Smith classes Human Abilities, or Labour, as Wealth. Moreover, under the title of "Fixed Capital," Smith enumerates "the acquired and useful abilities of all the inhabitants or members of the society. The acquisition of such talents by the maintenance of the acquirer during his education, study, or apprenticeship, always costs a real expense, which is a Capital fixed and realised as it were in his person. These Talents as they make a part of his Fortune, so do they likewise of that of the society to which he belongs."

So also he says:-"The Property which every man has in his own Labour, as it is the original foundation of all other property, so it is the most sacred and inevitable. The Patrimony of the poor man lies in the strength and dexterity of his hands."

These passages entirely coincide with the argument of the Eryxias, already cited, and given in the article Wealth in the following book. Thus it is seen that Smith expressly classes Human Abilities, or Labour, as Wealth. Now Human Abilities are certainly not the "produce of land," nor are they the "produce of land and labour" combined. It may be said that acquired abilities are the produce of Labour, but certainly natural abilities are not the produce of Labour, nor are abilities natural or acquired, the "annual produce of land and labour."

Thus Smith has already broken away from the doctrine of the Economists that Wealth is to be restricted to the material products of the earth, because they especially excluded Labour from the title of Wealth. And now we see the inconvenience of the nomenclature of the Economists. Labour is an exchangeable commodity. It may be bought and sold, it has value, and its value may be measured in money. But how are we to speak of the "Production, Distribution, and Consumption" of Labour?

Thus Smith, in these and many other passages, expressly acknowledges Labour, or the second order of Economic Quantities, to be Wealth; and he has a chapter discussing Wages as the Price of Labour.

Smith admits Rights to be Wealth.

Hence the definition of the Science of Economics as the "Production, Distribution, and Consumption of Wealth" has received a very awkward wrench by admitting Labour into it as Wealth. But more remains behind. For under the term Circulating Capital,

Smith expressly includes Bank Notes, Bills of Exchange, and other securities, which are merely Rights of Action recorded on paper. But these Rights of Action are Credit: hence Smith expressly includes Credit under Capital.

He says "A particular banker lends among his customers his own Promissory Notes to the extent, we shall suppose, of a hundred thousand pounds. As these Notes serve all the purposes of money, his debtors pay him the same interest as if he had lent them so much money. This is the source of his gain. Though he has in general in circulation, therefore, notes to the extent of a hundred thousand pounds, twenty thousand pounds in gold and silver may frequently be a sufficient provision for answering occasional demands. By this operation, therefore, twenty thousand pounds in gold and silver perform all the functions which a hundred thousand would otherwise have performed. The same exchanges may be made, the same quantity of consumable goods may be circulated and distributed to their proper consumers by means of his promissory notes to the value of a hundred thousand pounds, as by an equal value of gold and silver money."

Again," Let us suppose, for example, that the whole circulating money of some particular country amounted at a particular time to one million sterling, that sum being then sufficient for circulating the whole annual produce of their land and labour. Let us suppose, too, that some time thereafter different banks and bankers issued promissory notes payable to bearer to the extent of one million, reserving in their different coffers two hundred thousand pounds for answering occasional demands. There would remain, therefore, in circulation eight hundred thousand in gold and silver, and a million of bank notes, or eighteen hundred thousand pounds of paper and money together."

Again,—“ A paper money, consisting in bank notes issued by people of undoubted credit, payable on demand, without any condition, and, in fact, always readily paid as soon as presented, is, in every respect, equal in value to gold and silver money, since gold and silver money can at any time be had for it. Whatever is either bought or sold for such paper must necessarily be bought and sold as cheap as it could have been for gold and silver."

These extracts are quite sufficient to prove the point we are enforcing, that Smith admits one class of Rights to be Circulating Capital, or Wealth. He puts a million of notes on exactly the same footing as an equal amount of gold and silver. He admits that bankers, by issuing a million of notes, augment the mass of

exchangeable property to that amount. Now what are these Bank Notes? They are simply so many circulating Rights of Action, Credits, or Debts. They are the species of Property termed Credit, and thus we see that Smith classes Credit under the term Capital.

This class of Rights, however, is only one of a gigantic mass of various kinds of Rights, which, since Smith's time, have increased in a vastly greater ratio than material property. At the present time the property of this nature of different kinds amounts to scores of thousands of millions of money. It is termed Incorporeal Property, or Incorporeal Wealth.

Now these Rights of Action, Credits, or Debts, as well as the gigantic mass of other kinds of Rights which are bought and sold, are certainly not the "annual produce of land and labour."

Hence we see that Smith classes both Labour and Rights under the title of Wealth, which the Economists expressly excluded from that term; and thus he completely overthrew the doctrine of the Economists and others, that the earth is the only source of Wealth.

Thus we see that Smith's definition of Wealth as the "annual produce of land and labour"-assuming that we have interpreted him correctly-entirely fails. It is at once far too wide and far too narrow. It includes a mass of things which can by no means be called Wealth, and it excludes by far the greater portion of what Smith himself classes as Wealth.

Such a definition of Wealth, too, is also open to another manifest objection, which is patent from his own work. For if it be laid down absolutely that the "annual produce of land and labour" is Wealth, it clearly follows that if anything be produced by "land and labour," it must be Wealth in all times and in all places: that what is once wealth must always be wealth. But universal experience shews that such a doctrine is utterly erroneous and it was one of the points expressly enforced by Socrates in the Eryxias that anything is Wealth only where it is wanted and Demanded, that is when and where it is χρήσιμον.

And after laboriously inculcating through several hundred pages that Land and Labour are the essentials of Wealth, Smith admits this. He says "a guinea (which may be admitted to be the produce of land and labour) may be considered as a Bill (ie, a Right) for a certain quantity of necessaries and conveniences upon all the tradesmen in the neighbourhood. The revenue of the person to whom it is paid does not so properly consist in the piece of gold as in what he can get for it, or in what he can exchange it

for. If it could be exchanged for nothing it would, like a Bill upon a bankrupt, be of no more value than the most useless piece of paper." Thus, after all, Smith admits that Exchangeability is the real essence of Value and Wealth.

The incongruity of Smith's conception of the very word, which is the basis of the whole Science, is thus apparent. For several hundred pages he contends that the "annual produce of land and labour" is absolute Wealth, and then at last he says that unless it is Exchangeable it is not Wealth at all.

So far, however, he makes Labour and Materiality as necessary to Wealth, and in this he is still under the bondage of the Economists; but afterwards he classes human abilities as Wealth, in which there is certainly no Materiality, nor does it seem accurate to class Labour itself as the produce of Labour; and after that again he classes Kights of action, credit, and of course other Rights as Wealth, in which there is neither Labour nor Materiality.

It is manifest that these two fundamental concepts of Wealth do not coincide: for there are many things which are the produce of Land and Labour, which are not exchangeable: or which are exchangeable only in some places and not in others, and at some times and not at others: and there are stupendous masses of Exchangeable Property-nay, in this great commercial country enormously the greater portion-which are in no way whatever the "produce of land and labour."

The utter incongruity of ideas in the beginning of Smith's work with these in the later half has often been observed. Ricardo has adopted the former half of the work, and Whately the latter half. Ricardo adopts Labour as the essence of Value and Wealth, and Whately adopts Exchangeability. The latter part of Smith's work is utterly incongruous with the first. In accordance with the unanimous doctrine of antiquity we adopt Exchangeability as the sole essence and principle of Wealth, and it follows that there are three orders of Economical, or Exchangeable, Quantities as the ancients shewed, and as Smith has admitted.

This is the second service Smith has done to Economics. He broke through the narrow dogma of the Economists that it was to be restricted to the Exchanger or Commerce of the material products of the earth only, and enlarged it so as to embrace all Exchangeable Quantities and all Exchanges.

Smith also overthrew the dogma of the Economists that agricultural is the only productive labour; he shewed that the labour of artisans, manufacturers, and commerce are all productive, and enrich a nation.

Many persons might find a difficulty in understanding the scope and the purpose of Smith's first two books, but he himself says that his object is to investigate the principles which regulate the exchangeable value of commodities. Thus, it is seen that the subject-matter of the first two books of the Wealth of Nations is a treatise on commerce, or the Theory of Value, and his Editor, McCulloch, says in a note, "this science might be called the Science of Values.”

Such are the main outlines of Smith's services to Economics.

Confusion of Smith on Value.

But, unfortunately, great as are Smith's services to Economics, it may be questioned whether the mischief he has done to the science does not, at least, counterbalance them.

We have now to direct the student's attention to the irretrievable confusion he has caused to the science by his self-contradictions on Value in Book I. chap. v. Of this chapter, Horner says: "We have been under the necessity of suspending our progress in the perusal of the Wealth of Nations, on account of the insurmountable difficulties, obscurity, and embarrassment, in which the reasonings of the fifth chapter are involved . . . . the discovery that I did not understand Smith, speedily led me to doubt whether Smith understood himself."

From the earliest antiquity every writer has seen that the Value of a thing is something else external to itself, for which it can be exchanged.

So in Book I. chap. v., Smith begins by saying that the Value of any commodity is equal to the Quantity of Labour which it enables him to command or purchase. Hence, if / denotes labour,

A = 1, 21, 31, 47.

He then says in the next paragraph that is the same thing as saying that it is equal to the Produce of labour it enables him to purchase: or, denoting produce by p, we have

And in the next paragraph he says that the Value of anything is more frequently estimated in Money than either in labour or commodities: or, denoting Money by m,

1 Memoirs and Correspondence of Horner, vol. i. p. 163.