An Inquiry Into the Nature and Causes of the Wealth of Nations

Such are the results of the doctrine of Smith, and the fruits we are to reap from his immortal work. The proofs of the principle upon which his opinions are grounded, and the natural and easy manner in which his deductions flow from it, give it an air of simplicity and truth, which render it no less admirable than convincing. This simplicity, however, to be fully perceived, requires much study and consideration; for it cannot be denied that the 'Wealth of Nations' exhibits a striking instance of that defect for which English authors have so often been blamed, viz. a want of method, and a neglect, in their scientific works, of those divisions and arrangements which serve to assist the memory of the reader, and to guide his understanding. The author seems to have seized the pen at the moment when he was most elevated with the importance of his subject, and with the extent of his discoveries. He begins, by displaying before the eyes of his reader the innumerable wonders effected by the division of labour; and with this magnificent and impressive picture, he opens his course of instructions. He then goes back, to consider those circumstances which give rise to or limit this division; and is led by his subject to the definition of values – to the laws which regulate them, to the analysis of their several elements, and to the relations subsisting between those of different natures and origin; all of which are preliminary ideas, which ought naturally to have been explained to the reader before exhibiting to him the complicated instrument of the multiplication of wealth, or unveiling the prodigies of the most powerful of its resources.

On the other hand, he has often introduced long digressions, which interrupt the thread of his discussion, and, in many cases, completely destroy the connection of its several parts. Of this description is the digression

On the variations in the value of the precious metals during the four last centuries, with a critical examination of the opinions that their value is decreasing – book 1, chap. xi.

Upon banks of circulation and paper money – book 2, chap. ii.

Upon banks of deposit, and particularly that of Amsterdam – book 4, chap. iii.

Upon the advantage of seignorage in the coining of money – book 4, chap. vi.

Upon the commerce of grain, and the laws regarding this trade – book 4, chap. v.

These different treatises, although they are unquestionably the best that have ever been written on the subjects to which they relate, are, however, so introduced, as to distract the reader's attention – to make him lose sight of the principal object of the work – and to lessen the general effect of it as a whole.

To remedy, as far as I am able, these inconveniencies, and to facilitate to beginners the study of the doctrine of Smith, I have thought proper to point out the order which appears to me most agreeable to the natural progress of ideas, and, on this account, best calculated for the purpose of instruction.

I would begin by remarking, that the whole doctrine of Smith, upon the origin, multiplication, and distribution of wealth, is contained in his two first books; and that the three others may be read separately, as so many detached treatises, which, no doubt, confirm and develope his opinions, but do not by any means add to them.

The third book is an historical and political discussion on the progress which wealth would make in a country where labour and industry were left free; and upon the different causes which have tended, in all the countries of Europe, to reverse this progress.

In the fourth book, the author has endeavoured to combat the various systems of political economy which were popular previous to his time; and, in a particular manner, that which is denominated the mercantile system, which has exercised so strong an influence over the financial regulations of the European governments, and particularly over those of England.

In the fifth and last book, he considers the expenses of government; the most equitable and convenient modes of providing for these expenses; and lastly, public debts, and the influence they have over national prosperity.

The three last books may be read and studied in the same order and arrangement in which they were written, without any difficulty, by one who is completely master of the general doctrine contained in the two first.

I regard, then, the two first books, as a complete work, which I would divide into three parts.

The 1st relates to values in particular. It contains their definition; the laws which regulate them; the analysis of the elements which constitute a value, or enter into its composition; and the relations which values of different origin bear to each other.

The 2d part treats of the general mass of national wealth, which is here divided into separate classes, according to its destination or employment.

The 3d and last part explains the manner in which the growth and distribution of national wealth takes place.

PART FIRST. – OF VALUES IN PARTICULAR

The essential quality which constitutes wealth, and without which it would not be entitled to the name, is its exchangeable value.

Exchangeable value differs from the value of utility – book 1, end of chap. iv.

The relation existing between two exchangeable values, when expressed by a value generally agreed upon, is denominated price.

The value generally agreed on among civilized nations, is that of metals. Motives to this preference. Origin of money – book 1, chap. iv. Relation between money and the metal in the state of bullion – book 1, chap. v.

The price in money, or nominal price of a thing, differs from its real price, which is its valuation by the quantity of labour expended upon it, or which it represents – ibid.

Laws, according to which the price of wealth is naturally fixed; and those accidental circumstances which occasion the actual to differ from the natural price, and which gave rise to a distinction between the natural and the market price– book 1, chap. vii.

The price of a thing, in most cases, consists of three distinct elements – the wages of the labour, the profit of the master who directs the labour, and the rent of the ground that furnishes the materials on which it is erected. There are, however, some descriptions of merchandize in which the rent forms no part of the price; and others, in which the profit forms no part of it; but none, in which it is not formed principally by the wages – book 1, chap. vi.

Of wages. Laws, according to which the natural rate of wages is fixed; accidental circumstances which cause them to vary, during a short period, from that natural rate – book 1, chap. viii.

Of the profit of capitals. Laws, by which the natural right of profit is fixed; accidental circumstances which, for a long while, increase or diminish it beyond that rate – book 1, chap. ix.

Labour and capitals tend naturally to diffuse themselves through every species of employment; and, as certain employments are, by their nature, accompanied with inconveniencies and difficulties which do not occur in others, while these, on the contrary, offer some real or imaginary advantages which are peculiar to themselves; wages and profits should rise and fall in proportion to these advantages and disadvantages; thus forming a complete equilibrium between the various kinds of employment. The arbitrary and oppressive policy of Europe, in many instances, opposes the establishment of this equilibrium, which is conformable to the order of nature – book 1, chap. x.

Of the rent of the ground. The nature of rent: the manner in which it enters into the price of wealth; and according to what principles it in some cases forms an integral part of that price, while in others it does not – book 1, chap. xi.

Division of the rude produce of the earth into two great classes:

1. That produce which is always necessarily disposed of in such a way as to bring a rent to the landed proprietor.

2. That which, according to circumstances, may be disposed of so as to bring, or so as not to bring, a rent.

The produce of the first description is derived from the ground appropriated to furnishing subsistence for man, or for those animals which he uses as food. The value of the produce of the ground cultivated for the support of man, determines the value of the produce of all other ground proper for this species of culture. This general rule allows of some exceptions. Causes of these exceptions.

The produce of the second class consists of the materials of clothing, lodging, fuel, and the ornaments of dress and furniture. The value of this species of produce depends on that of the first description. Some circumstances render it possible that the produce of the second kind may be disposed of in such a way as to furnish a rent to the landed proprietor. Principles which regulate the proportion of the price of these products, which is formed by the rent – book 1, chap. xi.

Relation between the respective values of the produce of the first class, and those of the produce of the second. Variations which may take place in this relation, and the causes of such variations – ibid.

Relation existing between the values of the two descriptions of rude produce above mentioned, and the values of the produce of manufacture. Variations which may occur in this relation – ibid.

Certain kinds of rude produce, procured from very different sources, are, however, intended for the same kind of consumption; and hence it happens, the value of one determines and limits that of another – ibid.

The relations between values of different natures vary according to the state of society. This state is improving, declining, or stationary; that is to say, society is either increasing in wealth, or falling into poverty, or remaining in the same unchanged state of opulence.

Of the effects of these different states of society,

Upon the price of wages – book 1, chap. viii.

Upon the rate of profit – book 1, chap. ix.

Upon the value of the rude produce of the earth, and on that of the produce of manufacture – book 1, chap. xi.

Difference, in this respect, between the various kinds of rude produce, viz. 1. Those which the industry of man cannot multiply: 2. Those which his industry can always multiply in proportion to the demand: 3. Those over which human exertions have only an uncertain or limited influence – ibid.

PART SECOND. – OF STOCK AND ITS EMPLOYMENT

Wealth, accumulated in the possession of an individual, is of two descriptions, according to its destination or employment:

1. That reserved for immediate consumption.

2. That employed as capital, for the production of a revenue – book 2, chap. i.

Capital is also of two kinds:

1. Fixed capital, which produces a revenue and still remains in the same hands