same space of time, as one in a poor country. Wherefore, the multiplication of commodities to be circulated is not necessarily attended with a co-extensive increase of the demand for money. The business of circulation is extended; but the agent of circulation becomes more active and efficient.

2. In a state of national opulence, credit is a more frequent substitute for money. In Chap. 22. of the preceding book, it has been shown, how a portion of the national money may be dispensed with by the employment of convertible paper, without any resulting inconvenience. By this expedient, the use of metal money, and, consequently, the demand for silver for the purposes of money, is considerably diminished. Nor is convertible paper the sole expedient of substitution amongst an industrious and commercial people; every kind of private obligations and covenants, as well as sales on credit, transfers of money-credit, and even mere debtor and creditor accounts current, have an effect precisely analagous.

Thus the necessity, and consequently the demand, for metal money never advances in equal ratio with the progressive multiplication of other products; and it may be truly said, that the richer a nation is, the smaller is the amount of its coin, in comparison with other nations.

Were the quantum of the supply alone to determine the exchangeable value of a commodity, silver would stand to gold in the ratio of 1 to 45; for silver and gold are produced by metallurgy as 45 to 1. But the demand for silver is greater than for gold; its uses are both far more general and far more various; and thus its relative value is prevented from falling lower than 1 to 15.

A portion of the demand for the precious metals is occasioned by their gradual destruction by use; for, although less subject to decay than most products, they are still perishable in a certain degree; and doubtless the wear, though slow, must be considerable upon the immense quantity of gold and silver in constant use, as well in the character of money, as in the vari

In a poor country, after a dealer has disposed of his wares, he is sometimes a long while before he can provide himself with the returns he has in view; and, during the interval, the money-proceeds remain idle in his hands. Moreover, in a poor country, the investment of money is always difficult. Savings are slow and gradual, and are seldom turned to profitable account, until after a lapse of many years; so that a great deal of money is always lying by in a state of inaction.

Ricardo, whom I look upon as the individual in Europe the best acquainted with the subject of money, both in theory and in practice, has shown, in his Proposal for an economical and secure Currency, that, when the good government of the state may be safely reckoned upon, paper may be substituted for the whole of a metallic money; and a material possessed of no intrinsic value, by skilful management, be made to supplant a dear and cumbrous one, whose metallic properties are never called into play by the functions of money.

+ Humboldt. Essai Pol. sur la Nouvelle Espagne, 8vo. tom. iv. p. 222.

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ous objects of spoons, forks, goblets, dishes, and jewellery of all sorts. There is likewise a large consumption in plating and gilding. Smith asserts, that the manufactures of Birming ham alone, in his time, worked up annually, as much as the A further allowance must worth of 50,000l. in these ways.*

*

be made for the consumption of embroidery, tissue, book-binding, &c., all which may be set down as finally lost to other purposes. Add to this the buried hoards, the knowledge of which dies with the possessor, and the quantity lost by shipwreck.

If the nations of the world go on increasing their wealth, as most of them certainly have done for the last three centuries, their want of the precious metals will progressively advance, as well in consequence of the gradual wear, which will be greater in proportion to their increasing use, as of the multiplication and increased aggregate value of other commodities, which will create a larger demand for the purposes of transfer and circulation. If the produce of the mines do not keep pace with the increasing demand, the precious metals will rise in value, and less of them be given in exchange for other products in general. If the progress of mining shall keep pace with the advances of human industry, their value will remain stationary, as it seems to have done for the last two centuries; during which, the demand and supply have regularly advanced together. And, if the supply of those metals outrun the pro

• Wealth of Nations, book i. c. 11. The manufacturing consumption of Birmingham and other towns has greatly increased since the date of that work.

We are assured by Humboldt, that the produce of the mines of Mexico has, in the last 100 years, been increased in the ratio of 110 to 25; also, that such is the abundance of silver ore, in the chain of the Andes, that, reckoning the number of veins either worked superficially, or not worked at all, one would be led to imagine, that Europe has hitherto had a mere sample Essai Pol. sur la N. Espagne, 8vo. tom. iv. p. of their incalculable stores. 149.

The very slight and gradual depreciation of gold and silver, effected by their immense and increasing annual supply, is one amongst many proofs of the rapid and general advance of human wealth, whereby the demand is made to keep pace with the supply. Yet I am inclined to think, that their value, after remaining nearly stationary for a century, has, within the last thirty years, begun again to decline. The setier of wheat, Paris measure, which was for a long time, on an average, sold for 4oz. of silver, has now risen to 4 1-2oz., and rents are raised upon every renewal of lease. All other things seem to be rising in the like proportion; which indicates, that silver is undergoing a depreciation of relative value. (1)

(1) [It is here very justly remarked by the translator "that this may have been true about the period of the first treaty of Paris in 1814. Since then a variety of circumstances, he observes, have occurred to turn the scale of variation to the opposite direction." Some of the circumstances enumerated by him undoubtedly have had that effect; such, for example, as the diminished productiveness of the mines of Mexico and Peru, caused by the

gress of general wealth, as it seems to be doing at this moment, they will fall in respect to other commodities at large. Metal-money will thereby be rendered more cumbrous; but the other uses of gold and silver will be more widely diffused. It would be a long and a tedious task to expose all the false reasoning and erroneous views, originating in the perpetual confusion of the different kinds of variation, that it has cost so much time to analyze and distinguish. It is enough to put the reader in a condition himself to discover their fallacy, and estimate the tendency of measures avowedly directed to influence public wealth, by operating upon the scale of value.

CHAPTER V.

OF THE MANNER IN

WHICH REVENUE IS DISTRIBUTED

AMONGST SOCIETY.

THE causes, which determine the value of things, and which operate in the way described in the preceding chapters, apply without exception to all things possessed of value, however perishable; amongst others, therefore, to the productive serAvice yielded by industry, capital, and land, in a state of productive activity. Those, who have at their disposal any one of these three sources of production, are the venders of what we shall here denominate productive agency; and the consumers of its product are the purchasers. Its relative value, like that of every other commodity, rises in direct ratio to the demand, and inverse ratio to the supply.

The wholesale employers of industry, or adventurers, as they have been called, are but a kind of brokers between the venders and the purchasers, who engage a quantum of productive agency upon a particular product, proportionate to the demand for that product. The farmer, the manufacturer, the

It has been already seen, that the demand for every product is great, in proportion to the degree of its utility, and to the quantity of other products possessed by others, and capable of being given in exchange. In other words, the utility of an object, and the wealth of the purchasers, jointly determine the extent of the demand.

civil wars in those countries, and the increased demand for the precious metals, arising from the simultaneous return, on the part of Great Britain, the United States, Russia, and other nations to a metallic medium, or to a paper currency convertible at pleasure into coin.] AMERICAN EDITOR.

merchant, is constantly occupied in comparing the price, which the consumer of a given product will and can give for it, with the necessary charges of its production; if that comparison, determine him to produce it, he is the organ of a demand for all the productive agency applicable to this object, and thus furnishes one of the bases of the value of that agency.

On the other hand, the agents of production, animate and inanimate, land, capital, and human labour, are supplied in larger or smaller quantity, according to the action of the various motives, that will be detailed in the succeeding chapters; thus forming the other basis of the value at which their agency is

rated.*

Every product, when completed, repays by its value the whole amount of productive agency employed in its completion. A great part of this agency has been paid for before the entire completion of the product, and must have been advanced by somebody; other part has been remunerated on its completion; but the whole is always paid for ultimately out of the value of the product.

By way of exemplifying the mode, in which the value of a product is distributed amongst all that have concurred in its production, let us take a watch, and trace from the commencement, the manner in which its smallest parts have been procured, and in which their value has been paid to every one of the infinite number of concurring producers.

In the first place we find, that the gold, copper, and steel, used in its construction, have been purchased of the miner, who has received in exchange for these products, the wages of labour, interest of capital, and rent paid to the landed proprietor.

The dealers in metal, who buy of the original producer, resell to those engaged in watch-making, and are thus reimbursed their advance, and paid the profits of their business into the bargain.

The respective mechanics, who fashion the different parts whereof a watch is composed, sell them to the watchmaker, who, in paying them, refunds the advance of their previous value, together with the interest upon that advance; and pays, besides, the wages of labour hitherto incurred. This very complex operation of payment may be effected by a single

In digesting the plan of this work, I hesitated for a long time, whether or no to place the analysis of value before that of production; to explain the nature of the quality produced, before entering upon the investigation of the mode of its production. But it appeared to me, that to make the foundation of value int elligible, it was necessary to have a previous knowledge of wherein the costs of production consist; and for that purpose, to have a just and enlarged conception of the agents of production, and of the service they are capable of yielding.

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sum, equal to the aggregate of those united values. In the same way, the watchmaker deals with the mechanics that furnish the dial plate, the glass, &c., and such ornaments as he may think fit to add,-diamonds, enamel, or any thing he pleases.

Last of all, the individual purchaser of the watch for his own use refunds to the watchmaker the whole of his advances, together with interest on each part respectively, and pays him besides, a profit upon his personal skill and industry.

We find, then, that the total value of the watch has been shared amongst all its producers, perhaps long before it was finished; and those producers are much more numerous than I have described, or than is generally imagined. Among them, probably, may be found the unconscious purchaser himself, who has bought the watch, and wears it in his fob. For who knows but he may have advanced his own capital to a mining adventurer, or a dealer in metal; or to the director of a large factory; or to an individual who acts himself in none of these capacities, but has underlent to one or more such persons a part of the funds he has borrowed at interest from the identical consumer of the watch?

It has been observed, that it is by no means necessary for a product to be perfected for use, before the majority of its concurring producers can have been reimbursed that portion of value they have contributed to its completion; in a great many cases, these producers have even consumed their equivalent long before the product has arrived at perfection.Each successive producer makes the advance to his precursor of the then value of the product, including the labour already expended upon it. His successor in the order of production, reimburses him in turn, with the addition of such value as the product may have received in passing through his hands. Finally, the last producer, who is generally the retail dealer, is compensated by the consumer for the aggregate of all these advances, plus the concluding operation performed by himself upon the product.

The whole revenues of the community are distributed in one and the same manner.

That portion of the value produced, which accrues in this manner to the landed proprietor, is called the profit of land; which is sometimes transferred to the farmer, in consideration of a fixed rent.

The portion assigned to the capitalist, or person making the advances, however minute and for however short a period of time, is called the profil of capital; which capital is sometimes lent, and the profit relinquished on condition of a stipulated interest.

The portion assigned to the mere mechanic or labourer is