No More Learning

_ at 10 per cent. being
150_l. _ 24. 4_l. _
------
79. 4_l. _


If profits be 10 per cent. , the fisherman
must sell his goods for 173_l. _ 2_s. _ 7_d. _
To replace his circulating capital
of 150_l. _ with 10 per cent. profit 165_l. _
To replace his fixed capital with
10 per cent. profit, one-third of
the hunter's 8. 13
------
173. 13_l. _


Now if wages rise, although neither of these commodities should require
more labour for their production, yet their relative value will be
altered. Suppose wages to rise 6 per cent. , the hunter would not require
more than an increase of 3_l. _ to his capital, to employ the same number
of men, and obtain the same quantity of game; the fisherman would
require three times that sum, or 9_l. _ The profits of stock would fall
to 4 per cent. , the hunter would be obliged to sell his game for 73_l. _
12_s. _ 2_d. _


To replace his circulating capital
of 53_l. _ with a profit of 4 per
cent. 55. 12_l. _

To replace fixed capital, annually
wasted, the present value of an
annuity of 18. 49_l. _ for ten years,
when money is at 4 per cent. ,
being 150_l. _ 18. 49
-----
£73. 61

The fisherman would sell his fish
for 171_l. _ 11_s. _ 5_d. _ viz.

To replace his circulating capital
of 159_l. _ with a profit of 4 per
cent. £165. 360

To replace fixed capital annually
wasted, the present value of an
annuity of 6. 163_l. _, for ten years
at 4 per cent. , being 50_l. _ 6. 163
--------
£171. 523

Game was to fish before as 100 to 218.
It would now be as 100 to 233.

Thus we see, that with every rise of wages, in proportion as the capital
employed in any occupation consists of circulating capital, its produce
will be of greater relative value than the goods produced in another
occupation, where a less proportion of circulating, and a greater
proportion of fixed capital are employed.

Secondly, suppose the proportions of fixed capital to be the same; but
of different degrees of durability. In proportion as fixed capital is
less durable, it approaches to the nature of circulating capital. It
will be consumed in a shorter time, and its value reproduced in order to
preserve the capital of the manufacturer. We have just seen, that in
proportion as circulating capital preponderates in a manufacture, when
wages rise, the value of commodities produced in that manufacture, is
relatively higher than that of commodities produced in manufactures
where fixed capital preponderates. In proportion to the less durability
of fixed capital, and its approach to the nature of circulating capital,
the same effect will be produced by the same cause.

Suppose that an engine is made, which will last for a hundred years, and
that its value is 20,000_l. _. Suppose too, that this machine, without
any labour whatever, could produce a certain quantity of commodities
annually, and that profits were 10 per cent. : the whole value of the
goods produced would be annually 2,000_l. _ 2_s. _ 11_d. _; for the profit
of 20,000_l. _

at 10 per cent. per annum, is £2,000

And an annuity of 2_s. _ 11_d. _
for 100 years, at 10 per cent.
will, at the end of that
period, replace a capital of
20,000_l. _ 2 11
----------
Consequently the goods must
sell for £2000 2 11
----------

If the same amount of capital, viz. 20,000_l. _, be employed in
supporting productive labour, and be annually consumed and reproduced,
as it is when employed in paying wages, then to give an equal profit of
10 per cent. on 20,000_l. _ the commodities produced must sell for
22,000_l. _ Now suppose labour so to rise, that instead of 20,000_l. _
being sufficient to pay the wages of those employed in producing the
latter commodities, 20,952_l. _ is required; then profits will fall to 5
per cent. : for as these commodities would sell for no more than before,

viz. £22,000 and to
produce them £20,952 would be
requisite, there would remain -------
no more than £1,048 on a capital

of 20,952_l. _ If labour so rose, that 21,153_l. _ were required, profits
would fall to 4 per cent. and if it rose, so that 21,359_l. _ was
employed, profits would fall to 3 per cent.

But, as no wages would be paid by the owner of the machine, which would
last 100 years, when profits fell to 5 per cent. the price of his goods
must fall to 1007_l. _ 13_s. _ 8_d. _ viz. 1000_l. _ to pay his profits, and
7_l. _ 13_s. _ 8_d. _ to accumulate for 100 years at 5 per cent. to replace
his capital of 20,000_l. _ When profits fell to 4 per cent. his goods
must sell for 816_l. _ 3_s. _ 2_d. _, and when at 3 per cent. for 632_l. _
16_s. _ 7_d. _ By a rise in the price of labour then, under 7 per cent. ,
which has no effect on the prices of commodities wholly produced by
labour, a fall of no less than 68 per cent. is effected on those
commodities wholly produced by machinery. If the proprietor of the
machine sold his goods for more than 632_l. _ 16_s. _ 7_d. _, he would get
more than 3 per cent. , the general profit of stock; and as others could
furnish themselves with machines at the same price of 20,000_l. _ they
would be so multiplied, that he would be inevitably obliged to sink the
price of his goods, till they afforded only the usual and general
profits of stock.

In proportion as this machine were less durable, prices would be less
affected by the fall of profit, and the rise of wages. If, for example,
the machine would last only ten years, when profits were at 10 per cent.

the goods should sell for £3254
when at 5 per cent. 2590
4 per cent. 2465
3 per cent. 2344

for such are the sums requisite to place his profits on a par with
others, and to replace his capital at the end of ten years; or, which is
the same thing, such are the annuities which 20,000_l. _ would purchase
for ten years at those rates. If the machine would last only three
years, when profits were 10 per cent.

the price of the goods would be £8042
at 5 per cent. 7344
4 per cent. 7206
3 per cent. 7070

If it would last only one year, when profits
were 10 per cent.

the goods would sell for £22,000
at 5 per cent. 21,000
4 per cent. 20,800
3 per cent. 20,600:

therefore when profits fell from 10 to 3 per cent. the goods, which
were produced with equal capitals, would fall

68 per cent. if the machine would last 100 years.
28 per cent. if the machine would last 10 years.
13 per cent. if it would last 3 years.
And little more than 6 per cent. if it}
would last only } 1 year.

These results are of such importance to the science of political
economy, yet accord so little with some of its received doctrines, which
maintain that every rise in wages is necessarily transferred to the
price of commodities, that it may not be superfluous to elucidate the
subject still further.

A manufacturer of hats employs a hundred men at an annual expense of
50_l. _ each, who produce him commodities of the value of 8000_l. _ A
machine calculated to last precisely a year, and to do equally well the
same work as the 100 men, is offered to him for 5000_l. _, the sum,
exactly, that he is expending on wages. It will be a matter of
indifference to the manufacturer, whether he purchase the machine, or
continue to employ the men. Now if the wages of labour rise 10 per cent.
and an additional capital of 500_l. _ be consequently required to enable
him to employ the same labour, whilst his commodities continue to sell
for 8000_l. _, he will no longer hesitate, but will at once purchase the
machine, and will do the same annually, while wages continue above the
original 5000_l. _ But will he be able now to purchase the machine at the
former price? will not its value be increased, in consequence of the
rise of labour? It would be increased, if there were no stock employed
in its construction, and no profits to be paid to the maker of it. If,
for example, the machine were produced by 100 men working one year upon
it with wages of 50_l. _ each, and its price were 5000_l. _, should those
wages rise to 55_l. _ its price would be 5500_l. _: but this cannot be the
case; less than 100 men are employed, or it could not be sold for
5000_l. _; for out of the 5000_l. _ must be paid the profits of the stock
which employed the men. Suppose then that only eighty-five men were
employed at an expense of 4250_l. _ per annum, and that the 750_l. _,
which the sale of the machine would produce over and above the wages
advanced to the men, constituted the profits of the engineer's stock.
When wages rose 10 per cent. , he would be obliged to employ an
additional capital of 425_l. _, and would therefore employ 4675_l. _,
instead of 4250_l. _, on which capital he would only get a profit of
325_l. _ if he continued to sell his machine for 5000_l. _; but this is
precisely the case of all manufacturers and capitalists; the rise of
wages affects them all. If therefore the maker of the machine should
raise the price of his machine in consequence of a rise of wages, an
unusual quantity of capital would be employed in the construction of
such machines, till their price afforded only the usual profits. The
manufacturer of hats, by the employment of the machine, if he sells his
hats for 8000_l. _, is precisely in the same situation as before; he
employs no more capital, and obtains the same profits. The competition
of trade would not long allow this; for as capital would flow to the
most profitable employment, he would be obliged to lower the price of
hats, till his profits had sunk to the general level. Thus then is the
public benefited by machinery: these mute agents are always the produce
of much less labour than that which they displace, even when they are
of the same money value. Through their influence, an increase in the
price of provisions which raises wages, will affect fewer persons: it
will reach, as in the above instance, eighty-five men instead of a
hundred; and the saving which is the consequence, shews itself in the
reduced price of the commodity manufactured. Neither machines nor any
other commodities are raised in price, but all commodities which are
made by machines fall, and fall in proportion to their durability.

It appears, then, that in proportion to the quantity and the durability
of the fixed capital employed in any kind of production, the relative
prices of those commodities on which such capital is employed, will vary
inversely as wages; they will fall as wages rise. It appears too that no
commodities whatever are raised in absolute price, merely because wages
rise; that they never rise unless additional labour be bestowed on them;
but that all commodities in the production of which fixed capital
enters, not only do not rise with a rise of wages, but absolutely fall;
fall too as much as 68 per cent. , with a rise of seven per cent. in
wages, if fixed capital be exclusively employed, and be of the duration
of 100 years.

The above statement, which asserts the compatibility of a rise of wages,
with a fall of prices, has, I know, the disadvantage of novelty, and
must trust to its own merits for advocates; whilst it has for its
opponents, writers of distinguished and deserved reputation. It should
however be carefully remembered, that in this whole argument I am
supposing money to be of an invariable value; in other words, to be
always the produce of the same quantity of unassisted labour. Money,
however, is a variable commodity; and the rise of wages as well as of
commodities, is frequently occasioned by a fall in the value of money. A
rise of wages from this cause will indeed be invariably accompanied by a
rise in the price of commodities: but in such cases, it will be found
that labour and all commodities have not varied in regard to each other,
and that the variation has been confined to money.

Money, from its being a commodity obtained from a foreign country, from
its being the general medium of exchange between all civilized
countries, and from its being also distributed among those countries in
proportions which are ever changing with every improvement in commerce
and machinery, and with every increasing difficulty of obtaining food
and necessaries for an increasing population, is subject to incessant
variations. In stating the principles which regulate exchangeable value
and price, we should carefully distinguish between those variations
which belong to the commodity itself, and those which are occasioned by
a variation in the medium in which value is estimated, or price
expressed.

A rise in wages, from an alteration in the value of money, produces a
general effect on price, and for that reason it produces no real effect
whatever on profits. On the contrary, a rise of wages, from the
circumstance of the labourer being more liberally rewarded, or from a
difficulty of procuring the necessaries on which wages are expended,
does not produce the effect of raising price, but has a great effect in
lowering profits. In the one case, no greater proportion of the annual
labour of the country is devoted to the support of the labourers, in the
other case, a larger portion is so devoted.

It is according to the division of the whole produce of the land and
labour of the country, between the three classes of landlords,
capitalists, and labourers, that we are to judge of rent, profit, and
wages, and not according to the value at which that produce may be
estimated in a medium which is confessedly variable.

It is not by the absolute quantity of produce obtained by either class,
that we can correctly judge of the rate of profit, rent, and wages, but
by the quantity of labour required to obtain that produce. By
improvements in machinery and agriculture, the whole produce may be
doubled; but if wages, rent, and profit, be also doubled, these three
will bear the same proportions to one another, and neither could be said
to have relatively varied. But if wages partook not of the whole of this
increase; if they, instead of being doubled, were only increased one
half, if rent, instead of being doubled, were only increased
three-fourths, and the remaining increase went to profit, it would, I
apprehend, be correct for me to say, that rent and wages had fallen,
while profits had risen; for if we had an invariable standard, by which
to measure the value of this produce, we should find that a less value
had fallen to the class of labourers and landlords, and a greater to the
class of capitalists, than had been given before. We might find for
example, that though the absolute quantity of commodities had been
doubled, they were the produce of precisely the former quantity of
labour. Of every hundred hats, coats, and quarters of corn produced,

if the labourers had 25
The landlords 25
And the capitalists 50
---
100

And if, after these commodities were doubled in quantity, of every 100

The labourers had only 22
The landlords 22
And the capitalists 56
---
100

In that case I should say, that wages and rent had fallen, and profits
risen; though in consequence of the abundance of commodities, the
quantity paid to the labourer and landlord would have increased in the
proportion of 25 to 44. Wages are to be estimated by their real value,
viz. by the quantity of labour and capital employed in producing them,
and not by their nominal value either in coats, hats, money, or corn.
Under the circumstances I have just supposed, commodities would have
fallen to half their former value; and, if money had not varied, to half
their former price also. If then in this medium, which had not varied in
value, the wages of the labourer should be found to have fallen, it will
not the less be a real fall, because they might furnish him with a
greater quantity of cheap commodities, than his former wages.

The variation in the value of money, however great, makes no difference
in the _rate_ of profits; for suppose the goods of the manufacturer to
rise from 1000_l. _ to 2000_l. _, or 100 per cent. , if his capital, on
which the variations of money have as much effect as on the value of
produce, if his machinery, buildings, and stock in trade rise more than
100 per cent. , his rate of profits has fallen, and he has a
proportionably less quantity of the produce of the labour of the country
at his command.

If, with capital of a given value, he double the quantity of produce,
its value falls one half, and then it will bear the same proportion to
the capital which produced it, as it did before.
If at the same time that he doubles the quantity of produce by the
employment of the same capital, the value of money is by any accident
lowered one half, the produce will sell for twice the money value that
it did before; but the capital employed to produce it, will also be of
twice its former money value; and therefore in this case too, the value
of the produce will bear the same proportion to the value of the capital
as it did before; and although the produce be doubled, rent, wages, and
profits will only vary as the proportions vary, in which this double
produce may be divided among the three classes that share it.

It appears then that the accumulation of capital, by occasioning
different proportions of fixed and circulating capital to be employed
in different trades, and by giving different degrees of durability to
such fixed capital, introduces a considerable modification to the rule,
which is of universal application in the early states of society.

Commodities, though they continue to rise and fall, in proportion as
more or less labour is necessary to their production, are also affected
in their relative value by a rise or fall of profits, since equal
profits may be derived from goods which sell for 2,000_l. _ and from
those which sell for 10,000_l. _; and consequently the variations of
those profits, independently of any increased or diminished quantity of
labour required for the goods in question, must affect their prices in
different proportions.

It appears too, that commodities may be lowered in value in consequence
of a real rise of wages, but they never can be raised from that cause.
On the other hand, they may rise from a fall of wages, as they then lose
the peculiar advantages of production, which high wages afforded them.




CHAPTER II.

ON RENT.


It remains however to be considered, whether the appropriation of land,
and the consequent creation of rent, will occasion any variation in the
relative value of commodities, independently of the quantity of labour
necessary to production. In order to understand this part of the
subject, we must inquire into the nature of rent, and the laws by which
its rise or fall is regulated. Rent is that portion of the produce of
the earth, which is paid to the landlord for the use of the original and
indestructible powers of the soil. It is often however confounded with
the interest and profit of capital, and in popular language the term is
applied to whatever is annually paid by a farmer to his landlord. If,
of two adjoining farms of the same extent, and of the same natural
fertility, one had all the conveniences of farming buildings, were,
besides, properly drained and manured, and advantageously divided by
hedges, fences, and walls, while the other had none of these advantages,
more remuneration would naturally be paid for the use of one, than for
the use of the other; yet in both cases this remuneration would be
called rent. But it is evident, that a portion only of the money
annually to be paid for the improved farm, would be given for the
original and indestructible powers of the soil; the other portion would
be paid for the use of the capital which had been employed in
ameliorating the quality of the land, and in erecting such buildings as
were necessary to secure and preserve the produce. Adam Smith sometimes
speaks of rent, in the strict sense to which I am desirous of confining
it, but more often in the popular sense, in which the term is usually
employed. He tells us, that the demand for timber, and its consequent
high price, in the more southern countries of Europe, caused a rent to
be paid for forests in Norway, which could before afford no rent. Is it
not however evident, that the person who paid, what he thus calls rent,
paid it in consideration of the valuable commodity which was then
standing on the land, and that he actually repaid himself with a profit,
by the sale of the timber? If, indeed, after the timber was removed, any
compensation were paid to the landlord for the use of the land, for the
purpose of growing timber or any other produce, with a view to future
demand, such compensation might justly be called rent, because it would
be paid for the productive powers of the land; but in the case stated by
Adam Smith, the compensation was paid for the liberty of removing and
selling the timber, and not for the liberty of growing it. He speaks
also of the rent of coal mines, and of stone quarries, to which the same
observation applies--that the compensation given for the mine or quarry,
is paid for the value of the coal or stone which can be removed from
them, and has no connexion with the original and indestructible powers
of the land. This is a distinction of great importance, in an inquiry
concerning rent and profits; for it is found, that the laws which
regulate the progress of rent, are widely different from those which
regulate the progress of profits, and seldom operate in the same
direction. In all improved countries, that which is annually paid to the
landlord, partaking of both characters, rent and profit, is sometimes
kept stationary by the effects of opposing causes, at other times
advances or recedes, as one or other of these causes preponderates. In
the future pages of this work, then, whenever I speak of the rent of
land, I wish to be understood as speaking of that compensation, which is
paid to the owner of land for the use of its original and indestructible
powers.

On the first settling of a country, in which there is an abundance of
rich and fertile land, a very small proportion of which is required to
be cultivated for the support of the actual population, or indeed can be
cultivated with the capital which the population can command, there will
be no rent; for no one would pay for the use of land, when there was an
abundant quantity not yet appropriated, and therefore at the disposal of
whosoever might choose to cultivate it.

On the common principles of supply and demand, no rent could be paid for
such land, for the reason stated, why nothing is given for the use of
air and water, or for any other of the gifts of nature which exist in
boundless quantity. With a given quantity of materials, and with the
assistance of the pressure of the atmosphere, and the elasticity of
steam, engines may perform work, and abridge human labour to a very
great extent; but no charge is made for the use of these natural aids,
because they are inexhaustible, and at every man's disposal. In the same
manner the brewer, the distiller, the dyer, make incessant use of the
air and water for the production of their commodities; but as the supply
is boundless, it bears no price. [5] If all land had the same
properties, if it were boundless in quantity, and uniform in quality, no
charge could be made for its use, unless where it possessed peculiar
advantages of situation. It is only then because land is of different
qualities with respect to its productive powers, and because in the
progress of population, land of an inferior quality, or less
advantageously situated, is called into cultivation, that rent is ever
paid for the use of it. When, in the progress of society, land of the
second degree of fertility is taken into cultivation, rent immediately
commences on that of the first quality, and the amount of that rent will
depend on the difference in the quality of these two portions of land.

When land of the third quality is taken into cultivation, rent
immediately commences on the second, and it is regulated as before, by
the difference in their productive powers. At the same time, the rent of
the first quality will rise, for that must always be above the rent of
the second, by the difference between the produce which they yield with
a given quantity of capital and labour. With every step in the progress
of population, which shall oblige a country to have recourse to land of
a worse quality, to enable it to raise its supply of food, rent, on all
the more fertile land, will rise.

Thus suppose land--No. 1, 2, 3,--to yield, with an equal employment of
capital and labour, a net produce of 100, 90, and 80 quarters of corn.
In a new country, where there is an abundance of fertile land compared
with the population, and where therefore it is only necessary to
cultivate No. 1, the whole net produce will belong to the cultivator,
and will be the profits of the stock which he advances. As soon as
population had so far increased as to make it necessary to cultivate No.
2, from which ninety quarters only can be obtained after supporting the
labourers, rent would commence on No. 1; for either there must be two
rates of profit on agricultural capital, or ten quarters, or the value
of ten quarters must be withdrawn from the produce of No. 1, for some
other purpose. Whether the proprietor of the land, or any other person,
cultivated No. 1, these ten quarters would equally constitute rent; for
the cultivator of No. 2 would get the same result with his capital,
whether he cultivated No. 1, paying ten quarters for rent, or continued
to cultivate No. 2, paying no rent. In the same manner it might be shewn
that when No. 3 is brought into cultivation, the rent of No. 2 must be
ten quarters, or the value of ten quarters, whilst the rent of No. 1
would rise to twenty quarters; for the cultivator of No. 3 would have
the same profits whether he paid twenty quarters for the rent of No. 1,
ten quarters for the rent of No. 2, or cultivated No. 3 free of all
rent.

It often, and indeed commonly happens that before No. 2, 3, 4, or 5, or
the inferior lands are cultivated, capital can be employed more
productively on those lands which are already in cultivation. It may
perhaps be found, that by doubling the original capital employed on No.
1, though the produce will not be doubled, will not be increased by 100
quarters, it may be increased by eighty-five quarters, and that this
quantity exceeds what could be obtained by employing the same capital on
land, No. 3.

In such case, capital will be preferably employed on the old land, and
will equally create a rent; for rent is always the difference between
the produce obtained by the employment of two equal quantities of
capital and labour. If with a capital of 1000_l. _ a tenant obtain 100
quarters of wheat from his land, and by the employment of a second
capital of 1000_l. _, he obtain a further return of eighty-five, his
landlord would have the power at the expiration of his lease, of
obliging him to pay fifteen quarters, or an equivalent value, for
additional rent; for there cannot be two rates of profit. If he is
satisfied with a diminution of fifteen quarters in the return for his
second 1000_l. _, it is because no employment more profitable can be
found for it. The common rate of profit would be in that proportion, and
if the original tenant refused, some other person would be found willing
to give all which exceeded that rate of profit to the owner of the land
from which he derived it.

In this case, as well as in the other, the capital last employed pays no
rent. For the greater productive powers of the first 1000_l. _, fifteen
quarters is paid for rent, for the employment of the second 1000_l. _ no
rent whatever is paid. If a third 1000_l. _ be employed on the same land,
with a return of seventy-five quarters, rent will then be paid for the
second 1000_l. _ and will be equal to the difference between the produce
of these two, or ten quarters; and at the same time the rent of the
first 1000_l. _ will rise from fifteen to twenty-five quarters; while the
last 1000_l. _ will pay no rent whatever.

If then good land existed in a quantity much more abundant than the
production of food for an increasing population required, or if capital
could be indefinitely employed without a diminished return on the old
land, there could be no rise of rent; for rent invariably proceeds from
the employment of an additional quantity of labour with a proportionally
less return.

The most fertile, and most favourably situated land will be first
cultivated, and the exchangeable value of its produce will be adjusted
in the same manner as the exchangeable value of all other commodities,
by the total quantity of labour necessary in various forms, from first
to last, to produce it, and bring it to market. When land of an inferior
quality is taken into cultivation, the exchangeable value of raw produce
will rise, because more labour is required to produce it.

The exchangeable value of all commodities, whether they be manufactured,
or the produce of the mines, or the produce of land, is always
regulated, not by the less quantity of labour that will suffice for
their production under circumstances highly favourable, and exclusively
enjoyed by those who have peculiar facilities of production; but by the
greater quantity of labour necessarily bestowed on their production by
those who have no such facilities; by those who continue to produce them
under the most unfavourable circumstances; meaning--by the most
unfavourable circumstances, the most unfavourable under which the
quantity of produce required renders it necessary to carry on the
production.

Thus, in a charitable institution, where the poor are set to work with
the funds of benefactors, the general prices of the commodities, which
are the produce of such work, will not be governed by the peculiar
facilities afforded to these workmen, but by the common, usual, and
natural difficulties, which every other manufacturer will have to
encounter. The manufacturer enjoying none of these facilities might
indeed be driven altogether from the market, if the supply afforded by
these favoured workmen were equal to all the wants of the community; but
if he continued the trade, it would be only on condition that he should
derive from it the usual and general rate of profits on stock; and that
could only happen when his commodity sold for a price proportioned to
the quantity of labour bestowed on its production. [6]

It is true, that on the best land, the same produce would still be
obtained with the same labour as before, but its value would be enhanced
in consequence of the diminished returns obtained by those who employed
fresh labour and stock on the less fertile land. Notwithstanding then,
that the advantages of fertile over inferior lands are in no case lost,
but only transferred from the cultivator, or consumer, to the landlord,
yet since more labour is required on the inferior lands, and since it is
from such land only that we are enabled to furnish ourselves with the
additional supply of raw produce, the comparative value of that produce
will continue permanently above its former level, and make it exchange
for more hats, cloth, shoes, &c. &c. in the production of which no such
additional quantity of labour is required.

The reason then, why raw produce rises in comparative value, is because
more labour is employed in the production of the last portion obtained,
and not because a rent is paid to the landlord. The value of corn is
regulated by the quantity of labour bestowed on its production on that
quality of land, or with that portion of capital, which pays no rent.
Corn is not high because a rent is paid, but a rent is paid because corn
is high; and it has been justly observed, that no reduction would take
place in the price of corn, although landlords should forego the whole
of their rent. Such a measure would only enable some farmers to live
like gentlemen, but would not diminish the quantity of labour necessary
to raise raw produce on the least productive land in cultivation.

Nothing is more common than to hear of the advantages which the land
possesses over every other source of useful produce, on account of the
surplus which it yields in the form of rent. Yet when land is most
abundant, when most productive, and most fertile, it yields no rent; and
it is only when its powers decay, and less is yielded in return for
labour, that a share of the original produce of the more fertile
portions is set apart for rent. It is singular that this quality in the
land, which should have been noticed as an imperfection, compared with
the natural agents by which manufacturers are assisted, should have been
pointed out as constituting its peculiar pre-eminence. If air, water,
the elasticity of steam, and the pressure of the atmosphere, were of
various qualities; if they could be appropriated, and each quality
existed only in moderate abundance, they as well as the land would
afford a rent, as the successive qualities were brought into use. With
every worse quality employed, the value of the commodities in the
manufacture of which they were used would rise, because equal quantities
of labour would be less productive. Man would do more by the sweat of
his brow, and nature perform less; and the land would be no longer
pre-eminent for its limited powers.

If the surplus produce which land affords in the form of rent be an
advantage, it is desirable that, every year, the machinery newly
constructed should be less efficient than the old, as that would
undoubtedly give a greater exchangeable value to the goods manufactured,
not only by that machinery, but by all the other machinery in the
kingdom; and a rent would be paid to all those who possessed the most
productive machinery. [7]

The rise of rent is always the effect of the increasing wealth of the
country, and of the difficulty of providing food for its augmented
population. It is a symptom, but it is never a cause of wealth; for
wealth often increases most rapidly while rent is either stationary, or
even falling. Rent increases most rapidly, as the disposable land
decreases in its productive powers. Wealth increases most rapidly in
those countries where the disposable land is most fertile, where
importation is least restricted, and where through agricultural
improvements, productions can be multiplied without any increase in the
proportional quantity of labour, and where consequently the progress of
rent is slow.

If the high price of corn were the effect, and not the cause of rent,
price would be proportionally influenced as rents were high or low, and
rent would be a component part of price. But that corn which is produced
with the greatest quantity of labour is the regulator of the price of
corn, and rent does not and cannot enter in the least degree as a
component part of its price. Adam Smith, therefore, cannot be correct in
supposing that the original rule which regulated the exchangeable value
of commodities, namely the comparative quantity of labour by which they
were produced, can be at all altered by the appropriation of land and
the payment of rent. Raw material enters into the composition of most
commodities, but the value of that raw material as well as corn, is
regulated by the productiveness of the portion of capital last employed
on the land, and paying no rent; and therefore rent is not a component
part of the price of commodities.

We have been hitherto considering the effects of the natural progress of
wealth and population on rent, in a country in which the land is of
variously productive powers; and we have seen, that with every portion
of additional capital which it becomes necessary to employ on the land
with a less productive return, rent would rise. It follows from the same
principles, that any circumstances in the society which should make it
unnecessary to employ the same amount of capital on the land, and which
should therefore make the portion last employed more productive, would
lower rent. Any great reduction in the capital of a country, which
should materially diminish the funds destined for the maintenance of
labour, would naturally have this effect. Population regulates itself by
the funds which are to employ it, and therefore always increases or
diminishes with the increase or diminution of capital. Every reduction
of capital is therefore necessarily followed by a less effective demand
for corn, by a fall of price, and by diminished cultivation. In the
reverse order to that in which the accumulation of capital raises rent,
will the diminution of it lower rent. Land of a less unproductive
quality will be in succession relinquished, the exchangeable value of
produce will fall, and land of a superior quality will be the land last
cultivated, and that which will then pay no rent.

The same effects may however be produced when the wealth and population
of a country are increased, if that increase is accompanied by such
marked improvements in agriculture, as shall have the same effect of
diminishing the necessity of cultivating the poorer lands, or of
expending the same amount of capital on the cultivation of the more
fertile portions.

If a million of quarters of corn be necessary for the support of a given
population, and it be raised on land of the qualities of No. 1, 2, 3;
and if an improvement be afterwards discovered by which it can be raised
on No. 1 and 2, without employing No. 3, it is evident that the
immediate effect must be a fall of rent; for No. 2, instead of No. 3,
will then be cultivated without paying any rent; and the rent of No. 1,
instead of being the difference between the produce of No. 3 and No. 1,
will be the difference only between No. 2 and 1. With the same
population, and no more, there can be no demand for any additional
quantity of corn; the capital and labour employed on No. 3, will be
devoted to the production of other commodities desirable to the
community, and can have no effect in raising rent unless the raw
material from which they are made cannot be obtained without employing
capital less advantageously on the land, in which case No. 3 must again
be cultivated.

It is undoubtedly true, that the fall in the relative price of raw
produce, in consequence of the improvement in agriculture, or rather in
consequence of less labour being bestowed on its production, would
naturally lead to increased accumulation; for the profits of stock would
be greatly augmented. This accumulation would lead to an increased
demand for labour, to higher wages, to an increased population, to a
further demand for raw produce, and to an increased cultivation. It is
only, however, after the increase in the population, that rent would be
as high as before; that is to say, after No. 3 was taken into
cultivation. A considerable period would have elapsed, attended with a
positive diminution of rent.

But improvements in agriculture are of two kinds: those which increase
the productive powers of the land, and those which enable us to obtain
its produce with less labour. They both lead to a fall in the price of
raw produce; they both affect rent, but they do not affect it equally.
If they did not occasion a fall in the price of raw produce, they would
not be improvements; for it is the essential quality of an improvement
to diminish the quantity of labour before required to produce a
commodity; and this diminution cannot take place without a fall of its
price or relative value.

The improvements which increase the productive powers of the land, are
such as the more skilful rotation of crops, or the better choice of
manure. These improvements absolutely enable us to obtain the same
produce from a smaller quantity of land. If, by the introduction of a
course of turnips, I can feed my sheep besides raising my corn, the land
on which the sheep were fed becomes unnecessary, and the same quantity
of raw produce is raised by the employment of a less quantity of land.
If I discover a manure which will enable me to make a piece of land
produce 20 per cent. more corn, I may withdraw at least a portion of my
capital from the most unproductive part of my farm. But, as I have
before observed, it is not necessary that land should be thrown out of
cultivation, in order to reduce rent: to produce this effect, it is
sufficient that successive portions of capital are employed on the same
land with different results, and that the portion which gives the least
result should be withdrawn. If, by the introduction of the turnip
husbandry, or by the use of a more invigorating manure, I can obtain the
same produce with less capital, and without disturbing the difference
between the productive powers of the successive portions of capital, I
shall lower rent; for a different and more productive portion will be
that which will form the standard from which every other will be
reckoned. If, for example, the successive portions of capital yielded
100, 90, 80, 70; whilst I employed these four portions, my rent would be
60, or the difference between

70 and 100 = 30 } { 100
70 and 90 = 20 } { 90
70 and 80 = 10 } whilst the produce { 80
-- } would be 340 { 70
60 } { ---
{ 340

and while I employed these portions, the rent would remain the same,
although the produce of each should have an equal augmentation. If,
instead of 100, 90, 80, 70, the produce should be increased to 125, 115,
105, 95, the rent would still be 60, or the difference between

95 and 125 = 30 } { 125
95 and 115 = 20 } whilst the produce { 115
95 and 105 = 10 } would be increased { 105
-- } to 440 { 95
60 } { ---
{ 440

But with such an increase of produce, without an increase of demand,
there could be no motive for employing so much capital on the land; one
portion would be withdrawn, and consequently the last portion of capital
would yield 105 instead of 95, and rent would fall to 30, or the
difference between

105 and 125 = 20 } whilst the produce would be still { 125
105 and 115 = 10 } adequate to the wants of the { 115
-- } population, for it would be 345 { 105
30 } quarters, or { ---
{ 345

the demand being only for 340 quarters. --But there are improvements
which may lower the relative value of produce without lowering the corn
rent, though they will lower the money rent of land. Such improvements
do not increase the productive powers of the land, but they enable us to
obtain its produce with less labour. They are rather directed to the
formation of the capital applied to the land, than to the cultivation of
the land itself. Improvements in agricultural implements, such as the
plough and the threshing machine, economy in the use of horses employed
in husbandry, and a better knowledge of the veterinary art, are of this
nature. Less capital, which is the same thing as less labour, will be
employed on the land; but to obtain the same produce, less land cannot
be cultivated. Whether improvements of this kind, however, affect corn
rent, must depend on the question, whether the difference between the
produce obtained by the employment of different portions of capital be
increased, stationary, or diminished. If four portions of capital, 50,
60, 70, 80, be employed on the land, giving each the same results, and
any improvement in the formation of such capital should enable me to
withdraw 5 from each, so that they should be 45, 55, 65, and 75, no
alteration would take place in the corn rent; but if the improvements
were such as to enable me to make the whole saving on the largest
portion of capital, that portion which is least productively employed,
corn rent would immediately fall, because the difference between the
capital most productive and the capital least productive would be
diminished; and it is this difference which constitutes rent.

Without multiplying instances, I hope enough has been said to shew, that
whatever diminishes the inequality in the produce obtained from
successive portions of capital employed on the same or on new land,
tends to lower rent; and that whatever increases that inequality,
necessarily produces an opposite effect, and tends to raise it.

In speaking of the rent of the landlord, we have rather considered it as
the proportion of the whole produce, without any reference to its
exchangeable value; but since the same cause, the difficulty of
production, raises the exchangeable value of raw produce, and raises
also the proportion of raw produce paid to the landlord for rent, it is
obvious that the landlord is doubly benefited by difficulty of
production. First he obtains a greater share, and secondly the commodity
in which he is paid is of greater value. [8]




CHAPTER III.

ON THE RENT OF MINES.


The metals, like other things, are obtained by labour. Nature, indeed,
produces them; but it is the labour of man which extracts them from the
bowels of the earth, and prepares them for our service.

Mines, as well as land, generally pay a rent to their owner; and this
rent, as well as the rent of land, is the effect, and never the cause of
the high value of their produce.

If there were abundance of equally fertile mines, which any one might
appropriate, they could yield no rent; the value of their produce would
depend on the quantity of labour necessary to extract the metal from the
mine and bring it to market.

But there are mines of various qualities, affording very different
results, with equal quantities of labour. The metal produced from the
poorest mine that is worked, must at least have an exchangeable value,
not only sufficient to procure all the clothes, food, and other
necessaries consumed by those employed in working it, and bringing the
produce to market, but also to afford the common and ordinary profits to
him who advances the stock necessary to carry on the undertaking. The
return for capital from the poorest mine paying no rent, would regulate
the rent of all the other more productive mines. This mine is supposed
to yield the usual profits of stock. All that the other mines produce
more than this, will necessarily be paid to the owners for rent. Since
this principle is precisely the same as that which we have already laid
down respecting land, it will not be necessary further to enlarge on it.

It will be sufficient to remark, that the same general rule which
regulates the value of raw produce and manufactured commodities, is
applicable also to the metals; their value depending not on the rate of
profits, nor on the rate of wages, nor on the rent paid for mines, but
on the total quantity of labour necessary to obtain the metal, and to
bring it to market.

Like every other commodity, the value of the metals is subject to
variation. Improvements may be made in the implements and machinery used
in mining, which may considerably abridge labour; new and more
productive mines may be discovered, in which, with the same labour, more
metal may be obtained; or the facilities of bringing it to market may be
increased. In either of these cases the metals would fall in value, and
would therefore exchange for a less quantity of other things. On the
other hand, from the increasing difficulty of obtaining the metal,
occasioned by the greater depth at which the mine must be worked, and
the accumulation of water, or any other contingency, its value, compared
with that of other things, might be considerably increased.

It has therefore been justly observed, that however honestly the coin of
a country may conform to its standard, money made of gold and silver is
still liable to fluctuations in value, not only to accidental and
temporary, but to permanent and natural variations, in the same manner
as other commodities.

By the discovery of America and the rich mines in which it abounds, a
very great effect was produced on the natural price of the precious
metals. This effect is by many supposed not yet to have terminated. It
is probable however that all the effects on the value of the metals,
resulting from the discovery of America have long ceased, and if any
fall has of late years taken place in their value, it is to be
attributed to improvements in the mode of working the mines.

From whatever cause it may have proceeded, the effect has been so slow
and gradual, that little practical inconvenience has been felt from gold
and silver being the general medium in which the value of all other
things is estimated. Though undoubtedly a variable measure of value,
there is probably no commodity subject to fewer variations. This and the
other advantages which these metals possess, such as their hardness,
their malleability, their divisibility, and many more, have justly
secured the preference every where given to them, as a standard for the
money of civilized countries.

Having acknowledged the imperfections to which money made of gold and
silver is liable as a measure of value, from the greater or less
quantity of labour which may, under varying circumstances, be necessary
for the production of those metals, we may be permitted to make the
supposition that all these imperfections were removed, and that equal
quantities of labour could at all times obtain, from that mine which
paid no rent, equal quantities of gold. Gold would then be an invariable
measure of value. The quantity indeed would enlarge with the demand, but
its value would be invariable, and it would be eminently well calculated
to measure the varying value of all other things. I have already in a
former part of this work considered gold as endowed with this
uniformity, and in the following chapter I shall continue the
supposition. In speaking therefore of varying price, the variation will
be always considered as being in the commodity, and never in the medium
in which it is estimated.




CHAPTER IV.

ON NATURAL AND MARKET PRICE.


In making labour the foundation of the value of commodities, and the
comparative quantity of labour which is necessary to their production,
the rule which determines the respective quantities of goods which shall
be given in exchange for each other, we must not be supposed to deny the
accidental and temporary deviations of the actual or market price of
commodities from this, their primary and natural price.

In the ordinary course of events, there is no commodity which continues
for any length of time to be supplied precisely in that decree of
abundance, which the wants and wishes of mankind require, and therefore
there is none which is not subject to accidental and temporary
variations of price.

It is only in consequence of such variations, that capital is
apportioned precisely, in the requisite abundance and no more, to the
production of the different commodities which happen to be in demand.
With the rise or fall of price, profits are elevated above, or depressed
below their general level, and capital is either encouraged to enter
into, or is warned to depart from the particular employment in which the
variation has taken place.

Whilst every man is free to employ his capital where he pleases, he will
naturally seek for it that employment which is most advantageous; he
will naturally be dissatisfied with a profit of 10 per cent. , if by
removing his capital he can obtain a profit of 15 per cent. This
restless desire on the part of all the employers of stock, to quit a
less profitable for a more advantageous business, has a strong tendency
to equalize the rate of profits of all, or to fix them in such
proportions, as may in the estimation of the parties, compensate for
any advantage which one may have, or may appear to have over the other.
It is perhaps very difficult to trace the steps by which this change is
effected: it is probably effected, by a manufacturer not absolutely
changing his employment, but only lessening the quantity of capital he
has in that employment. In all rich countries, there is a number of men
forming what is called the monied class; these men are engaged in no
trade, but live on the interest of their money, which is employed in
discounting bills, or in loans to the more industrious part of the
community. The bankers too employ a large capital on the same objects.
The capital so employed forms a circulating capital of a large amount,
and is employed, in larger or smaller proportions, by all the different
trades of a country. There is perhaps no manufacturer, however rich, who
limits his business to the extent that his own funds alone will allow:
he has always some portion of this floating capital, increasing or
diminishing according to the activity of the demand for his commodities.
When the demand for silks increases, and that for cloth diminishes, the
clothier does not remove with his capital to the silk trade, but he
dismisses some of his workmen, he discontinues his demand for the loan
from bankers and monied men; while the case of the silk manufacturer is
the reverse: he wishes to employ more workmen, and thus his motive for
borrowing is increased: he borrows more, and thus capital is transferred
from one employment to another, without the necessity of a manufacturer
discontinuing his usual occupation. When we look to the markets of a
large town, and observe how regularly they are supplied both with home
and foreign commodities, in the quantity in which they are required,
under all the circumstances of varying demand, arising from the caprice
of taste, or a change in the amount of population, without often
producing either the effects of a glut from a too abundant supply, or an
enormously high price from the supply being unequal to the demand, we
must confess that the principle which apportions capital to each trade
in the precise amount that it is required, is more active than is
generally supposed.

A capitalist, in seeking profitable employment for his funds, will
naturally take into consideration all the advantages which one
occupation possesses over another. He may therefore be willing to forego
a part of his money profit, in consideration of the security,
cleanliness, ease, or any other real or fancied advantage which one
employment may possess over another.

If from a consideration of these circumstances, the profits of stock
should be so adjusted that in one trade they were 20, in another 25, and
in another 30 per cent. , they would probably continue permanently with
that relative difference, and with that difference only; for if any
cause should elevate the profits of one of these trades 10 per cent.