An Inquiry Into the Nature and Causes of the Wealth of Nations. Adam Smith
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
2. Circulating capital, which yields no revenue unless it be employed in trade—book 2 chap. i.
The whole accumulated wealth of any community may be divided into three parts:
1. The fund appropriated to the immediate consumption of the proprietors of wealth.
2. The fixed capital of the community.
3. Its circulating capital.
The fixed capital of the society consists,
1. Of all machines and instruments of labour;
2. Of all buildings and edifices erected for the purposes of industry;
3. Of every kind of agricultural improvement which can tend to render the soil more productive;
4. Of the talents and skill which certain members of the community have acquired by time and expense.
The circulating capital of a community consists,
1. In the money in circulation;
2. In the stock of provisions in the hands both of the producers and of the merchants, and from the sale of which they expect to derive a profit;
3. In the materials of lodging, clothing, dress, and ornament, more or less manufactured, which are in the hands of those who are employed in rendering them fit for use and consumption;
4. In the goods more completely fit for consumption, and preserved in warehouses and shops, by merchants who propose to sell them with a profit—book 2, chap. i.
Of the relation existing between the employment of these two kinds of capital—ibid.
Of the mode in which the capital withdrawn from circulation