up based on the land’s productivity.

A land’s rental cost varies according to its fertility and location. Rent will be higher for land located near town. A good transport infrastructure means that land in remote parts of the country is as accessible as that near major towns.

A moderately fertile cornfield produces a greater quantity of food than the best pasture. Corn is an annual crop, whereas livestock requires four or five years before it is ready to market. As an acre of land will produce a much smaller quantity of the one than of the other, this lower quantity must be compensated for by a higher price. In major towns, the demand for milk and hay for horses, together with the high price of butcher’s meat, increase the value of grass.

The use of turnips, carrots, cabbages and other legumes to feed a greater number of cattle than when in grass will tend to reduce the price of butcher’s meat over that of bread. The landowner’s rent in the case of a hop garden, fruit garden or vegetable garden will generally be higher, and the farmer’s profit generally greater than for a corn or grass field. But to obtain the richness of soil needed for these crops costs more, so the landowner will charge a higher rent. On the other hand, the land requires more skillful management—hence the farmer will be paid a higher wage. In the past, productive vegetable gardens were the most productive in a farm.

The sugar colonies owned by European nations in the West Indies may be compared to vineyards. Their entire produce falls short of market demand from Europe, and can therefore be sold at high prices, covering the rent, profit and wages involved in preparing and bringing the produce to market. A sugar planter can expect rum and molasses to cover the costs for his cultivation, with his sugar being all clear profit.

Tobacco is the prime crop in Virginia and Maryland, and is more profitable than corn. Tobacco cultivation being prohibited throughout most of Europe means that Virginia and Maryland have a monopoly. Each worker on these tobacco plantations manages six thousand plants, which yield a thousand weight of tobacco, as well as four acres of Indian corn. In Europe, corn (wheat) is the major crop, and a staple part of our diets. Except in particular situations, therefore, the rent of cornfields in Europe regulates the rent of all other cultivated land.

A rice field produces a much greater quantity of food than the most fertile cornfield, with an acre generally producing two crops a year. Though rice cultivation requires more labor, the resulting profit easily covers the cost. In Carolina, the cultivation of rice is found to be more profitable than that of corn, though their fields produce only one crop a year.

An acre of potatoes will produce three times the quantity of nourishment produced by the acre of wheat, and potatoes are cheaper to cultivate. As such, the same volume of land producing potatoes will provide for a much greater number of people than if it produced wheat.

PART II: THE PRODUCE OF LAND, WHICH SOMETIMES DOES, AND SOMETIMES DOES NOT, AFFORD THE RENT

The only produce which guarantees a profit to the farmer is food for human consumption. Other produce may or may not make a profit, depending on various circumstances.

After food, clothing and housing are the two basic human needs. Land provides more materials for clothing and construction than it does food. Productive land, however, may produce more food than clothing and construction materials, resulting in prices soaring for these materials. A surplus of produce results in price drops, whereas a scarcity results in price rises.

Many years ago, wool produced in Britain, which could neither be eaten nor used in construction, was sold to the wealthy, industrious country of Flanders, its price covering the rent of the land which produced it.

Rental fees for a good stone quarry in the London area would be high, contrary to the low fees in many parts of Scotland and Wales. Timber for construction is of great value in developed countries, with the result that rental for the forests producing it is expensive. But in many parts of North America, landowners are happy to have someone fell and remove their trees. Britain provides a market for the forests of Norway and the coasts of the Baltic—a market they could not find at home—thereby providing an income to their owners.

A country’s population numbers are often aligned with the quantity of foodstuffs that country produces. When food is available, it is easy to find clothing and housing. When the labor of half of a society is sufficient to provide food for the entire society, the other half can be employed in providing products such as clothing and housing.

Food is not only the original source of rent, but other land-related produce, which goes towards paying rent, derives from improvements made in food production labor processes. A mine is classed as fertile or barren, depending on the quantity of minerals it produces. The lowest price at which coal can be sold is the price which just covers replenishment of stock used to bring the coal to market, inclusive of its average profit.

The rental fee for land above ground is commonly a third of the gross produce, and is independent of the occasional variations in the crop. A rental contract of thirty years is considered a moderate period for land above ground, with ten years considered a good period for a coal mine. The tin mines of Cornwall, the most fertile in the world, bring in a rent of a sixth of their gross produce.

The demand for precious stones is high due to their scarcity, with demand driven by their beauty as ornaments rather than their utility. Consequently, wages and profit make up almost the whole of their high price.

Food not only constitutes the major share of the riches of the world, but it is the abundance of food which gives the principal part of their value to many other sorts of riches.

PART III: THE VARIATIONS IN THE PROPORTION BETWEEN THE RESPECTIVE VALUES OF THAT SORT OF PRODUCE WHICH ALWAYS AFFORD RENT, AND OF THAT WHICH SOMETIMES DOES, AND SOMETIMES DOES NOT, AFFORD RENT

The increasing abundance of food, as a result of advances in agriculture and production processes, goes hand in hand with an increased demand for non-foodstuff agricultural produce, which is put to other uses, including decoration.

The demand for materials used in clothing and construction, useful materials of the land and precious metals is gradually increasing, with these items being exchanged for a greater quantity of food and hence for a higher price.

The value of a free-stone quarry will increase as the area immediately surrounding it develops, especially if it is the only one in the area. The market for the produce of a free-stone quarry is generally limited to the immediate surrounding region, with demand tending to be proportionate to the development and population of that small region.

The silver market is a worldwide commerce; unless global world finance improves, the demand for silver will not necessarily increase due to the improvement of even a large country in the neighborhood of the mine.

We should always bear in mind that labor is the real measure of the value of silver and all other commodities. In society, corn is produced through human industry, but the average produce of every type of industry is generally always in line with average consumption—the average supply to the average demand. At each stage of improvement, the production of equal quantities of corn requires equal quantities of labor, and as such, price. Steady improvement in production capacity and cultivation methods will be more or less counterbalanced by the steady price rise of cattle, the mainstay of farming.

This means that equal quantities of corn will, in every state of society, at every stage of improvement, be more representative of, or equivalent to, equal quantities of labor, than equal quantities of any other land-related produce. As such, corn is a more accurate measure of value than any other commodity or set of commodities. In all of these stages, therefore, corn is a better estimate of the real value of silver than any other commodity or set of commodities.

The quantity of precious metals in any country can increase due to abundance in its mines or increased produce of annual labor. The first of these causes is no doubt necessarily connected with a decrease in value of the precious metals, whereas the second is not. In major towns, corn is always more expensive than in remote parts of the country. This, however, is the effect not of the real low price of silver, but of the real high price of corn. It does not require less labor to transport silver to a major town than to a remote part of the country; but it costs a great deal more to transport corn.

The civil war (in Britain) led to decreased tillage and commerce, resulting in a rise in corn prices. Another event was the bounty upon the export of corn, granted in 1688. The bounty, which encouraged tillage, led to greater abundance and consequently a drop in corn prices in the home market.

The value of silver has risen in proportion to that of corn during the course of the present century. In years of great scarcity, the bounty was suspended, though it definitely had an effect on prices throughout that period. Although resulting in extraordinary export during years of plenty, it would frequently have hindered the abundance of one year from compensating the scarcity of another.

The monetary price of labor in Britain has risen during the course of the present century. This seems to be due to increased demand for labor in Britain due to the country’s prosperity, rather than to the drop in value of silver on the European market.

Since the discovery of America, the market for the produce of its silver mines has been growing increasingly extensive. America is itself a new market for the produce of its silver mines; its development in terms of agriculture, industry and population is much more rapid than that of the most thriving countries in Europe, so its demand is growing much more rapidly. The British colonies are a new market for silver, with an ever increasing demand for this precious metal, for both coinage and other purposes.

The sharp price rise for pigs and poultry in Britain was due mainly to the decrease in the numbers of people living in cottages and other small homes, since these more disadvantaged people often keep a few poultry or a sow and a few pigs. With fewer small-home dwellers, this type of commodity has become scarcer and hence the price has risen.

A farmer’s cows produce more milk than will be used by their calves and the farmer’s family, with most being produced during one season. But of all land produce, milk is perhaps the most perishable. In the summer months, when milk is most abundant, it will scarcely keep twenty-four hours. The farmer, by making it into fresh butter, is able to store a small part of it for nearly a week; by making it into salt butter, for a year; and by making it into cheese, he can store a large part of it for several years. Some of these stocks will be reserved for his family; the rest goes to market, to be sold at the best price he can get.

The rise in the nominal or monetary price of all these products is due not to a drop in the value of silver, but to a rise in their real price. Today they are worth a greater quantity of silver as well as a greater quantity of labor and subsistence than they were in the past; since it costs more in terms of labor and subsistence to bring them to market, they are worth more.

The market for butcher’s meat is generally confined to the country in which it is produced. The market for wool and raw hides is improving. The quantity of fish brought to market is both limited and uncertain.

Precious metals abound in countries with no mines, their quantity depending on the country’s purchasing power. As with all luxury goods, this quantity is likely to rise during times of wealth and development in a country, and to fall during times of poverty and depression. Countries with an abundance of labor and provisions can afford to purchase more precious metals than their less-developed counterparts.

Effects of the Progress of Improvement upon the real Price of Manufactured Goods

As a business develops, with better machinery, higher levels of skill and specialization, the prices of its produce will drop considerably. Division of labor (specialization) and improvements in machinery can be carried out more extensively in base metals businesses than in any other.