2

and, without troubling himself about definitions, the author launches in medias res in his first sentence :"The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniencies of life which it annually consumes, and which consist always either in the immediate produce of that labour or in what is purchased with that produce from other nations." 1 Plain reason tells us that "the real wealth" of a society is "the annual produce of the land and labour" of it. The mercantile writers have therefore been wrong in regarding a nation as wealthy in proportion to its supply of the precious metals; and the Physiocrats came nearer the truth when they "represented the wealth of nations as consisting not in the unconsumable riches of money, but in the consumable goods annually reproduced by the labour of the society." " The really important "balance" of trade is the balance of the annual produce over consumption. In other words, Adam Smith sides with the Physiocrats, but he refuses with them to limit "real wealth" to raw produce; to him, every product of labour is part of the national wealth. Wealth means consumable goods of every sort. Every man is rich or poor according to the degree in which he can afford to enjoy," etc., page 13. Unfortunately in the Wealth of Nations there is no complete theory of consumption; and the treatise is far more on the causes than on the nature of wealth. We have indeed near the end of the book a distinction between the consumable goods that are necessaries and those that are luxuries. The former are such as nature renders necessary for the support of life and also such as custom, which is a second nature, has rendered necessary for decent living. We are told too that it is not necessarily a losing trade that a man drives with the ale-house. Consumption is not the same as loss or waste. But, for the author's view of this sub

5

1 W. of N., I. Introd., pp. 1, 2. Cf. II. III., 149, 1, 150, 151, etc. 2 IV. IX. 307, I. 3 Wealth of Nations, IV. III. 220, 2. 4 Professor Leser makes a praiseworthy attempt to draw a complete theory of wealth from Adam Smith. See his Begriff des Reichthums bei Adam Smith (1874).

5 Bk. V., ch. II., p. 393. 1874.

"Taxes upon consumable commodities," 6 IV. I. pt. II. 217, 2.

" 2

ject, and Mandeville's paradox in regard to it, we have to go to his Moral Sentiments. There he tells us that virtue does not mean insensibility or absence of passion, but a restraint of it so that it hurts neither the subject of it nor society at large. Mandeville's assertions are only plausible if morality means asceticism; and it must be allowed that on that assumption civilization could only develope at the expense of virtue. But this is far from being the case. Our author, indeed, allows that there may be happiness without wealth. God made the "machine of the universe so as at all times to produce the greatest possible quantity of happiness." "When providence divided the earth among a few lordly masters, it neither forgot nor abandoned those who seemed to have been left out in the partition. These last too enjoy their share of all that it produces. In what constitutes the real happiness of human life they are in no real respect inferior to those who would seem so much above them. In ease of body and peace of mind, all the different ranks of life are nearly upon a level, and the beggar who suns himself by the side of the highway possesses that security which kings are fighting for."3 On the other hand, it is one of his theses in the Wealth of Nations, that in civilized society there is not only greater wealth than in the savage state but it extends even to the humblest classes in society. The English peasant is better accommodated than the African king. The wealth of the nation means in greater or less degree the wealth of every member of it. With an obvious reference to the opposite contention in Turgot" and the Physiocrats, he points out that the wages of labourers are not merely a bare subsistence but considerably above that (Wealth of Nations, I. VIII. 33 seq.). What are the causes of the greater wealth of civilized societies?—This becomes the important question at starting. The first

1 1st ed., p. 483 seq.

2 Moral Sent. (6th ed.), II. 118, cf. 414, I. Cf. the attack on Asceticism in W. of N., V. I. 346.

3 Moral Sent. (1st ed.), pp. 350, 351.

4 W. of N., I. 1. p. 6.

above, page 93.

Locke had said the same before him. See

5 E.g. Formation et Distribution des Richesses (1766), § 16, cf. § 6.

cause (and it is the pivot of all the rest) is the division of labour in manufacture, which increases dexterity, saves time, and leads to inventions. The result is a much greater quantity of produce than before. But, besides that, division of labour implies social or joint efforts at starting; and it requires a wide social area for the distribution of its products, unless it is to be waste instead of gain. The result is opulence to the community, and yet the design was (says Adam Smith) mere individual gain. So completely is our author imbued with the growing individualism of his time' that he thinks of each human unit as at birth almost exactly the same in character and capacities as every other unit; it is division of labour that alters character, not character that determines a man's selection of his particular task in the division. We have seen how differently Plato regarded the subject. If we ask how it comes that men ever thought of dividing labour, we are told it was through a propensity they had to truck or barter. is by nature a trader, from the very fact that he possesses reason and language. Being more dependent on his kind than other animals are, he is soon compelled by stress of circumstances to appeal to his kind for help. As it is more easy to gain it by giving them an equivalent than by securing their friendship out of benevolence (for a whole life is scarce sufficient to gain the friendship of a few persons), he sets himself to making what circumstances have accustomed him to make best, and then he offers his wares to his neighbours in exchange for theirs. It seems clear (though Adam Smith barely touches the point) that division of labour assumes a society or at least a common understanding ready formed, and does not itself create such. Given the common understanding, however, it may be granted that the division of labour will constitute a new means of binding men into

Man

1 It may be said to appear even in the early essay on the Formation of Languages (Moral Sent., 6th ed., vol. ii., appendix). All words are represented as at first absolutely concrete and particular; their generalization comes gradually afterwards. Cf. Romanes, Mental Evolution in Man (1888).

2 W. of N., I. 11. 7, 8. 3 See above.

a society, or of binding society more firmly together. The idea that division of labour in society is analogous to the division of function among the organs of a living individual body did not occur to Adam Smith,1 and he does not even trace out the division of labour, like Aristotle, in the Family. But like Aristotle he deduces from it a doctrine of Exchange, Value, and Money. The first form of exchange is the direct form, exchange in kind or barter; and the difficulties and awkwardness of barter lead to the use of a common medium of exchange and common measure of value called money. When one thing is exchanged for another, they are said to have a value, by which is simply meant that the one purchases the other. This is one sense (according to our author) in which we may use the word value; it is the power which a given commodity possesses of purchasing other goods. There is however another sense; there is a value which simply means the "utility of some particular object." This is Value in Use, as the other was Value in Exchange-a distinction very nearly identical with the Physiocratic distinction of valeur usuelle and valeur vénale. Adam Smith adds that the two are so far from depending on each other that "the things which have the greatest value in use have frequently (like water or air) little or no value in exchange" and vice versa. Like the Physiocrats, he makes no attempt to analyse value in use, but devotes his attention to value in exchange. The ordinary common measure of it, he allows, is money, and he adds little or nothing to Aristotle's account of the nature and functions of money. But the real measure of the purchasing power of anything is (he says) not its price in money but the quantity of labour which it will enable the purchaser to command. From the seller's point of view, the article he sells is of great or of little value according to the power which the equivalent that he gets for it has of purchasing labour; from the buyer's point of view, the article he buys is of

3

1 Though he uses similes from Physiology, e.g. IV. IX. 304, 2. 2 One of the latest and most complete monographs on the hackneyed subject of Division of Labour is that of Schmoller in Jahrb. für Gesetzgebung, 13th series, 3rd part, 1889, pp. 57 seq.

3 W. of N., I. IV. 13; cf. I. XI. 79.

great or little value, according as it saves him his own. labour or purchases the labour of others, in a great or a small degree. So far as Adam Smith is consistent (and he is not so always), he understands the measure of value to be the labour that the exchanged articles will purchase. This seems to him the only factor which remains unchanged through the centuries. The wear and tear of tissue in human beings is (he considers) always the same. When we read of corn as having a certain price in shillings or pounds 300 years ago and a very different price now, we cannot tell which of the two, the corn or the money, has altered; but, when we are told that corn would purchase so many days' labour 300 years ago and so many fewer or so many more now, we can tell at once how much the corn has altered in value, for we know that labour is the same to human beings to-day, yesterday, and at all times. The postulates here are simply that the human race is identical in the whole length of its history, and that the physiological cost of labour to the labourer is always the same, on the very ground of the identity of race. It is the same idea as was noticed in the case of division of labour; human beings are at all times alike, and we can reason from their similarity. It is the same idea as in the striking passage of Hume: "There is a great uniformity among the actions of men in all nations and ages; and human nature still remains the same in its principles and operations. . . . Would you know the sentiments, inclinations and course of life of the Greeks and Romans? Study well the temper and actions of the French and English. . . . Mankind are so much the same in all times and places that history informs us of nothing new or strange in this particular. . So readily and

universally do we acknowledge a uniformity in human notives and actions as well as in the operations of body." To Adam Smith's particular application of this doctrine there are many objections, ill and well founded. The objection that skilled labour is paid more than unskilled, is not of the latter sort. We have to consider not only

1 Human Understanding, § viii. Of Liberty and Necessity. Essays, vol. ii., p. 98.