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relax. Find a

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And off we go.

2:04

Tonight, let's relax with

2:06

more from a foundational

2:09

work about the mysterious

2:11

world of economics. We're

2:13

reading an inquiry into

2:15

the nature and causes

2:18

of the wealth of

2:20

nations. First published in

2:22

the year 1776. Let's

2:25

pick up right where

2:27

we left off at

2:29

Chapter 6. Let's begin.

2:31

Chapter 6. Of the

2:34

component part of the

2:36

price of commodities. In

2:38

that early and rude

2:41

state of society, which

2:43

proceeds both the accumulation

2:45

of stock and the

2:47

appropriation of land, the

2:50

proportion between the quantities

2:52

of labor necessary for

2:54

acquiring different objects seems

2:56

to be the only

2:59

circumstance which can afford

3:01

any rule for exchanging

3:03

them for one another.

3:06

If among a nation

3:08

of hunters, for example,

3:10

it usually costs twice

3:12

the labor to kill

3:15

a beaver, which it

3:17

does to kill a

3:19

deer. One beaver should

3:21

naturally exchange for or

3:24

be worth two deer.

3:26

It is natural that

3:28

what is usually the

3:31

produce of two days

3:33

or two hours labor

3:35

should be worth double

3:37

of what is usually

3:40

the produce of one

3:42

days or one hours

3:44

labor. If the one

3:47

species of labor should

3:49

be more severe, Some

3:51

allowance will naturally be

3:53

made for this superior

3:56

hardship and the produce

3:58

of one hour's labor

4:00

in the one way

4:02

may frequently exchange

4:04

for that of two hours labor in

4:07

the other? Or if the one

4:09

species of labor requires

4:11

an uncommon degree of

4:14

dexterity and ingenuity, the

4:16

esteem which men have for

4:18

such talents will naturally

4:21

give a value to their

4:23

produce, superior to what

4:25

would be due to the time

4:27

employed about it? Such talents

4:29

can seldom be acquired,

4:32

but in consequence of

4:34

long application, and the

4:36

superior value of their produce

4:39

may frequently be no

4:41

more than a reasonable

4:43

compensation for the

4:45

time and labour which must

4:47

be spent in acquiring them.

4:50

In the advanced state

4:52

of society, allowances

4:54

of this kind for superior

4:56

hardship and superior skill

4:59

are commonly made in the

5:01

wages of labor, and something

5:03

of the same kind must

5:06

probably have taken place in

5:08

its earliest and rudest period.

5:11

In this state of things,

5:13

the whole produce of labor

5:15

belongs to the laborer, and

5:17

the quantity of labor

5:19

commonly employed in acquiring

5:22

or producing any commodity.

5:24

is the only circumstance

5:27

which can regulate the

5:29

quantity of labor which it

5:31

ought commonly to purchase, command,

5:34

or exchange for. As soon as

5:36

stock has accumulated in the

5:38

hands of particular persons,

5:41

some of them will naturally

5:43

employ it in setting

5:45

to work industrious people,

5:47

whom they will supply with

5:50

materials and subsistence

5:52

in order to make a profit by the

5:54

sale of their work, or by what

5:56

their labour adds to the value

5:58

of the material. In exchanging

6:01

the complete manufacture either

6:03

for money, for labor,

6:05

or for other goods, over and

6:08

above, what may be sufficient

6:10

to pay the price of the

6:12

materials and the wages of

6:15

the workmen, something must be

6:17

given for the profits of

6:19

the undertaker of the work,

6:22

who hazards his stock in

6:24

this adventure. The value

6:26

which the workmen add to

6:29

the materials therefore resolves

6:31

itself in this case into

6:33

two parts, of which the one

6:36

pays their wages, the other the

6:38

profits of their employer,

6:40

upon the whole stock of

6:43

materials and wages which he

6:45

advanced. He could have no

6:47

interest to employ them,

6:49

unless he expected from the

6:51

sale of their work. something

6:54

more than what was sufficient

6:56

to replace his stock to

6:58

him, and he could have no

7:00

interest to employ a great stock

7:03

rather than a small one, unless

7:05

his profits were to bear

7:07

some proportion to the extent

7:10

of his stock. The profits

7:12

of stock, it may perhaps

7:14

be thought, are only a different

7:16

name for the wages of

7:18

a particular sort of labor.

7:20

The labor of inspection.

7:23

and direction. They are, however,

7:25

altogether different, are

7:28

regulated by quite

7:30

different principles, and bear

7:32

no proportion to the

7:35

quantity, the hardship, or

7:37

the ingenuity of this

7:39

supposed labor of inspection

7:42

and direction. They are

7:45

regulated altogether by the

7:47

value of the stock

7:49

employed. and are greater or

7:51

smaller in proportion to the

7:53

extent of this stock. Let us

7:56

suppose, for example, that

7:58

in some particular place

8:00

where the common annual

8:02

profits of manufacturing

8:05

stock are 10% there

8:07

are two different manufacturers

8:10

in each of which 20 workmen

8:12

are employed at the rate

8:14

of 15 pounds a year each

8:17

or at the expense of 300

8:19

a year in each

8:21

manufacturing. Let us suppose too

8:24

that the course materials

8:26

annually brought up in the

8:29

one. cost only 700

8:31

pounds, while the finer

8:33

materials in the other

8:36

cost 7,000. The

8:38

capital annually employed

8:40

in the one will

8:42

in this case amount

8:44

only to 1,000 pounds,

8:47

whereas that employed

8:49

in the other will amount

8:51

to 7,300 pounds. At

8:54

the rate of 10% therefore,

8:56

the undertaker of

8:58

the one. will expect the

9:00

yearly profit of about

9:03

100 pounds only, while

9:05

that of the other will

9:07

expect about 730 pounds.

9:10

But though their profits are

9:12

so very different, their

9:15

labor of inspection and

9:17

direction may be

9:19

either altogether or very

9:21

nearly the same. In many

9:23

great works, almost

9:25

the whole labor of this

9:28

kind. is committed to some

9:30

principal clerk. His wages

9:32

properly expressed the value

9:34

of this labor of

9:36

inspection and direction, though

9:38

in settling them some regard

9:41

is had commonly, not only

9:43

to his labor and skill,

9:45

but to the trust which is

9:47

reposed in him. Yet they never

9:49

bear any regular proportion

9:52

to the capital of which

9:54

he oversees the management. and

9:57

the owner of this

9:59

capital. He is thus discharged

10:01

of almost all labor,

10:03

still expects that his

10:05

profit should bear a

10:07

regular proportion to his

10:09

capital. In the price

10:11

of commodities, therefore, the

10:13

profits of stock constitute

10:15

a component part altogether

10:17

different from the wages

10:19

of labor, and regulated

10:22

by quite different principles.

10:24

In this state of

10:26

things, the whole produce

10:28

of labor does not

10:30

always belong to the

10:32

laborer. He must, in

10:34

most cases, share it

10:36

with the owner of

10:38

the stock which employs

10:40

him. Neither is the

10:42

quantity of labor commonly

10:44

employed in acquiring or

10:46

producing any commodity, the

10:48

only circumstance which can

10:50

regulate the quantity which

10:52

it ought commonly to

10:54

purchase, command, or exchange

10:56

for. An additional quantity,

10:58

it is evident, must be

11:01

due for the profits of

11:03

the stock which advanced the

11:05

wages and furnished the materials

11:08

of that labor. As soon

11:10

as the land of any

11:12

country has all become private

11:15

property, the landlords, like all

11:17

other men, love to reap

11:19

where they never sewed, and

11:22

demand a rent even for

11:24

its natural produce. the wood

11:26

of the forest, the grass

11:29

of the field, and all

11:31

the natural fruits of the

11:34

earth, which when land was

11:36

in common, cost the laborer

11:38

only the trouble of gathering

11:41

them, come even to him

11:43

to have an additional price

11:45

fixed upon them. He must

11:48

then pay for the license

11:50

to gather them, and must

11:52

give up to the landlord

11:55

a portion of what his

11:57

labor. either collects or produces.

11:59

This portion, or what comes to

12:02

the same thing, the price of

12:04

this portion, constitutes

12:06

the rent of land, and in

12:08

the price of the greater

12:11

part of commodities, makes

12:13

a third component part.

12:15

The real value of all

12:17

the different component parts

12:20

of price, it must be

12:22

observed, is measured by the

12:24

quantity of labor which they

12:26

can, each of them purchase

12:28

or command. Labor

12:30

measures the value not

12:33

only of that part of

12:35

price, which resolves

12:37

itself into labor,

12:39

but of that which

12:42

resolves itself into

12:44

profit. In every society,

12:46

the price of every

12:49

commodity finally

12:51

resolves itself into

12:53

someone or other, or

12:56

all of those three parts.

12:58

and in every improved

13:00

society. All the three enter

13:02

more or less as component

13:04

parts into the price of

13:07

the far greater part of

13:09

commodities. In the price of

13:11

corn, for example, one

13:13

part pays the rent of

13:16

the landlord, another pays

13:18

the wages or maintenance

13:20

of the laborers, and

13:22

laboring cattle employed in

13:24

producing it. And the third. pays

13:27

the profit of the farmer. These

13:29

three parts seem either immediately

13:31

or ultimately to make up

13:34

the whole price of corn.

13:36

A fourth part, it may

13:38

perhaps be thought, is necessary

13:41

for replacing the stock

13:43

of the farmer or

13:45

for compensating the wear and

13:47

tear of his laboring cattle

13:50

and other instruments

13:52

of husbandry. But it

13:54

must be considered. that

13:56

the price of any instrument

13:58

of husbandry, such as a

14:00

laboring horse, is

14:02

itself made up of the same

14:04

time parts, the

14:06

rent of the land upon which he is

14:09

reared, the labor of

14:11

tending and rearing him, and the

14:13

profits of the farmer, who

14:15

advances both the rent of this

14:17

land and the wages of

14:19

this labor. Though

14:21

the price of the corn

14:23

therefore may pay the price as

14:25

well as the maintenance of the

14:28

horse, the whole price still

14:30

resolves itself either immediately

14:32

or ultimately into

14:34

the same three parts

14:36

of rent, labor, and

14:39

profit. In

14:41

the price of flour or

14:44

meal we must add to the price of

14:46

the corn, the profits of

14:48

the miller, and the wages of

14:50

his servants. In

14:52

the price of bread, the profits

14:54

of the baker and the

14:56

wages of his servants, and

14:59

in the price of both, the

15:01

labor of transporting the corn from

15:03

the house of the farmer

15:05

to that of the miller, and

15:08

from that of the miller to that

15:10

of the baker, together

15:12

with the profits of those who

15:14

advance the wages of that

15:16

labor. The price

15:18

of flax resolves itself

15:21

into the same three parts as

15:23

that of corn. In

15:26

the price of linen, we must

15:28

add to this price the wages

15:30

of the flax dresser, of

15:32

the spinner, of the weaver,

15:35

of the bleacher,

15:37

etc., together with the profits

15:39

of their respective employers. As

15:43

any particular commodity comes

15:45

to be more manufactured, that

15:48

part of the price which resolves

15:50

itself into wages

15:52

and profit comes to

15:54

be greater in proportion to

15:57

that which resolves itself into

15:59

rent. In the progress

16:01

of the manufacture, not

16:03

only the number of

16:05

profits increase, but every subsequent

16:08

profit is greater than

16:10

the foregoing, because the

16:12

capital from which it is

16:15

derived must always be greater.

16:17

The capital which employs

16:19

the weavers, for example,

16:21

must be greater than that

16:24

which employs the spinners. because

16:26

it not only replaces

16:28

that capital with its

16:31

profits, but pays besides

16:33

the wages of the weavers,

16:35

and the profits must

16:37

always bear some proportion

16:40

to the capital. In

16:42

the most improved societies,

16:44

however, there are always

16:46

a few commodities, of which

16:49

the price resolves itself,

16:51

into two parts only.

16:53

The wages of labor. and

16:55

the profits of stock, and

16:57

a still smaller number, in

17:00

which it consists altogether

17:02

in the wages of

17:04

labor. In the price of sea

17:06

fish, for example, one part

17:09

pays the labor of the

17:11

fishermen, and the other, the

17:13

profits of the capital

17:15

employed in the fishery.

17:17

Rent very seldom makes

17:19

any part of it, though it

17:22

does sometimes. as I shall

17:24

show hereafter. It is otherwise

17:27

at least through a greater

17:29

part of Europe in river

17:31

fisheries. A salmon fishery

17:34

pays a rent and rent,

17:36

though it cannot well be

17:38

called the rent of land,

17:41

makes a part of the price

17:43

of a salmon, as well

17:45

as wares and profit. In

17:48

some parts of Scotland,

17:50

a few poor people. make

17:52

a trade of gathering along

17:54

the seashore. Those little variegated

17:57

stones commonly known by

17:59

the name of Scotch

18:01

Pebbles. The price which is

18:04

paid to them by the

18:06

stone cutter is altogether the

18:09

wages of their labour. Neither

18:11

rent nor profit makes any

18:14

part of it. But the

18:16

whole price of any commodity

18:18

must still finally resolve itself

18:21

into some one or other

18:23

or all of those three

18:26

parts, as whatever part of

18:28

it remains. after paying the

18:31

rent of the land and

18:33

the price of the whole

18:36

labour employed in raising, manufacturing,

18:38

and bringing it to market,

18:41

must necessarily be profit to

18:43

somebody. As the price or

18:46

exchangeable value of every particular

18:48

commodity taken separately, resolves itself

18:50

into some one or other

18:53

or all of those three

18:55

parts. So that of all

18:58

the commodities, which compose the

19:00

whole annual produce of the

19:03

labor of every country, taking

19:05

completely, must resolve itself into

19:08

the same three parts, and

19:10

be parceled out among different

19:13

inhabitants of the country, either

19:15

as the wages of their

19:17

labor, the profits of their

19:20

stock, or the rent of

19:22

their land. The

19:24

whole of what is

19:27

annually either collected or

19:29

produced by the labor

19:31

of every society, or

19:33

what comes to the

19:36

same thing, the whole

19:38

price of it, is

19:40

in this manner originally

19:42

distributed among some of

19:44

its different members. Wages,

19:47

profit, and rent are

19:49

the three original sources

19:51

of all revenue. as

19:53

well as of all

19:55

exchangeable value. All other

19:58

revenue is ultimately derived.

20:00

from someone or other of

20:02

these. Whoever derives his

20:05

revenue from a fund which

20:07

is his own must

20:09

draw it either from his

20:11

labor, from his stock,

20:13

or from his land.

20:16

The revenue derived from

20:18

labor is called wages.

20:21

That derived from stock

20:23

by the person who

20:25

manages or employs it

20:27

is called profit. That

20:30

derived from it by the

20:32

person who does not employ

20:34

it himself, but lends it to

20:37

another, is called the interest

20:39

or the use of money.

20:41

It is the compensation

20:43

which the borrower pays to

20:45

the lender for the profit

20:47

which he has an opportunity

20:49

of making by the use

20:51

of the money. Part of

20:53

that profit naturally belongs

20:55

to the borrower, who runs

20:57

the risk. and takes the

21:00

trouble of employing it, and

21:02

part to the lender, who affords

21:04

him the opportunity of

21:07

making this profit. The interest

21:09

of money is always

21:11

a derivative revenue, which,

21:14

if it is not paid from the

21:16

profit, which is made by

21:18

the use of the money, must

21:20

be paid from some other source

21:22

of revenue, unless, perhaps,

21:25

the borrower is a

21:27

spendthrift. who contracts the

21:29

second debt in order to

21:31

pay the interest of the first.

21:34

The revenue which proceeds

21:36

altogether from land is

21:38

called rent and belongs

21:40

to the landlord. The

21:42

revenue of the farmer is

21:45

derived partly from his labor

21:47

and partly from his stock.

21:49

To him, land is only

21:51

the instrument which enables

21:54

him to earn the wages of

21:56

this labor. and to make the profits

21:59

of this stock. All

22:01

taxes and all the

22:03

revenue which is founded

22:05

upon them, all salaries,

22:07

pensions, and annuities of

22:09

every kind, are ultimately

22:11

derived from some one

22:13

or other of those

22:15

three original sources of

22:17

revenue, and are paid

22:19

either immediately or immediately

22:22

from the wages of

22:24

labor, the profits of

22:26

stock, or the rent

22:28

of land. When those

22:30

three different sorts of

22:32

revenue belong to different

22:34

persons, they are readily

22:36

distinguished. But when they

22:38

belong to the same,

22:40

they are sometimes confounded

22:42

with one another, at

22:44

least in common language.

22:46

A gentleman who farms

22:48

a part of his

22:50

own estate, after paying

22:53

the expense of cultivation,

22:55

should gain both the

22:57

rent of the landlord

22:59

and the profit of

23:01

the farmer. He is

23:03

apt to denominate, however,

23:05

his whole gain, profit,

23:07

and thus confounds rent

23:09

with profit, at least

23:11

in common language. The

23:13

greater part of our

23:15

North American and West

23:17

Indian planters are in

23:19

this situation. They farm

23:22

the greater part of

23:24

them part of them.

23:26

their own estates, and

23:28

accordingly we seldom hear

23:30

of the rent of

23:32

a plantation, but frequently

23:34

of its profit. Common

23:36

farmers seldom employ any

23:38

overseer to direct the

23:40

general operations of the

23:42

farm. They generally, too,

23:44

work a good deal

23:46

with their own hands,

23:48

as plowmen, herowers, etc.

23:51

What remains of the

23:53

crop? What remains of

23:55

the crop? after paying

23:57

the rent. Therefore, should

23:59

not only reply. placed

24:01

them their stock employed

24:03

in cultivation, but pay them

24:05

the wages which are due to

24:07

them, both as laborers and

24:10

overseers. Whatever remains, however,

24:12

after paying the rent

24:14

and keeping up the

24:16

stock is called profit.

24:18

But wages evidently

24:20

make a part of it.

24:23

The farmer, by saving these

24:25

wages, must necessarily gain

24:28

them. Wages, therefore,

24:30

are in this case confounded

24:32

with profit. An independent

24:35

manufacturer who has stock

24:37

enough both to purchase

24:40

materials and to maintain

24:42

himself till he can carry

24:44

his work to market should

24:46

gain both the wages of a

24:48

journeyman who works under a master

24:51

and the profit which that

24:53

master makes by the sale

24:55

of that journeyman's work. His

24:58

whole gains, however, are

25:01

commonly called profit, and

25:03

wages are, in this

25:05

case too, confounded with

25:07

profit. A gardener, who

25:10

cultivates his own garden

25:12

with his own hands,

25:14

unites in his own

25:16

person, the three different

25:19

characters, of landlord,

25:21

farmer, and laborer. His

25:24

produce, therefore. should

25:26

pay him the rent of the

25:28

first, the profit of the

25:30

second, and the wages of

25:32

the third. The whole, however, is

25:35

commonly considered as the

25:37

earnings of his neighbor. Both

25:40

rent and profit are,

25:42

in this case, confounded

25:44

with wages. As in a

25:46

civilized country, there are

25:49

but few commodities. of

25:51

which the exchangeable value

25:53

arises from labor only.

25:55

Rent and profit contributing

25:57

largely to that of

26:00

the far greater part

26:02

of them. So the

26:04

annual produce of its

26:06

labor will always be

26:08

sufficient to purchase or

26:10

command a much greater

26:12

quantity of labor than

26:14

what was employed in

26:16

raising, preparing, and bringing

26:18

that produce to market.

26:20

If the society were

26:22

annually to employ all

26:24

the labor which it

26:26

can annually purchase, as

26:28

the quantity of labor

26:30

would increase greatly every

26:32

year, so the produce

26:34

of every succeeding year

26:36

would be a vastly

26:38

greater value than that

26:40

of the foregoing. But

26:42

there is no country

26:45

in which the whole

26:47

annual produce is employed

26:49

in maintaining the industrious.

26:51

The idol everywhere consume

26:53

a great part of

26:55

it. and according to

26:57

the different proportions in

26:59

which it is annually

27:01

divided between those two

27:03

different orders of people,

27:05

its ordinary or average

27:07

value must either annually

27:09

increase or diminish or

27:11

continue the same from

27:13

one year to another.

27:15

Chapter 7 of the

27:17

Natural and Market Price

27:19

of Commodities There

27:22

is in every society

27:24

or neighborhood an ordinary

27:26

or average rate both

27:29

of wages and profit

27:31

in every different employment

27:33

of labor and stock

27:35

This rate is naturally

27:38

regulated as I shall

27:40

show hereafter Partly by

27:42

the general circumstances of

27:45

the society their riches

27:47

or poverty They're advancing

27:49

stationary or declining condition,

27:51

and partly by the

27:54

particular nature of each

27:56

employment. There is likewise

27:58

in every society neighborhood,

28:00

an ordinary or average

28:03

rate of rent, which is

28:05

regulated too as I

28:07

shall show hereafter, partly by

28:09

the general circumstances of

28:11

the society or neighborhood

28:14

in which the land

28:16

is situated, and partly

28:18

by the natural or

28:21

improved fertility of the land.

28:23

These ordinary or average

28:25

rates. may be called the

28:28

natural rates of wages, profit,

28:30

and rent, at the time

28:32

and place in which they

28:34

commonly prevail. When the price

28:37

of any commodity is

28:39

neither more nor less than what

28:41

is sufficient to pay the rent

28:43

of the land, the wages

28:45

of the labour, and the profits

28:48

of the stock employed in

28:50

raising, preparing, and bringing

28:52

it to market. according

28:55

to their natural rates, the

28:57

commodity is then sold for

28:59

what may be called its

29:01

natural price. The commodity is then

29:04

sold precisely for what it is

29:06

worth, or for what it really

29:08

costs the person who brings

29:10

it to market. For though in

29:12

common language, what is called

29:15

the prime cost of any commodity

29:17

does not comprehend

29:19

the profit of the profit

29:21

of the person of the person.

29:23

who is to sell it again.

29:25

Yet, if he sells it at

29:27

a price which does not

29:30

allow him the ordinary rate

29:32

of profit in his neighborhood,

29:34

he is evidently a loser

29:36

by the trade. Since, by

29:39

employing his stock in some

29:41

other way, he might have

29:43

made that profit. His profit

29:45

besides is his revenue, the

29:48

proper fund of his

29:50

subsistence. As well he

29:52

is preparing and bringing the

29:55

goods to market, he advances

29:57

to his workmen their wages.

29:59

or their subsistence. So he

30:02

advances to himself in the

30:04

same manner his own subsistence,

30:06

which is generally suitable to

30:09

the profit which he may

30:11

reasonably expect from the sale

30:13

of his goods. Unless they

30:16

yield him this profit therefore,

30:18

they do not repay him,

30:20

what they may very properly

30:23

be said, to have really

30:25

cost him. Though the

30:27

price therefore which leaves him

30:30

this profit is not always

30:32

the lowest at which a

30:34

dealer may sometimes sell his

30:37

goods It is the lowest

30:39

at which he is likely

30:41

to sell them for any

30:44

considerable time At least where

30:46

there is perfect liberty or

30:48

where he may change his

30:51

trade as often as he

30:53

pleases The actual price at

30:56

which any commodity is commonly

30:58

sold is called its market

31:00

price. It may either be

31:03

above or below or exactly

31:05

the same with its natural

31:07

price. The market price of

31:10

every particular commodity is regulated

31:12

by the proportion between the

31:14

quantity which is actually brought

31:17

to market and the demand

31:19

of those who are willing

31:21

to pay the natural price

31:24

of the commodity. or the

31:26

whole value of the rent,

31:29

labor, and profit, which must

31:31

be paid in order to

31:33

bring it thither. Such people

31:36

may be called the effectual

31:38

demanders, and their demand the

31:40

effectual demand, since it may

31:43

be sufficient to effectuate the

31:45

bringing of the commodity to

31:47

market. It is different from

31:50

the absolute demand. A very

31:52

poor man may be said

31:54

in some sense to have

31:57

a demand for a coach.

31:59

he might like to have

32:01

it, but his demand is

32:03

not an effectual demand,

32:05

as the commodity

32:07

can never be brought to

32:10

market in order to satisfy

32:12

it. When the quantity

32:14

of any commodity which

32:16

is brought to market fall

32:19

short of the effectual

32:21

demand, all those who are

32:23

willing to pay the whole

32:25

value of the rent, wages

32:27

and profit. which must be paid

32:29

in order to bring it thither,

32:32

cannot be supplied with the

32:34

quantity which they want. Rather

32:36

than want it altogether,

32:38

some of them will be willing to

32:41

give more. A competition

32:43

will immediately begin among

32:45

them, and the market price

32:48

will rise more or less

32:50

above the natural price, according

32:52

as either the greatness of

32:55

the deficiency. or the wealth and

32:57

wanton luxury of the

32:59

competitors, happen to animate

33:01

more or less the eagerness

33:04

of the competition. Among

33:06

competitors of equal wealth

33:08

and luxury, the same deficiency

33:11

will generally occasion a

33:13

more or less eager

33:15

competition, according as the acquisition

33:18

of the commodity happens

33:20

to be of more or less importance

33:22

to them. hence

33:25

the exorbitant price of

33:27

the necessaries of life,

33:29

during the blockade of a

33:31

town, or in a famine. When the

33:33

quantity brought to

33:36

market exceeds the effectual

33:38

demand, it cannot be all

33:40

sold to those who are willing

33:42

to pay the whole value of

33:44

the rent, wages, and profit,

33:47

which must be paid in

33:49

order to bring it thither. Some

33:52

part must be sold to

33:54

those who are willing to pay

33:56

less, and the low price which

33:58

they give for it. must reduce

34:00

the price of the whole.

34:03

The market price will sink

34:05

more or less below the

34:08

natural price, according as the

34:10

greatness of the excess increases

34:12

more or less the competition

34:15

of the sellers. Or according

34:17

as it happens to be

34:19

more or less important to

34:22

them, to get immediately rid

34:24

of the commodity. The same

34:26

excess in the importation of

34:29

perish. will occasion a much

34:31

greater competition than in that

34:34

of durable commodities, in the

34:36

importation of oranges, for example,

34:38

than in that of old

34:41

iron. When the quantity brought

34:43

to market is just sufficient

34:45

to supply the effectual demand

34:48

and no more, the market

34:50

price naturally comes. To be

34:52

either exactly or as nearly

34:55

as can be judged of.

34:57

the same with the natural

34:59

price. The whole quantity upon

35:02

hand can be disposed of

35:04

for this price, and cannot

35:07

be disposed of for more.

35:09

The competition of the different

35:11

dealers obliges them all to

35:14

accept of this price, but

35:16

does not oblige them to

35:18

accept of less. The quantity

35:21

of every commodity brought to

35:23

market naturally suits itself to

35:25

the effectual demand. It is

35:28

the interest of all those

35:30

who employ their land, labor,

35:32

or stock in bringing any

35:35

commodity to market, that the

35:37

quantity never should exceed the

35:40

effectual demand, and it is

35:42

in the interest of all

35:44

other people that it never

35:47

should fall short of that

35:49

demand. If at any time

35:51

it exceeds the effectual demand,

35:54

Some of the component parts

35:56

of its price must be

35:58

paid. below their natural rate.

36:01

If it is rent, the

36:03

interest of the landlords will

36:05

immediately prompt them to withdraw a

36:08

part of their land, and if

36:10

it is wages or profit,

36:12

the interest of the laborers

36:15

in the one case, and of their

36:17

employers in the other, will

36:19

prompt them to withdraw a

36:21

part of their labor or

36:23

stock from this employment. The

36:25

quantity brought to market to

36:27

market market. will soon be

36:30

no more than sufficient to

36:32

supply the effectual demand. All

36:35

the different parts of its

36:37

price will rise to their

36:39

natural rate, and the whole price

36:41

to its natural price. If, on

36:44

the contrary, the quantity

36:46

brought to market should at

36:48

any time fall short of

36:50

the effectual demand, some of

36:52

the component parts of its

36:55

price must rise above

36:57

their natural rate. If it

36:59

is rent, the interest of

37:02

all other landlords will naturally

37:04

prompt them to prepare more

37:07

land for the raising of

37:09

this commodity. If it is

37:11

wages or profit, the interest

37:14

of all other laborers and

37:16

dealers will soon prompt them

37:18

to employ more labor and

37:21

stock in preparing and bringing

37:23

it to market. The

37:25

quantity brought thither will

37:28

soon be sufficient to

37:30

supply the effectual demand.

37:32

All the different parts of

37:35

its price will soon sink

37:37

to their natural rate, and

37:39

the whole price to its

37:41

natural price. The natural price,

37:44

therefore, is, as it were,

37:46

the central price, to which

37:48

the prices of all

37:50

commodities are continually

37:53

gravitating. Different

37:55

accidents may sometimes keep them

37:57

suspended a good deal above

37:59

it. and sometimes forced them

38:01

down even somewhat below

38:04

it. But whatever may

38:06

be the obstacles which

38:08

hinder them from settling

38:10

in this center of

38:12

repose and continuance, they

38:14

are constantly tending towards

38:16

it. The whole quantity

38:18

of industry naturally employed

38:20

in order to bring

38:22

any commodity to market

38:25

naturally suits itself in

38:27

this manner to the

38:29

effectual demand. It naturally

38:31

aims at bringing always

38:33

always that precise quantity

38:35

thither, which may be

38:37

sufficient to supply, and

38:39

no more than supply,

38:41

that demand. But in

38:43

some employments, the same

38:46

quantity of industry will

38:48

in different years produce

38:50

very different quantities of

38:52

commodities. While in others,

38:54

it will produce always

38:56

the same. or very

38:58

nearly the same. The

39:00

same number of laborers

39:02

in husbandry will in

39:04

different years produce very

39:06

different quantities of corn,

39:09

wine, oil, hops, etc.

39:11

But the same number

39:13

of spinners or weavers

39:15

will every year produce

39:17

the same or very

39:19

nearly the same quantity

39:21

of linen and woolen

39:23

cloth. It is only

39:25

the average produce of

39:27

the one species of

39:30

industry which can be

39:32

suited in any respect

39:34

to the effectual demand.

39:36

And as its actual

39:38

produce is frequently much

39:40

greater and frequently much

39:42

less than its average

39:44

produce, the quantity of

39:46

the commodities brought to

39:48

market will sometimes exceed

39:51

a good deal and

39:53

sometimes fall short a

39:55

good deal. of the

39:57

effectual demand, even though

39:59

the demand and therefore

40:01

should continue always the same.

40:03

Their market price will

40:06

be liable to great

40:08

fluctuations, will sometimes fall a

40:11

good deal below, and sometimes

40:13

rise a good deal above

40:15

their natural price. In the

40:18

other species of industry,

40:20

the produce of equal quantities

40:22

of labor being always

40:24

the same, or very

40:26

nearly the same. It can

40:28

be more exactly suited

40:31

to the effectual demand.

40:33

While that demand continues

40:35

the same, therefore, the

40:38

market price of the commodities

40:40

is likely to do so too,

40:42

and to be either altogether,

40:45

or as nearly as can be

40:47

judged of, the same with

40:49

the natural price. That the price

40:51

of linen and woolen

40:53

cloth is liable neither

40:55

to such frequent, nor to

40:58

such great variations as the

41:00

price of corn. Every man's

41:02

experience will inform him.

41:05

The price of the one species

41:08

of commodities varies only

41:10

with the variations in

41:12

the demand. That of the other

41:14

varies not only with

41:16

the variations in the demand,

41:19

but with the much greater

41:21

and more frequent. variations

41:24

in the quantity of what is

41:26

brought to market, in order

41:29

to supply that demand.

41:31

The occasional and temporary

41:33

fluctuations in the

41:35

market price of any

41:38

commodity fall chiefly upon those

41:40

parts of its price, which

41:42

resolve themselves into wages

41:45

and profit. That part

41:47

which resolves itself into

41:49

rent is less affected

41:52

by them. A rent

41:54

certain in money is not

41:56

in the least affected by

41:58

them, either in its... rate or

42:00

in its value? A

42:02

rent which consists either

42:04

in a certain proportion

42:06

or in a certain

42:08

quantity of the rude

42:10

produce is no doubt

42:12

affected in its yearly

42:14

value by all the

42:16

occasional and temporary fluctuations

42:18

in the market price

42:20

of that rude produce,

42:22

but it is seldom

42:24

affected by them in

42:27

its yearly rate. In

42:29

settling the terms of

42:31

the terms of the

42:33

lease, the landlord and

42:35

farmer endeavor, according to

42:37

their best judgment, to

42:39

adjust that rate, not

42:41

to the temporary and

42:43

occasional, but to the

42:45

average and ordinary price

42:47

of the produce. Such

42:49

fluctuations affect both the value

42:51

and the rate, either

42:53

of wages or of

42:55

profit, according as the

42:57

market happens to be

42:59

either overstocked or understocked.

43:01

with commodities or with

43:03

labor, with work done, or

43:06

with work to be

43:08

done. A public morning

43:10

raises the price of

43:12

black cloth, with which

43:14

the market is almost

43:16

always understocked upon such

43:18

occasions, and augments the

43:20

profits of the merchants, who

43:22

possess any considerable quantity

43:24

of it. It has

43:26

no effect upon the

43:28

wages of the weavers.

43:30

The market is understocked

43:32

with commodities, not with

43:34

labor. With work done,

43:36

not with work to be

43:39

done. It raises the

43:41

wages of journeyman Taylor's.

43:43

The market is here

43:45

understacked with labor. There

43:47

is an effectual demand

43:49

for more labor to

43:51

be done than can

43:53

be had. It

43:55

sinks the price of colored

43:57

silks and cloths and thereby...

44:00

reduces the profits of the

44:02

merchants, who have

44:04

any considerable quantity of

44:06

them upon hand. It sinks to

44:09

the wages of the workmen

44:11

employed in preparing such commodities,

44:14

for which all demand is stopped

44:16

for six months, perhaps for

44:18

a twelve month. The market

44:21

is here overstucked both

44:23

with commodities and with

44:25

labor. But though the

44:27

market price of every

44:29

particular commodity is in

44:31

this manner continually gravitating,

44:34

if one may say so, towards

44:36

the natural price, yet

44:39

sometimes particular accidents,

44:41

sometimes natural causes,

44:44

and sometimes particular

44:46

regulations of policy, may

44:48

in many commodities keep up

44:51

the market price for a

44:53

long time together. a good deal

44:55

above the natural price, when

44:57

by an increase in the

45:00

effectual demand, the market

45:02

price of some particular

45:05

commodity happens to rise

45:07

a good deal above the natural

45:09

price. Those who employ their

45:12

stocks in supplying that market

45:14

are generally careful to

45:17

conceal this change. If it

45:19

was commonly known, Their great

45:21

profit would tempt so many

45:23

new rivals to employ their

45:25

stocks in the same way,

45:27

that the effectual demand being

45:30

fully supplied, the market

45:32

price would soon be reduced

45:34

to the natural price, and

45:37

perhaps for some time even below

45:39

it. If the market is at

45:41

a great distance from the

45:43

residence of those who supply

45:46

it, They may sometimes be able

45:48

to keep their secret for

45:50

several years together, and

45:52

may so long enjoy

45:55

their extraordinary profits without

45:57

any new rivals. Secrets

46:00

of this kind, however, it

46:03

must be acknowledged, can seldom

46:05

be long kept, and the

46:08

extraordinary profit can last very

46:10

little longer than they are

46:12

kept. Secrets and manufacturers are

46:15

capable of being longer kept

46:17

than secrets in trade. A

46:20

dire who has found the

46:22

means of producing a particular

46:24

color. with materials which cost

46:27

only half the price of

46:29

those commonly made use of,

46:32

may with good management, enjoy

46:34

the advantage of his discovery

46:36

as long as he lives,

46:39

and even leave it as

46:41

a legacy to his posterity.

46:44

His extraordinary gains arise from

46:46

the high price which is

46:48

paid for his private labor.

46:51

They properly consist in the

46:54

high wages of that labor.

46:56

But as they are repeated

46:58

upon every part of his

47:01

stock, and as their whole

47:03

amount bears upon that account,

47:06

a regular proportion to it,

47:08

they are commonly considered as

47:10

extraordinary profits of stock. Such

47:13

enhancements of the market price

47:15

are evidently the effects of

47:17

particular accidents, of which, however,

47:20

the operation may sometimes last

47:22

for many years together. Some

47:25

natural productions require such a

47:27

singularity of soil and situation

47:29

that all the land in

47:32

a great country which is

47:34

fit for producing them may

47:36

not be sufficient to supply

47:39

the effectual demand. The whole

47:41

quantity brought to market therefore

47:44

may be disposed of. to

47:46

those who are willing to

47:48

give more than what is

47:51

sufficient to pay the rent

47:53

of the land which produced

47:55

them, together with the wages

47:58

of the labor. and the

48:00

profits of the stock, which

48:02

were employed in preparing

48:04

and bringing them to

48:06

market, according to their natural

48:09

rates. Such commodities may

48:11

continue for whole centuries together

48:13

to be sold at this

48:15

high price, and that part

48:17

of it which resolves itself

48:19

into the rent of land,

48:21

is in this case the part

48:24

which is generally paid above its

48:26

natural rate. The rent of

48:28

the land which affords such

48:31

singular and esteemed productions,

48:33

like the rent of some

48:35

vineyards in France of a

48:37

peculiarly happy soil and situation,

48:40

bears no regular proportion

48:42

to the rent of other

48:45

equally fertile and equally well-cultivated

48:47

land in its neighborhood. The

48:49

wages of the labour and

48:52

the profits of the stock

48:54

employed in bringing such commodities

48:56

to market on the contrary,

48:58

are seldom out of

49:00

their natural proportion to those

49:03

of the other employments of

49:05

labour and stock in their neighbourhood.

49:07

Such enhancements of

49:10

the market price are evidently

49:12

the effect of natural causes

49:15

which may hinder the

49:17

effectual demand from ever

49:19

being fully supplied, and

49:21

which may continue, therefore,

49:23

to operate forever. A

49:26

monopoly granted either to

49:28

an individual or to

49:30

a trading company has the

49:32

same effect as a secret

49:35

in trade or manufacturers. The

49:37

monopolists, by keeping the

49:40

market constantly under-stocked

49:42

by never fully supplying the

49:45

effectual demand, sell their

49:47

commodities much above the

49:49

natural price, and raise their

49:52

emoluments. whether they consist

49:54

in wages or profit,

49:56

greatly above their natural

49:58

rate. The price of

50:01

monopoly is upon every

50:03

occasion the highest which

50:05

can be got. The

50:07

natural price, or the

50:09

price of free competition

50:11

on the contrary, is

50:13

the lowest which can

50:15

be taken. Not upon

50:17

every occasion indeed, but

50:19

for any considerable time

50:22

together. The one is

50:24

upon every occasion the

50:26

highest which can be

50:28

squeezed out of the

50:30

buyers. or which it

50:32

is supposed they will

50:34

consent to give. The

50:36

other is the lowest

50:38

which the sellers can

50:40

commonly afford to take,

50:42

and at the same

50:44

time continue their business.

50:46

The exclusive privileges of

50:48

corporations, statutes of apprenticeship,

50:51

and all those laws

50:53

which restrain in particular

50:55

employments, the competition to

50:57

a smaller number than

50:59

might otherwise go into

51:01

them. have the same

51:03

tendency, though in a

51:05

less degree. They are

51:07

a sort of enlarged

51:09

monopolies, and may frequently,

51:11

for ages together, and

51:13

in whole classes of

51:15

employments, keep up the

51:17

market price of particular

51:20

commodities above the natural

51:22

price, and maintain both

51:24

the wages of the

51:26

labour and the profits

51:28

of the stock employed

51:30

about them. somewhat above

51:32

their natural rate. Such

51:34

enhancements of the market

51:36

price may last as

51:38

long as the regulations

51:40

of policy which give

51:42

occasion to them. The

51:44

market price of any

51:46

particular commodity, though it

51:49

may continue long above,

51:51

can seldom continue long

51:53

below its natural price.

51:55

The persons whose interest

51:57

it affected would immediately...

51:59

feel the loss and

52:01

would immediately withdraw either

52:03

so much land or so

52:05

much labor or so much stock

52:08

from being employed about

52:10

it that the quantity

52:12

brought to market would soon

52:14

be no more than

52:17

sufficient to supply the

52:19

effectual demand. Its market

52:21

price therefore would soon

52:23

rise to the natural price.

52:26

This at least would be

52:28

the case where there was

52:30

perfect liberty. The same statutes

52:33

of apprenticeship and

52:35

other corporation laws indeed,

52:37

which when a manufacture

52:39

is in prosperity, enable

52:42

the workmen to raise his

52:44

wages a good deal above

52:46

their natural rate, sometimes oblige

52:48

him when it decays to

52:50

let them down a good

52:52

deal below it. As in

52:54

the one case, they exclude

52:57

many people from his employment,

52:59

so in the other, they exclude

53:02

him from many employments.

53:04

The effect of such

53:07

regulations, however, is not

53:09

near so durable in sinking

53:11

the workman's wages below,

53:13

as in raising them above

53:15

their natural rate. Their

53:17

operation in the one way

53:20

may endure for many centuries,

53:22

but in the other. It can last

53:24

no longer than the lives of

53:26

some of the workmen, who were

53:29

bred to the business in

53:31

the time of its prosperity.

53:33

When they are gone, the number

53:35

of those who are afterwards

53:37

educated to the trade will

53:39

naturally suit itself to

53:42

the effectual demand. The

53:44

policy must be as violent

53:46

as that of Indostan or

53:49

ancient Egypt. where every man was

53:51

bound by a principle of religion

53:54

to follow the occupation of his

53:56

father and was supposed to commit

53:58

the most horrid sex if he

54:00

changed it for another,

54:02

which can in any

54:05

particular employment, and for

54:07

several generations together, sink

54:09

either the wages of

54:11

labor or the profits

54:13

of stock below their

54:15

natural rate. This is

54:17

all that I think

54:19

necessary to be observed

54:21

at present concerning the

54:24

deviations, whether occasional or

54:26

permanent. of the market

54:28

price of commodities from

54:30

their natural price. The

54:32

natural price itself varies

54:34

with the natural rate

54:36

of each of its

54:38

component parts, of wages,

54:41

profit, and rent. And

54:43

in every society this

54:45

rate varies according to

54:47

their circumstances, according to

54:49

their riches or poverty.

54:51

their advancing, stationary, or

54:53

declining condition. I shall,

54:55

in the four following

54:57

chapters, endeavor to explain,

55:00

as fully and distinctly

55:02

as I can, the

55:04

causes of those different

55:06

variations. First, I shall

55:08

endeavor to explain what

55:10

are the circumstances, which

55:12

naturally determine the rate

55:14

of wages. And in

55:17

what manner those circumstances

55:19

are affected by the

55:21

riches or poverty? By

55:23

the advancing, stationary, or

55:25

declining state of the

55:27

society? Secondly, I shall

55:29

endeavor to show what

55:31

are the circumstances which

55:33

naturally determine the rate

55:36

of profit? And in

55:38

what manner, too, those

55:40

circumstances are affected? by

55:42

the like variations in

55:44

the state of the

55:46

society. The pecuniary wages

55:48

and profit are very

55:50

different in the different

55:53

employments of labor and

55:55

stock, yet a certain

55:57

proportion seems commonly to

55:59

take place between both

56:01

the pecuniary wages in

56:03

all the different employments

56:05

of labor and the pecuniary

56:08

profits in all the

56:10

different employments of stock.

56:13

This proportion it will

56:15

appear hereafter depends partly

56:17

upon the nature of

56:19

the different employment and partly

56:21

upon the different laws and

56:24

policy of the society in which

56:26

they are carried on. but though

56:28

in many respects dependent

56:31

upon the laws and

56:33

policy, this proportion seems

56:35

to be little affected

56:37

by the riches or

56:40

poverty of that society, by

56:42

its advancing, stationary,

56:44

or declining condition,

56:47

but to remain the

56:49

same, or very nearly

56:51

the same, in all those different

56:53

states. I shall in the

56:55

third place. endeavor to

56:57

explain all the

56:59

different circumstances which

57:01

regulate this proportion.

57:04

In the fourth and last place,

57:06

I shall endeavor to show what

57:09

are the circumstances which

57:11

regulate the rent of

57:13

land, and which either raise

57:15

or lower the real price

57:18

of all the different

57:20

substances which it produces.

57:28

And while all of that

57:30

content sounds absolutely riveting,

57:33

I think will end this

57:35

evening's reading from The

57:37

Wealth of Nations by Adam

57:39

Smith, which quite frankly is

57:41

such a concise and

57:44

clear demonstration of

57:46

modern economic principles

57:48

that I rather wish a lot

57:50

more people had read this book.

57:53

It seems we could use

57:55

a little basic economic

57:58

knowledge these days. I hope... you

58:00

enjoyed that. If you'd like to read you'd

58:02

like to read this

58:04

foundational work of economics for

58:06

yourself, as as always, you'll

58:09

find a link to a

58:11

free e -book from Project in the

58:13

show description. If

58:15

you'd like to connect, suggest

58:18

a boring book you'd

58:20

like to hear read,

58:22

or or request more

58:25

from one we've already

58:27

started, started, you can drop

58:29

me an email via

58:31

our our website. It's always a pleasure.com.

58:34

you. It's always a pleasure to

58:36

hear from you. joining Thank

58:38

you so much for joining me

58:40

for this evening's reading. Until

58:43

our next boring book,

58:46

book. Good night.