is in every society or neighbourhood an ordinary or average
rate both of wages and profit in every different employment
of labour and stock. This rate is naturally regulated, as
I shall show hereafter, partly by the general circumstances
of the society, their riches or poverty, their advancing,
stationary, or declining condition; and partly by the particular
nature of each employment.
is likewise in every society or neighbourhood an ordinary
or average rate of rent, which is regulated too, as I shall
show hereafter, partly by the general circumstances of the
society or neighbourhood in which the land is situated, and
partly by the natural or improved fertility of the land.
ordinary or average rates may be called the natural rates
of wages, profit, and rent, at the time and place in which
they commonly prevail.
the price of any commodity is neither more nor less than what
is sufficient to pay the rent of the land, the wages of the
labour, and the profits of the stock employed in raising,
preparing, and bringing it to market, according to their natural
rates, the commodity is then sold for what may be called its
commodity is then sold precisely for what it is worth, or
for what it really costs the person who brings it to market;
for though in common language what is called the prime cost
of any commodity does not comprehend the profit of the person
who is to sell it again, yet if he sell it at a price which
does not allow him the ordinary rate of profit in his neighbourhood,
he is evidently a loser by the trade; since by employing his
stock in some other way he might have made that profit. His
profit, besides, is his revenue, the proper fund of his subsistence.
As, while he is preparing and bringing the goods to market,
he advances to his workmen their wages, or their subsistence;
so he advances to himself, in the same manner, his own subsistence,
which is generally suitable to the profit which he may reasonably
expect from the sale of his goods. Unless they yield him this
profit, therefore, they do not repay him what they may very
properly be said to have really cost him.
the price, therefore, which leaves him this profit is not
always the lowest at which a dealer may sometimes sell his
goods, it is the lowest at which he is likely to sell them
for any considerable time; at least where there is perfect
liberty, or where he may change his trade as often as he pleases.
actual price at which any commodity is commonly sold is called
its market price. It may either be above, or below, or exactly
the same with its natural price.
market price of every particular commodity is regulated by
the proportion between the quantity which is actually brought
to market, and the demand of those who are willing to pay
the natural price of the commodity, or the whole value of
the rent, labour, and profit, which must be paid in order
to bring it thither. Such people may be called the effectual
demanders, and their demand the effectual demand; since it
may be sufficient to effectuate the bringing of the commodity
to market. It is different from the absolute demand. A very
poor man may be said in some sense to have a demand for a
coach and six; he might like to have it; but his demand is
not an effectual demand, as the commodity can never be brought
to market in order to satisfy it.
the quantity of any commodity which is brought to market falls
short of the effectual demand, all those who are willing to
pay the whole value of the rent, wages, and profit, which
must be paid in order to bring it thither, cannot be supplied
with the quantity which they want. Rather than want it altogether,
some of them will be willing to give more. A competition will
immediately begin among them, and the market price will rise
more or less above the natural price, according as either
the greatness of the deficiency, or the wealth and wanton
luxury of the competitors, happen to animate more or less
the eagerness of the competition. Among competitors of equal
wealth and luxury the same deficiency will generally occasion
a more or less eager competition, according as the acquisition
of the commodity happens to be of more or less importance
to them. Hence the exorbitant price of the necessaries of
life during the blockade of a town or in a famine.
the quantity brought to market exceeds the effectual demand,
it cannot be all sold to those who are willing to pay the
whole value of the rent, wages, and profit, which must be
paid in order to bring it thither. Some part must be sold
to those who are willing to pay less, and the low price which
they give for it must reduce the price of the whole. The market
price will sink more or less below the natural price, according
as the greatness of the excess increases more or less the
competition of the sellers, or according as it happens to
be more or less important to them to get immediately rid of
the commodity. The same excess in the importation of perishable,
will occasion a much greater competition than in that of durable
commodities; in the importation of oranges, for example, than
in that of old iron.
the quantity brought to market is just sufficient to supply
the effectual demand, and no more, the market price naturally
comes to be either exactly, or as nearly as can be judged
of, the same with the natural price. The whole quantity upon
hand can be disposed of for this price, and cannot be disposed
of for more. The competition of the different dealers obliges
them all to accept of this price, but does not oblige them
to accept of less.
quantity of every commodity brought to market naturally suits
itself to the effectual demand. It is the interest of all
those who employ their land, labour, or stock, in bringing
any commodity to market, that the quantity never should exceed
the effectual demand; and it is the interest of all other
people that it never should fall short of that demand.
at any time it exceeds the effectual demand, some of the component
parts of its price must be paid below their natural rate.
If it is rent, the interest of the landlords will immediately
prompt them to withdraw a part of their land; and if it is
wages or profit, the interest of the labourers in the one
case, and of their employers in the other, will prompt them
to withdraw a part of their labour or stock from this employment.
The quantity brought to market will soon be no more than sufficient
to supply the effectual demand. All the different parts of
its price will rise to their natural rate, and the whole price
to its natural price.
on the contrary, the quantity brought to market should at
any time fall short of the effectual demand, some of the component
parts of its price must rise above their natural rate. If
it is rent, the interest of all other landlords will naturally
prompt them to prepare more land for the raising of this commodity;
if it is wages or profit, the interest of all other labourers
and dealers will soon prompt them to employ more labour and
stock in preparing and bringing it to market. The quantity
brought thither will soon be sufficient to supply the effectual
demand. All the different parts of its price will soon sink
to their natural rate, and the whole price to its natural
natural price, therefore, is, as it were, the central price,
to which the prices of all commodities are continually gravitating.
Different accidents may sometimes keep them suspended a good
deal above it, and sometimes force them down even somewhat
below it. But whatever may be the obstacles which hinder them
from settling in this centre of repose and continuance, they
are constantly tending towards it.
whole quantity of industry annually employed in order to bring
any commodity to market naturally suits itself in this manner
to the effectual demand. It naturally aims at bringing always
that precise quantity thither which may be sufficient to supply,
and no more than supply, that demand.
in some employments the same quantity of industry will in
different years produce very different quantities of commodities;
while in others it will produce always the same, or very nearly
the same. The same number of labourers in husbandry will,
in different years, produce very different quantities of corn,
wine, oil, hops, etc. But the same number of spinners and
weavers will every year produce the same or very nearly the
same quantity of linen and woollen cloth. It is only the average
produce of the one species of industry which can be suited
in any respect to the effectual demand; and as its actual
produce is frequently much greater and frequently much less
than its average produce, the quantity of the commodities
brought to market will sometimes exceed a good deal, and sometimes
fall short a good deal, of the effectual demand. Even though
that demand therefore should continue always the same, their
market price will be liable to great fluctuations, will sometimes
fall a good deal below, and sometimes rise a good deal above
their natural price. In the other species of industry, the
produce of equal quantities of labour being always the same,
or very nearly the same, it can be more exactly suited to
the effectual demand. While that demand continues the same,
therefore, the market price of the commodities is likely to
do so too, and to be either altogether, or as nearly as can
be judged of, the same with the natural price. That the price
of linen and woolen cloth is liable neither to such frequent
nor to such great variations as the price of corn, every man's
experience will inform him. The price of the one species of
commodities varies only with the variations in the demand:
that of the other varies, not only with the variations in
the demand, but with the much greater and more frequent variations
in the quantity of what is brought to market in order to supply
occasional and temporary fluctuations in the market price
of any commodity fall chiefly upon those parts of its price
which resolve themselves into wages and profit. That part
which resolves itself into rent is less affected by them.
A rent certain in money is not in the least affected by them
either in its rate or in its value. A rent which consists
either in a certain proportion or in a certain quantity of
the rude produce, is no doubt affected in its yearly value
by all the occasional and temporary fluctuations in the market
price of that rude produce; but it is seldom affected by them
in its yearly rate. In settling the terms of the lease, the
landlord and farmer endeavour, according to their best judgment,
to adjust that rate, not to the temporary and occasional,
but to the average and ordinary price of the produce.
fluctuations affect both the value and the rate either of
wages or of profit, according as the market happens to be
either overstocked or understocked with commodities or with
labour; with work done, or with work to be done. A public
mourning raises the price of black cloth (with which the market
is almost always understocked upon such occasions), and augments
the profits of the merchants who possess any considerable
quantity of it. It has no effect upon the wages of the weavers.
The market is understocked with commodities, not with labour;
with work done, not with work to be done. It raises the wages
of journeymen tailors. The market is here understocked with
labour. There is an effectual demand for more labour, for
more work to be done than can be had. It sinks the price of
coloured silks and cloths, and thereby reduces the profits
of the merchants who have any considerable quantity of them
upon hand. It sinks, too, the wages of the workmen employed
in preparing such commodities, for which all demand is stopped
for six months, perhaps for a twelvemonth. The market is here
over-stocked both with commodities and with labour.
though the market price of every particular commodity is in
this manner continually gravitating, if one may say so, towards
the natural price, yet sometimes particular accidents, sometimes
natural causes, and sometimes particular regulations of police,
may, in many commodities, keep up the market price, for a
long time together, a good deal above the natural price.
by an increase in the effectual demand, the market price of
some particular commodity happens to rise a good deal above
the natural price, those who employ their stocks in supplying
that market are generally careful to conceal this change.
If it was commonly known, their great profit would tempt so
many new rivals to employ their stocks in the same way that,
the effectual demand being fully supplied, the market price
would soon be reduced to the natural price, and perhaps for
some time even below it. If the market is at a great distance
from the residence of those who supply it, they may sometimes
be able to keep the secret for several years together, and
may so long enjoy their extraordinary profits without any
new rivals. Secrets of this kind, however, it must be acknowledged,
can seldom be long kept; and the extraordinary profit can
last very little longer than they are kept.
in manufactures are capable of being longer kept than secrets
in trade. A dyer who has found the means of producing a particular
colour with materials which cost only half the price of those
commonly made use of, may, with good management, enjoy the
advantage of his discovery as long as he lives, and even leave
it as a legacy to his posterity. His extraordinary gains arise
from the high price which is paid for his private labour.
They properly consist in the high wages of that labour. But
as they are repeated upon every part of his stock, and as
their whole amount bears, upon that account, a regular proportion
to it, they are commonly considered as extraordinary profits
enhancements of the market price are evidently the effects
of particular accidents, of which, however, the operation
may sometimes last for many years together.
natural productions require such a singularity of soil and
situation that all the land in a great country, which is fit
for producing them, may not be sufficient to supply the effectual
demand. The whole quantity brought to market, therefore, may
be disposed of to those who are willing to give more than
what is sufficient to pay the rent of the land which produced
them, together with the wages of the labour, and the profits
of the stock which were employed in preparing and bringing
them to market, according to their natural rates. Such commodities
may continue for whole centuries together to be sold at this
high price; and that part of it which resolves itself into
the rent of land is in this case the part which is generally
paid above its natural rate. The rent of the land which affords
such singular and esteemed productions, like the rent of some
vineyards in France of a peculiarly happy soil and situation,
bears no regular proportion to the rent of other equally fertile
and equally well-cultivated land in its neighbourhood. The
wages of the labour and the profits of the stock employed
in bringing such commodities to market, on the contrary, are
seldom out of their natural proportion to those of the other
employments of labour and stock in their neighbourhood.
enhancements of the market price are evidently the effect
of natural causes which may hinder the effectual demand from
ever being fully supplied, and which may continue, therefore,
to operate for ever.
monopoly granted either to an individual or to a trading company
has the same effect as a secret in trade or manufactures.
The monopolists, by keeping the market constantly understocked,
by never fully supplying the effectual demand, sell their
commodities much above the natural price, and raise their
emoluments, whether they consist in wages or profit, greatly
above their natural rate.
price of monopoly is upon every occasion the highest which
can be got. The natural price, or the price of free competition,
on the contrary, is the lowest which can be taken, not upon
every occasion, indeed, but for any considerable time together.
The one is upon every occasion the highest which can be squeezed
out of the buyers, or which, it is supposed, they will consent
to give: the other is the lowest which the sellers can commonly
afford to take, and at the same time continue their business.
exclusive privileges of corporations, statutes of apprenticeship,
and all those laws which restrain, in particular employments,
the competition to a smaller number than might otherwise go
into them, have the same tendency, though in a less degree.
They are a sort of enlarged monopolies, and may frequently,
for ages together, and in whole classes of employments, keep
up the market price of particular commodities above the natural
price, and maintain both the wages of the labour and the profits
of the stock employed about them somewhat above their natural
enhancements of the market price may last as long as the regulations
of police which give occasion to them.
market price of any particular commodity, though it may continue
long above, can seldom continue long below its natural price.
Whatever part of it was paid below the natural rate, the persons
whose interest it affected would immediately feel the loss,
and would immediately withdraw either so much land, or so
much labour, or so much stock, from being employed about it,
that the quantity brought to market would soon be no more
than sufficient to supply the effectual demand. Its market
price, therefore, would soon rise to the natural price. This
at least would be the case where there was perfect liberty.
same statutes of apprenticeship and other corporation laws
indeed, which, when a manufacture is in prosperity, enable
the workman to raise his wages a good deal above their natural
rate, sometimes oblige him, when it decays, to let them down
a good deal below it. As in the one case they exclude many
people from his employment, so in the other they exclude him
from many employments. The effect of such regulations, however,
is not near so durable in sinking the workman's wages below,
as in raising them above their natural rate. Their operation
in the one way may endure for many centuries, but in the other
it can last no longer than the lives of some of the workmen
who were bred to the business in the time of its prosperity.
When they are gone, the number of those who are afterwards
educated to the trade will naturally suit itself to the effectual
demand. The police must be as violent as that of Indostan
or ancient Egypt (where every man was bound by a principle
of religion to follow the occupation of his father, and was
supposed to commit the most horrid sacrilege if he changed
it for another), which can in any particular employment, and
for several generations together, sink either the wages of
labour or the profits of stock below their natural rate.
is all that I think necessary to be observed at present concerning
the deviations, whether occasional or permanent, of the market
price of commodities from the natural price.
natural price itself varies with the natural rate of each
of its component parts, of wages, profit, and rent; and in
every society this rate varies according to their circumstances,
according to their riches or poverty, their advancing, stationary,
or declining condition. I shall, in the four following chapters,
endeavour to explain, as fully and distinctly as I can, the
causes of those different variations.
I shall endeavour to explain what are the circumstances which
naturally determine the rate of wages, and in what manner
those circumstances are affected by the riches or poverty,
by the advancing, stationary, or declining state of the society.
I shall endeavour to show what are the circumstances which
naturally determine the rate of profit, and in what manner,
too, those circumstances are affected by the like variations
in the state of the society.
pecuniary wages and profit are very different in the different
employments of labour and stock; yet a certain proportion
seems commonly to take place between both the pecuniary wages
in all the different employments of labour, and the pecuniary
profits in all the different employments of stock. This proportion,
it will appear hereafter, depends partly upon the nature of
the different employments, and partly upon the different laws
and policy of the society in which they are carried on. But
though in many respects dependent upon the laws and policy,
this proportion seems to be little affected by the riches
or poverty of that society; by its advancing, stationary,
or declining condition; but to remain the same or very nearly
the same in all those different states. I shall, in the third
place, endeavour to explain all the different circumstances
which regulate this proportion.
the fourth and last place, I shall endeavour to show what
are the circumstances which regulate the rent of land, and
which either raise or lower the real price of all the different
substances which it produces.