No More Learning

" This would be to say, that it is clearly the rise in the
natural or necessary price of corn, which encourages its production--a
proposition which could not be maintained. It is not the price at which
corn can be produced, that has any influence on the quantity produced,
but the price at which it can be sold. It is in proportion to the degree
of the excess of its price above the cost of production, that capital is
attracted to or repelled from the land. If that excess be such as to
give to capital so employed, a greater than the general profit of stock,
capital will go to the land; if less, it will be withdrawn from it.

It is not then by an alteration in the real price of corn that its
production is encouraged, but by an alteration in its market price. It
is not "because a greater quantity of capital and labour must be
employed to produce it," Mr. Malthus's just definition of real price,
that more capital and labour are attracted to the land, but because the
market price rises above this its real price, and, notwithstanding the
increased charge, makes the cultivation of land the more profitable
employment of capital.

Nothing can be more just than the following observations of Mr. Malthus,
on Adam Smith's standard of value. "Adam Smith was evidently led into
this train of argument, from his habit of considering _labour as the
standard measure of value_, and corn as the measure of labour. But that
corn is a very inaccurate measure of labour, the history of our own
country will amply demonstrate; where labour, compared with corn, will
be found to have experienced very great and striking variations, not
only from year to year, but from century to century; and for ten,
twenty, and thirty years together. _And that neither labour nor any
other commodity can be an accurate measure of real value in exchange_,
is now considered as one of the most incontrovertible doctrines of
political economy; and, indeed, follows from the very definition of
value in exchange. "

If neither corn nor labour are accurate measures of real value in
exchange, which they clearly are not, what other commodity
is? --certainly none. If then the expression real price of commodities,
have any meaning, it must be that which Mr. Malthus has stated, in the
Essay on Rent--it must be measured by the proportionate quantity of
capital and labour necessary to produce them.

In Mr. Malthus's "Inquiry into the Nature of Rent," he says, "that,
independently of irregularities in the currency of a country, and other
temporary and accidental circumstances, the cause of the high
comparative money price of corn, is its high comparative real price, _or
the greater quantity of capital and labour which must be employed to
produce it_. "[60]

This, I apprehend, is the correct account of all permanent variations in
price, whether of corn or of any other commodity. A commodity can only
permanently rise in price, either because a greater quantity of capital
and labour must be employed to produce it, or because money has fallen
in value; and on the contrary, it can only fall in price, either because
a less quantity of capital and labour may be employed to produce it, or
because money has risen in value.

A variation arising from the latter of either of these alternatives, an
altered value of money, is common at once to all commodities; but a
variation arising from the former cause, is confined to the particular
commodity requiring more or less labour in its production. By allowing
the free importation of corn, or by improvements in agriculture, raw
produce would fall; but the price of no other commodity would be
affected, except in proportion to the fall in the real value, or cost of
production, of the raw produce which entered into its composition.

Mr. Malthus, having acknowledged this principle, cannot, I think,
consistently maintain that the whole money value of all the commodities
in the country must sink exactly in proportion to the fall in the price
of corn. If the corn consumed in the country were of the value of ten
millions per annum, and the manufactured and foreign commodities
consumed were of the value of twenty millions, making altogether thirty
millions, it would not be admissible to infer that the annual
expenditure was reduced to 15 millions, because corn had fallen 50 per
cent. , or from 10 to 5 millions.

The value of the raw produce which entered into the composition of these
manufactures might not, for example, exceed 20 per cent. of their whole
value, and, therefore, the fall in the value of manufactured
commodities, instead of being from 20 to 10 millions, would be only from
20 to 18 millions; and after the fall in the price of corn of 50 per
cent. , the whole amount of the annual expenditure, instead of falling
from 30 to 25 millions, would fall from 30 to 23 millions. [61]

Instead of thus considering the effect of a fall in the value of raw
produce; as Mr. Malthus was bound to do by his previous admission; he
considers it as precisely the same thing with a rise of 100 per cent. in
the value of money, and, therefore, argues as if all commodities would
sink to half their former price.

"During the twenty years, beginning with 1794," he says, "and ending
with 1813, the average price of British corn per quarter was about
eighty-three shillings; during the ten years ending with 1813,
ninety-two shillings; and during the last five years of the twenty, one
hundred and eight shillings. In the course of these twenty years, the
Government borrowed near five hundred millions of real capital; for
which, on a rough average, exclusive of the sinking fund, it engaged to
pay about five per cent. But if corn should fall to fifty shillings a
quarter, and other commodities in proportion, instead of an interest of
about five per cent. , the Government would really pay an interest of
seven, eight, nine, and, for the last two hundred millions, ten per
cent.

"To this extraordinary generosity towards the stockholders, I should be
disposed to make no kind of objection, if it were not necessary to
consider by whom it is to be paid; and a moment's reflection will shew
us, that it can only be paid by the industrious classes of society, and
the landlords, that is, by all those whose nominal income will vary with
the variations in the measure of value. The nominal revenues of this
part of the society, compared with the average of the last five years,
will be diminished one half, and out of this nominally reduced income,
they will have to pay the same nominal amount of taxes. "[62]

In the first place, I think, I have already shewn, that the nominal
income of the whole country will not be diminished in the proportion
for which Mr. Malthus here contends; it would not follow, that because
corn fell fifty per cent. , each man's income would be reduced fifty per
cent. in value. [63]

In the second place, I think the reader will agree with me, that the
increased charge, if admitted, would not fall exclusively "on the
landlords and the industrious classes of society:" the stockholder, by
his expenditure, contributes his share to the support of the public
burdens in the same way as the other classes of society. If then money
became really more valuable, although he would receive a greater value,
he would also pay a greater value in taxes, and, therefore, it cannot be
true that the whole addition to the real value of the interest would be
paid by "the landlords and the industrious classes. "

The whole argument, however, of Mr. Malthus, is built on an infirm
basis: it supposes, because the gross income of the country is
diminished, that, therefore, the net income must also be diminished, in
the same proportion. It has been one of the objects of this work to
shew, that with every fall in the real value of necessaries, the wages
of labour would fall, and that the profits of stock would rise--in other
words, that of any given annual value a less portion would be paid to
the labouring class, and a larger portion to those whose funds employed
this class. Suppose the value of the commodities produced in a
particular manufacture to be 1000_l. _, and to be divided between the
master and his labourers, in the proportion of 800_l. _ to labourers, and
200_l. _ to the master; if the value of these commodities should fall to
900_l. _, and 100_l. _ be saved from the wages of labour, in consequence
of the fall of necessaries, the net income of the masters would be in no
degree impaired, and, therefore, he could with just as much facility pay
the same amount of taxes, after, as before the reduction of price. [64]

And that wages would fall as much as the mass of commodities, or rather
that the net income remaining to landlords, farmers, manufacturers,
traders, and stockholders, the only real payers of taxes, would be as
great as before, is very highly probable; for nothing would be even
nominally lost to the society by the freest importation of corn, but
that portion of rent of which the landlords would be deprived in
consequence of the fall of raw produce.

The difference between the value of corn and all other commodities sold
in the country, before and after the importation of cheap corn, would be
only equal to the fall of rent; because, independently of rent, the same
quantity of labour would always produce the same value.

The whole reduction which is made in wages, is a value actually added to
the value of the net income before possessed by the society; whilst the
only value which is taken from that net income is the value of that part
of their rent of which the landlords will be deprived by a fall of raw
produce. When we consider that the fall of produce acts upon a limited
number of landlords, while it reduces the wages not only of those who
are employed in agriculture, but of all those who are occupied in
manufactures and commerce, it may well be doubted, whether the net
revenue of the society would suffer any abatement whatever. [65]

But, if it did, it must not be supposed that the ability to pay taxes
will diminish in the same degree, as the money value, even of the net
revenue. Suppose that my net revenue were diminished from 1000_l. _ to
900_l. _; but that my taxes continued to be the same, to be 100_l. _: is
it not probable that my ability to pay this 100_l. _ may be greater with
the smaller than with the larger revenue? Commodities cannot fall so
universally as Mr. Malthus supposes, without greatly benefiting the
consumers, without enabling them with a much smaller money revenue to
command more of the conveniences, necessaries, and luxuries of human
life; and the question resolves itself into this--whether those who are
in possession of the net revenue of the country will be benefited as
much by the diminished price of commodities, as they will suffer by the
greater real taxation. On which side the balance may preponderate, will
depend on the proportion which taxes bear to the annual revenue; if it
be enormously large, it may undoubtedly more than counterbalance the
advantages from cheap necessaries; but I trust enough has been said, to
shew, that Mr. Malthus has very greatly over-rated the loss to the
tax-payers, from a fall in one of the most important necessaries of
life; and that if they were not entirely remunerated for the real
increase of taxes, by the fall of wages and increase of profits, they
would be more than compensated, by the cheaper price of all objects on
which their incomes were expended.

That the stockholder is benefited by a great fall in the value of corn,
cannot be doubted; but if no one else be injured, that is no reason why
corn should be made dear: for the gains of the stockholder are national
gains, and increase, as all other gains do, the real wealth and power of
the country. If they are unjustly benefited, let the degree in which
they are so, be accurately ascertained, and then it is for the
legislature to devise a remedy; but no policy can be more unwise than to
shut ourselves out from the great advantages arising from cheap corn,
and abundant productions, merely because the stockholder would have an
undue proportion of the increase.

To regulate the dividends on stock by the money value of corn, has never
yet been attempted. If justice and good faith required such a
regulation, a great debt is due to the old stockholders; for they have
been receiving the same money dividends for more than a century,
although corn has, perhaps, been doubled or trebled in price. [66]

Mr. Malthus says, "It is true, that the last additions to the
agricultural produce of an improving country are not attended with a
large proportion of rent; and it is precisely this circumstance that may
make it answer to a rich country to import some of its corn, if it can
be secure of obtaining an equable supply. But in all cases the
importation of foreign corn must fail to answer nationally, if it is not
so much cheaper than the corn that can be grown at home, as to equal
both the profits and the rent of the grain which it displaces. "
_Grounds_, &c. p. 36.

As rent is the effect of the high price of corn, the loss of rent is the
effect of a low price. Foreign corn never enters into competition with
such home corn as affords a rent; the fall of price invariably affects
the landlord till the whole of his rent is absorbed;--if it fall still
more, the price will not afford even the common profits of stock;
capital will then quit the land for some other employment, and the corn,
which was before grown upon it, will then, and not till then, be
imported. From the loss of rent, there will be a loss of value, of
estimated money value, but there will be a gain of wealth. The amount
of the raw produce and other productions together will be increased,
from the greater facility with which they are produced; they will,
though augmented in quantity, be diminished in value.

Two men employ equal capitals--one in agriculture, the other in
manufactures. That in agriculture produces a net annual value of
1200_l. _ of which 1000_l. _ is retained for profit, and 200_l. _ is paid
for rent; the other in manufactures produces only an annual value of
1000_l. _ Suppose that by importation, the same quantity of corn can be
obtained for commodities which cost 950_l. _, and that, in consequence,
the capital employed in agriculture is diverted to manufactures, where
it can produce a value of 1000_l. _ the net revenue of the country will
be of less value, it will be reduced from 2200_l. _ to 2000_l. _, but
there will not only be the same quantity of commodities and corn for its
own consumption, but also as much addition to that quantity as 50_l. _
would purchase, the difference between the value at which its
manufactures were sold to the foreign country, and the value of the corn
which was purchased from it.

Mr. Malthus says, "It has been justly observed by Adam Smith, that no
equal quantity of productive labour employed in manufactures can ever
occasion so great a reproduction as in agriculture. " If Adam Smith
speaks of value, he is correct, but if he speaks of riches, which is the
important point, he is mistaken, for he has himself defined riches to
consist of the necessaries, conveniences, and enjoyments of human life.
One set of necessaries and conveniences admits of no comparison with
another set; value in use cannot be measured by any known standard, it
is differently estimated by different persons.

FOOTNOTES:

[1] Chap. xv. part i. "Des Débouchés," contains in
particular some very important principles, which I believe
were first explained by this distinguished writer.

[2] Book i. chap. 5.

[3] "But though labour be the real measure of the
exchangeable value of all commodities, it is not that by
which their value is commonly estimated. It is often
difficult to ascertain the proportion between two
different quantities of labour. The time spent in two
different sorts of work will not always alone determine
this proportion. The different degrees of hardship
endured, and of ingenuity exercised, must likewise be
taken into account. There may be more labour in an hour's
hard work, than in two hours' easy business; or, in an
hour's application to a trade, which it costs ten years'
labour to learn, than in a month's industry at an ordinary
and obvious employment. But it is not easy to find any
accurate measure, either of hardship or ingenuity. In
exchanging, indeed, the different productions of different
sorts of labour for one another, some allowance is
commonly made for both. It is adjusted, however, not by
any accurate measure, but by the higgling and bargaining
of the market, according to that sort of rough equality,
which, though not exact, is sufficient for carrying on the
business of common life. "--_Wealth of Nations. _ Book i.
chap. 10.

[4] Wealth of Nations, book i. chap. 10.

[5] "The earth, as we have already seen, is not the only
agent of nature which has a productive power; but it is
the only one, or nearly so, that one set of men take to
themselves, to the exclusion of others; and of which
consequently they can appropriate the benefits. The waters
of rivers, and of the sea, by the power which they have of
giving movement to our machines, carrying our boats,
nourishing our fish, have also a productive power; the
wind which turns our mills, and even the heat of the sun,
work for us; but happily no one has yet been able to say:
the 'wind and the sun are mine, and the service which they
render must be paid for. '"--_Economie Politique, par J. B.
Say_, vol. ii. p. 124.

[6] Has not M. Say forgotten, in the following passage,
that it is the cost of production which ultimately
regulates price? "The produce of labour employed on the
land has this peculiar property, that it does not become
more dear by becoming more scarce, because population
always diminishes at the same time that food diminishes,
and consequently the quantity of these products
_demanded_, diminishes at the same time as the quantity
supplied. Besides it is not observed that corn is more
dear in those places where there is plenty of uncultivated
land, than in completely cultivated countries. England and
France were much more imperfectly cultivated in the middle
ages than they are now; they produced much less raw
produce: nevertheless from all that we can judge by a
comparison with the value of other things, corn was not
sold at a dearer price. If the produce was less, so was
the population; the weakness of the demand compensated the
feebleness of the supply. " vol. ii. 338. M. Say being
impressed with the opinion that the price of commodities
is regulated by the price of labour, and justly supposing
that charitable institutions of all sorts tend to increase
the population beyond what it otherwise would be, and
therefore to lower wages, says, "I suspect that the
cheapness of the goods, which come from England is partly
caused by the numerous charitable institutions which exist
in that country. " vol. ii. 277. This is a consistent
opinion in one who maintains that wages regulate price.

[7] "In agriculture too," says Adam Smith, "nature labours
along with man; and though her labour costs no expense,
its produce has its value, as well as that of the most
expensive workman. " The labour of nature is paid, not
because she does much, but because she does little. In
proportion as she becomes niggardly in her gifts, she
exacts a greater price for her work. Where she is
munificently beneficent, she always works gratis. "The
labouring cattle employed in agriculture, not only
occasion, like the workmen in manufactures, the
reproduction of a value equal to their own consumption, or
to the capital which employs them, together with its
owner's profits, but of a much greater value. Over and
above the capital of the farmer and all its profits, they
regularly occasion the reproduction of the rent of the
landlord. This rent may be considered as the produce of
those powers of nature, the use of which the landlord
lends to the farmer. It is greater or smaller according to
the supposed extent of those powers, or in other words,
according to the supposed natural or improved fertility of
the land. It is the work of nature which remains, after
deducting or compensating every thing which can be
regarded as the work of man. It is seldom less than a
fourth, and frequently more than a third of the whole
produce. No equal quantity of productive labour employed
in manufactures, can ever occasion so great a
reproduction. _In them nature does nothing, man does all_;
and the reproduction must always be in proportion to the
strength of the agents that occasion it. The capital
employed in agriculture, therefore, not only puts into
motion a greater quantity of productive labour than any
equal capital employed in manufactures, but in proportion
too to the quantity of the productive labour which it
employs, it adds a much greater value to the annual
produce of the land and labour of the country, to the
_real_ wealth and revenue of its inhabitants. Of all the
ways in which a capital can be employed, it is by far the
most advantageous to the society. "--Book II. chap. v. p.
15.

Does nature nothing for man in manufactures? Are the
powers of wind and water, which move our machinery, and
assist navigation, nothing? The pressure of the atmosphere
and the elasticity of steam, which enable us to work the
most stupendous engines--are they not the gifts of nature?
to say nothing of the effects of the matter of heat in
softening and melting metals, of the decomposition of the
atmosphere in the process of dyeing and fermentation.
There is not a manufacture which can be mentioned, in
which nature does not give her assistance to man, and give
it too, generously and gratuitously.

In remarking on the passage which I have copied from Adam
Smith, Mr. Buchanan observes, "I have endeavoured to shew,
in the observations on productive and unproductive
Footnote: labour, contained in the fourth volume, that
agriculture adds no more to the national stock than any
other sort of industry. In dwelling on the reproduction of
rent as so great an advantage to society, Dr. Smith does
not reflect that rent is the effect of high price, and
that what the landlord gains in this way, he gains at the
expense of the community at large. There is no absolute
gain to the society by the reproduction of rent; it is
only one class profiting at the expense of another class.
The notion of agriculture yielding a produce, and a rent
in consequence, because nature concurs with human industry
in the process of cultivation, is a mere fancy. It is not
from the produce, but from the price at which the produce
is sold, that the rent is derived; and this price is got,
not because nature assists in the production, but because
it is the price which suits the consumption to the
supply. "

[8] To make this obvious, and to shew the degrees in which
corn and money rent will vary, let us suppose that the
labour of ten men will, on land of a certain quality,
obtain 180 quarters of wheat, and its value to be 4_l. _
per quarter, or 720_l. _; and that the labour of ten
additional men will, on the same or any other land,
produce only 170 quarters in addition; wheat would rise
from 4_l. _ to 4_l. _ 4_s. _. 8_d. _ for 170: 180:: 4_l. _:
4_l. _ 4_s. _ 8_d. _; or, as in the production of 170
quarters, the labour of 10 men is necessary in one case,
and only of 9. 44 in the other, the rise would be as 9. 44
to 10, or as 4_l. _ to 4_l. _ 4_s. _ 8_d. _ If 10 men be
further employed, and the return be

160, the price will rise to £4 10 0
150, " " " " " 4 16 0
140, " " " " " 5 2 10

Now if no rent was paid for the land which yielded 180
quarters when corn was at 4_l. _ per quarter, the value of
10 quarters would be paid as rent when only 170 could be
procured, which, at 4_l. _ 4_s. _ 8_d. _ would be 42_l. _
7_s. _ 6_d. _

20 qrs. when 160 were produced, which at £4 10 0 would be £ 90 0 0
30 qrs. " 150 " " " " 4 16 0 " " 144 0 0
40 qrs. " 140 " " " " 5 2 10 " " 205 13 4

{100} { 100
Corn rent then would increase {200} and money rent in the { 212
in the proportion of {300} proportion of { 340
{400} { 485

[9] With Mr.
Buchanan in the following passage, if it
refers to temporary states of misery, I so far agree, that
"the great evil of the labourer's condition, is poverty,
arising either from a scarcity of food or of work; and in
all countries, laws without number have been enacted for
his relief. But there are miseries in the social state
which legislation cannot relieve; and it is useful
therefore to know its limits, that we may not, by aiming
at what is impracticable, miss the good which is really in
our power. "--_Buchanan_, page 61.

[10] The reader is desired to bear in mind, that for the
purpose of making the subject more clear, I consider money
to be invariable in value, and therefore every variation
of price to be referable to an alteration in the value of
the commodity.

[11] The reader is aware, that we are leaving out of our
consideration the accidental variations arising from bad
and good seasons, or from the demand increasing or
diminishing by any sudden effect on the state of
population. We are speaking of the natural and constant,
not of the accidental and fluctuating price of corn.

[12] The 180 quarters of corn would be divided in the
following proportions between landlords, farmers, and
labourers, with the above-named variations in the value of
corn.

Price per qr. Rent. Profit. Wages. Total.
_£. s. d. _ In Wheat. In Wheat. In Wheat.
4 0 0 None. 120 qrs. 60 qrs. }
4 4 8 10 qrs. 111. 7 58. 3 }
4 10 0 20 103. 4 56. 6 } 180
4 16 0 30 95 55 }
5 2 10 40 86. 7 53. 5 }

and, under the same circumstances, money rent, wages, and
profit, would be as follows:

Price per qr. Rent. Profit. Wages. Total.
_£. s. d. _ _£. s. d. _ _£. s. d. _ _£. s. d. _ _£. s. d. _
4 0 0 None. 480 0 0 240 0 0 720 0 0
4 4 8 42 7 6 473 0 0 247 0 0 762 7 6
4 10 0 90 0 0 465 0 0 255 0 0 810 0 0
4 16 0 144 0 0 456 0 0 264 0 0 864 0 0
5 2 10 205 13 4 445 15 0 274 5 0 925 13 4

[13] See Adam Smith, book i. chap. 9.

[14] It will appear then, that a country possessing very
considerable advantages in machinery and skill, and which
may therefore be enabled to manufacture commodities with
much less labour than her neighbours, may in return for
such commodities, import a portion of the corn required
for its consumption, even if its land were more fertile,
and corn could be grown with less labour than in the
country from which it was imported. Two men can both make
shoes and hats, and one is superior to the other in both
employments; but in making hats, he can only exceed his
competitor by one-fifth or 20 per cent. , and in making
shoes he can excel him by one-third or 33 per cent. ;--will
it not be for the interest of both, that the superior man
should employ himself exclusively in making shoes, and the
inferior man in making hats?

[15] Book V. ch. ii.

[16] M. Say appears to have imbibed the general opinion on
this subject. Speaking of corn, he says, "thence it
results, that its price influences the price of _all_
other commodities. A farmer, a manufacturer, or a
merchant, employs a certain number of workmen, who all
have occasion to consume a certain quantity of corn. If
the price of corn rises, he is obliged to raise, in an
equal proportion, the price of his productions. " Vol. i.
p. 255.

[17] M. Say says, that "the tax, added to the price of a
commodity, raises its price. Every increase in the price
of a commodity, necessarily reduces the number of those
who are able to purchase it, or at least the quantity they
will consume of it. " This is by no means a necessary
consequence. I do not believe, that if bread were taxed,
the consumption of bread would be diminished, more than if
cloth, wine, or soap, were taxed.

[18] The following remark of the same author appears to me
equally erroneous: "When a high duty is laid on cotton,
the production of all those goods, of which cotton is the
basis, is diminished. If the total value added to cotton
in its various manufactures, in a particular country,
amounted to 100 millions of francs per annum, and the
effect of the tax was, to diminish the consumption one
half, then the tax would deprive that country every year
of 50 millions of francs, in addition to the sum received
by government. " Vol. ii. p. 314.

[19] It is observed by M. Say, "that a manufacturer is not
enabled to make the consumer pay the whole tax levied on
his commodity, because its increased price will diminish
its consumption. " Should this be the case, should the
consumption be diminished, will not the supply also
speedily be diminished? Why should the manufacturer
continue in the trade if his profits are below the general
level? M. Say appears here also to have forgotten the
doctrine which he elsewhere supports, "that the cost of
production determines the price, below which commodities
cannot fall for any length of time, because production
would then be either suspended or diminished. "--Vol. ii.
p. 26.

"The tax in this case falls then partly on the consumer
who is obliged to give more for the commodity taxed, and
partly on the producer, who, after deducting the tax, will
receive less. The public treasury will be benefited by
what the purchaser pays in addition, and also by the
sacrifice which the producer is obliged to make of a part
of his profits. It is the effort of gunpowder, which acts
at the same time on the bullet which it projects, and on
the gun which it causes to recoil. " Vol. ii. p. 333.

[20] "Melon says, that the debts of a nation are debts due
from the right hand to the left, by which the body is not
weakened. It is true that the general wealth is not
diminished by the payment of the interest on arrears of
the debt: The dividends are a value which passes from the
hand of the contributor to the national creditor: Whether
it be the national creditor or the contributor who
accumulates or consumes it, is I agree of little
importance to the society; but the principal of the
debt--what has become of that? It exists no more. The
consumption which has followed the loan has annihilated a
capital which will never yield any further revenue. The
society is deprived not of the amount of interest, since
that passes from one hand to the other, but of the revenue
from a destroyed capital. This capital, if it had been
employed productively by him who lent it to the state,
would equally have yielded him an income, but that income
would have been derived from a real production, and would
not have been furnished from the pocket of a fellow
citizen. "--_Say_, vol. ii. p. 357. This is both conceived
and expressed in the true spirit of the science.

[21] "Manufacturing industry increases its produce in
proportion to the demand, and the price falls; _but the
produce of land cannot be so increased_; and a high price
is still necessary to prevent the consumption from
exceeding the supply. " _Buchanan_, vol. iv. p. 40. Is it
possible that Mr. Buchanan can seriously assert, that the
produce of the land cannot be increased, if the demand
increases?

[22] I wish the word "Profit" had been omitted. Dr. Smith
must suppose the profits of the tenants of these precious
vineyards to be above the general rate of profits. If they
were not, they would not pay the tax, unless they could
shift it either to the landlord or consumer.

[23] See note, p. 346.

[24] See note, p. 346.

[25] Vol. iii. p. 355.

[26] In a former part of this work, I have noticed the
difference between rent, properly so called, and the
remuneration paid to the landlord under that name, for the
advantages which the expenditure of his capital has
procured to his tenant; but I did not perhaps sufficiently
distinguish the difference which would arise from the
different modes in which this capital might be applied. As
a part of this capital, when once expended in the
improvement of a farm, is inseparably amalgamated with the
land, and tends to increase its productive powers, the
remuneration paid to the landlord for its use is strictly
of the nature of rent, and is subject to all the laws of
rent. Whether the improvement be made at the expense of
the landlord or the tenant, it will not be undertaken in
the first instance, unless there is a strong probability
that the return will at least be equal to the profit that
can be made by the disposition of any other equal capital;
but when once made, the return obtained will ever after be
wholly of the nature of rent, and will be subject to all
the variations of rent. Some of these expenses however,
only give advantages to the land for a limited period, and
do not add permanently to its productive powers: being
bestowed on buildings, and other perishable improvements,
they require to be constantly renewed, and therefore do
not obtain for the landlord any permanent addition to his
real rent.

[27] Adam Smith says, "that the difference between the
real and the nominal price of commodities and labour, is
not a matter of mere speculation, but may sometimes be of
considerable use in practice. " I agree with him; but the
real price of labour and commodities, is no more to be
ascertained by their price in goods, Adam Smith's real
measure, than by their price in gold and silver, his
nominal measure. The labourer is only paid a really high
price for his labour, when his wages will purchase the
produce of a great deal of labour.

[28] In vol. i. p. 108, M. Say infers, that silver is now
of the same value, as in the reign of Louis XIV. "because
the same quantity of silver will buy the same quantity of
corn. "

[29] "The first man who knew how to soften metals by fire,
is not the creator of the value which that process adds to
the melted metal. That value is the result of the physical
action of fire added to the industry and capital of those
who availed themselves of this knowledge. "

"From this error Smith has drawn this false result, that
the value of all productions represents the recent or
former labour of man, _or in other words, that riches are
nothing else but accumulated labour; from which, by a
second consequence, equally false, labour is the sole
measure of riches, or of the value of productions_. "[30]
The inferences with which M. Say concludes are his own,
and not Dr. Smith's; they are correct if no distinction be
made between value and riches: but though Adam Smith, who
defined riches to consist in the abundance of necessaries,
conveniences, and enjoyments of human life, would have
allowed that machines and natural agents might very
greatly add to the riches of a country, he would not have
allowed that they add any thing to value in exchange.

[30] Chap. iv. p. 31.

[31] M. Say, _Catechisme d'Economie Politique_, p. 99.

[32] Adam Smith speaks of Holland, as affording an
instance of the fall of profits from the accumulation of
capital, and from every employment being consequently
overcharged. "The Government there borrow at 2 per cent. ,
and private people of good credit, at 3 per cent. " But it
should be remembered, that Holland was obliged to import
almost all the corn which she consumed, and by imposing
heavy taxes on the necessaries of the labourer, she
further raised the wages of labour. These facts will
sufficiently account for the low rate of profits and
interest in Holland.

[33] Is the following quite consistent with M. Say's
principle? "The more disposable capitals are abundant in
proportion to the extent of employment for them, the more
will the rate of interest on loans of capital fall. "--Vol.
ii. p. 108. If capital to any extent can be employed by a
country, how can it be said to be abundant compared with
the extent of employment for it?

[34] Adam Smith says, that "When the produce of any
particular branch of industry exceeds what the demand of
the country requires, the surplus must be sent abroad, and
exchanged for something for which there is a demand at
home. _Without such exportation a part of the productive
labour of the country must cease, and the value of its
annual produce diminish. _ The land and labour of great
Britain produce generally more corn, woollens, and
hardware, than the demand of the home market requires. The
surplus part of them, therefore, must be sent abroad, and
exchanged for something for which there is a demand at
home. It is only by means of such exportation, that this
surplus can acquire a value sufficient to compensate the
labour and expense of producing it. " One would be led to
think by the above passage, that Adam Smith concluded we
were under some necessity of producing a surplus of corn,
woollen goods, and hardware, and that the capital which
produced them could not be otherwise employed. It is,
however, always a matter of choice in what way a capital
shall be employed, and therefore there can never, for any
length of time, be a surplus of any commodity; for if
there were, it would fall below its natural price, and
capital would be removed to some more profitable
employment. No writer has more satisfactorily and ably
shewn than Dr. Smith, the tendency of capital to move from
employments in which the goods produced do not repay by
their price the whole expenses, including the ordinary
profits, of producing and bringing them to market. [35]

[35] See Chap. 10. Book I.

[36] "All kinds of public loans," observes M. Say, "are
attended with the inconvenience of withdrawing capital, or
portions of capital, from productive employments, to
devote them to consumption; and when they take place in a
country, _the Government of which does not inspire much
confidence_, they have the further inconvenience of
raising the interest of capital. Who would lend at 5 per
cent. per annum to agriculture, to manufacturers, and to
commerce, when a borrower may be found ready to pay an
interest of 7 or 8 per cent. ? That sort of income, which
is called profit of stock, would rise then at the expense
of the consumer. Consumption would be reduced by the rise
in the price of produce; and the other productive services
would be less in demand, less well paid. The whole nation,
capitalists excepted, would be the sufferers from such a
state of things. " To the question: "who would lend money
to farmers, manufacturers, and merchants, at 5 per cent.
per annum, when another borrower having little credit,
would give 7 or 8? " I reply, that every prudent and
reasonable man would. Because the rate of interest is 7 or
8 per cent. there where the lender runs extraordinary
risk, is this any reason that it should be equally high in
those places where they are secured from such risks? M.
Say allows, that the rate of interest depends on the rate
of profits; but it does not therefore follow, that the
rate of profits depends on the rate of interest. One is
the cause, the other the effect, and it is impossible for
any circumstances to make them change places.

[37] In another place he says, that "whatever extension of
the foreign market can be occasioned by the bounty, must,
in every particular year, be altogether at the expense of
the home market; as every bushel of corn which is exported
by means of the bounty, and which would not have been
exported without the bounty, would have remained in the
home market to increase the consumption, and to lower the
price of that commodity. The corn bounty, it is to be
observed, as well as every other bounty upon exportation,
imposes two different taxes upon the people; first, the
tax which they are obliged to contribute, in order to pay
the bounty; and, secondly, the tax which arises from the
advanced price of the commodity in the home market, and
which, as the whole body of the people are purchasers of
corn, must in this particular commodity be paid by the
whole body of the people. In this particular commodity,
therefore, this second tax is by much the heaviest of the
two. " "For every five shillings, therefore, which they
contribute to the payment of the first tax, they must
contribute six pounds four shillings to the payment of the
second. " "The extraordinary exportation of corn,
therefore, occasioned by the bounty, not only in every
particular year diminishes the home, just as much as it
extends the foreign market and consumption, but, by
restraining the population and industry of the country,
its final tendency is to stunt and restrain the gradual
extension of the home market, and thereby, in the long
run, rather to diminish than to augment the whole market
and consumption of corn. "

[38] The same opinion is held by M. Say. Vol.