Adam Smith

William B. Todd (ed.), The Glasgow Edition of the Works and Correspondence of Adam Smith, Vol. 2: An Inquiry into the Nature and Causes of the Wealth of Nations, Vol. 1

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pg 330[1] CHAPTER IIIOf the Accumulation of Capital, or of productive and unproductive Labour

1 4There is one sort of labour which adds to the value of the subject5upon which it is bestowed: There is another which has no such effect. Link 6The former, as it produces a value, may be called productive; the7latter, unproductive* labour.1 Thus the labour of a manufacturer adds,8generally, to the value of the materials which he works upon, that of Link 9his own [2] maintenance, and of his master's profit. The labour of a menial10servant, on the contrary, adds to the value of nothing. Though the manu-11facturer has his wages advanced to him by his master, he, in reality, costs12him no expence, the value of those wages being generally restored, to-13gether with a profit, in the improved value of the subject upon which his14labour is bestowed. But the maintenance of a menial servant never is15restored. A man grows rich by employing a multitude of manufacturers:16He grows poor, by maintaining a multitude of menial servants. The labour17of the latter, however, has its value, and deserves its reward as well as that18of the former. But the labour of the manufacturer fixes and realizes itself in19some particular subject or vendible commodity, which lasts for some time at20least after that labour is past.2 It is, as it were, a certain quantity of labour21stocked and stored up to be employed, if necessary, upon some other22occasion. That subject, or what is the same thing, the price of that subject,23can afterwards, if necessary, put into motion a quantity of labour equal to24that which had originally produced it.3 The labour of the menial servant,25on the contrary, does not fix or realize itself in any particular subject or26vendible commodity. His services generally perish in the very instant of27their performance, and seldom leave any trace or value behind them, for28which an equal quantity of service could afterwards be procured.4

2 29The labour of some of the most respectable orders in the society is, like30that of menial ser-[3]vants, unproductive of any value, and does not fix or31realize itself in any permanent subject, or vendible commodity, which32endures after that labour is past, and for which an equal quantity of labour33could afterwards be procured. The sovereign, for example, with all thepg 331 1officers both of justice and war who serve under him, the whole army and2navy, are unproductive labourers.5 They are the servants of the publick,3and are maintained by a part of the annual produce of the industry of4other people.6 Their service, how honourable, how useful,7 or how neces-5sary soever, produces nothing for which an equal quantity of service can6afterwards be procured. The protection, security, and defence of the7commonwealth, the effect of their labour this year, will not purchase its8protection, security, and defence, for the year to come. In the same class9must be ranked, some both of the gravest and most important, and some10of the most frivolous professions: churchmen, lawyers, physicians, men of11letters of all kinds; players, buffoons, musicians, opera-singers, opera-12dancers, &c.8 The labour of the meanest of these has a certain value, regu-13lated by the very same principles which regulate that of every other sort of14labour;9 and that of the noblest and most useful, produces nothing which15could afterwards purchase or procure an equal quantity of labour. Like16the declamation of the actor, the harangue of the orator, or the tune of the17musician, the work of all of them perishes in the very instant of its pro-18duction.10

pg 3323 1[4] Both productive and unproductive labourers, and those who do not2labour at all, are all equally maintained by the annual produce of the land3and labour of the country. This produce, how great soever, can never be4infinite, but must have certain limits. According, therefore, as a smaller5or greater proportion of it is in any one year employed in maintaining6unproductive hands, the more in the one case and the less in the other will7remain for the productive, and the next year's produce will be greater or8smaller accordingly; the whole annual produce, if we except the spon-9taneous productions of the earth, being the effect of productive labour.

4 10Though the whole annual produce of the land and labour of every11country, is, no doubt, ultimately destined for supplying the consumption12of its inhabitants, and for procuring a revenue to them; yet when it first13comes either from the ground, or from the hands of the productive la-14bourers, it naturally divides itself into two parts. One of them, and fre-15quently the largest, is, in the first place, destined for replacing a capital, or16for renewing the provisions, materials, and finished work, which had been17withdrawn from a capital; the other for constituting a revenue either to the18owner of this capital, as the profit of his stock; or to some other person, as19the rent of his land. Thus, of the produce of land, one part replaces the20capital of the farmer; the other pays his profit and the rent of the landlord;21and thus constitutes a revenue both to the owner of this capital, as the22profits of his stock; [5] and to some other person, as the rent of his land.23Of the produce of a great manufactory, in the same manner, one part, and24that always the largest, replaces the capital of the undertaker of the work;25the other pays his profit, and thus constitutes a revenue to the owner of26athisa capital.

5 27That part of the annual produce of the land and labour of any country28which replaces a capital, never is immediately employed to maintain any29but productive hands. It pays the wages of productive labour only. That30which is immediately destined for constituting a revenue either as profit or31as rent, may maintain indifferently either productive or unproductive32hands.

6 33Whatever part of his stock a man employs as a capital, he always expects34bisb to be replaced to him with a profit. He employs it, therefore, in main-35taining productive hands only; and after having served in the function of a36capital to him, it constitutes a revenue to them. Whenever he employs any37part of it in maintaining unproductive hands of any kind, that part is, from Link 38that moment, withdrawn from his capital, and placed in his stock reserved39for immediate consumption.

pg 3337 1Unproductive labourers, and those who do not labour at all, are all2maintained by revenue; either, first, by that part of the annual produce3which is originally destined for constituting a revenue to some particular4persons, either as the rent of land or as the profits of stock; or, secondly,5by that part which, though originally destined for replacing a capital and6for maintaining productive labourers only, yet when it comes [6] into7their hands, whatever part of it is over and above their necessary subsis-8tence, may be employed in maintaining indifferently either productive or un-9productive hands. Thus, not only the great landlord or the rich merchant,10but even the common workman, if his wages are considerable, may maintain Link 11a menial servant; or he may sometimes go to a play or a puppet-show, and12so contribute his share towards maintaining one set of unproductive labour-13ers; or he may pay some taxes, and thus help to maintain another set, more14honourable and useful, indeed, but equally unproductive. No part of the15annual produce, however, which had been originally destined to replace a16capital, is ever directed towards maintaining unproductive hands, till after17it has put into motion its full complement of productive labour, or all that18it could put into motion in the way in which it was employed.11 The work-19man must have earned his wages by work done, before he can employ any20part of them in this manner. That part too is generally but a small one. It is21his spare revenue only, of which productive labourers have seldom a great22deal. They generally have some, however; and in the payment of taxes the23greatness of their number may compensate, in some measure, the smallness24of their contribution.12 The rent of land and the profits of stock are every25where, therefore, the principal sources from which unproductive hands26derive their subsistence. These are the two sorts of revenue of which the27owners have generally most to spare. They might both maintain indiffer-[7] 28ently either productive or unproductive hands. They seem, however, to29have some predilection for the latter. The expence of a great lord feeds30generally more idle than industrious people. The rich merchant, though31with his capital he maintains industrious people only, yet by his expence,32that is, by the employment of his revenue, he feeds commonly the very33same sort as the great lord.13

8 34The proportion, therefore, between the productive and unproductivepg 334 1hands, depends very much in every country upon the proportion between2that part of the annual produce, which, as soon as it comes either from the3ground or from the hands of the productive labourers, is destined for re-4placing a capital, and that which is destined for constituting a revenue,5either as rent, or as profit. This proportion is very different in rich from6what it is in poor countries.14

9 7Thus, at present, in the opulent countries of Europe, a very large,8frequently the largest portion of the produce of the land, is destined for9replacing the capital of the rich and independent farmer; the other for10paying his profits, and the rent of the landlord. But antiently, during the Link 11prevalency of the feudal government, a very small portion of the produce12was sufficient to replace the capital employed in cultivation. It consisted13commonly in a few wretched cattle, maintained altogether by the spon-14taneous produce of uncultivated land, and which might, therefore, be15considered as a part of that spontaneous produce. It generally too belonged16to the landlord, and [8] was by him advanced to the occupiers of the land.17All the rest of the produce properly belonged to him too, either as rent for18his land, or as profit upon this paultry capital. The occupiers of land were19generally bondmen, whose persons and effects were equally his property.20Those who were not bondmen were tenants at will, and though the rent Link 21which they paid was often nominally little more than a quit-rent, it really22amounted to the whole produce of the land. Their lord could at all times23command their labour in peace, and their service in war. Though they lived24at a distance from his house, they were equally dependant upon him as his25retainers who lived in it. But the whole produce of the land undoubtedly26belongs to him, who can dispose of the labour and service of all those whom27it maintains. In the present state of Europe, the share of the landlord28seldom exceeds a third, sometimes not a fourth part of the whole produce29of the land. The rent of land, however, in all the improved parts of the30country, has been tripled and quadrupled since those antient times; and31this third or fourth part of the annual produce is, it seems, three or four32times greater than the whole had been before. In the progress of improve-33ment, rent, though it increases in proportion to the extent, diminishes in34proportion to the produce of the land.15

10 35In the opulent countries of Europe, great capitals are at present employed36in trade and manufactures. In the antient state, the little trade that was37stirring, and the few homely and coarse [9] manufactures that were carried38on, required but very small capitals. These, however, must have yielded39very large profits. The rate of interest was no where less than ten per cent.pg 335 1and their profits must have been sufficient to afford this great interest. At2present the rate of interest, in the improved parts of Europe, is no where3higher than six per cent. and in some of the most improved it is so low as4four, three, and two per cent. Though that part of the revenue of the5inhabitants which is derived from the profits of stock is always much6greater in rich than in poor countries, it is because the stock is much7greater: in proportion to the stock the profits are generally much less.

11 8That part of the annual produce, therefore, which, as soon as it comes9either from the ground, or from the hands of the productive labourers, is10destined for replacing a capital, is not only much greater in rich than in11poor countries, but bears a much greater proportion to that which is12immediately destined for constituting a revenue either as rent or as profit.13The funds destined for the maintenance of productive labour, are not only14much greater in the former than in the latter, but bear a much greater15proportion to those which, though they may be employed to maintain16either productive or unproductive hands, have generally a predilection for17the latter.

12 18The proportion between those different funds necessarily determines in19every country the general character of the inhabitants as to industry or20idleness. We are more industrious than our [10] forefathers; because in the Link 21present times the funds destined for the maintenance of industry, are much22greater in proportion to those which are likely to be employed in the23maintenance of idleness, than they were two or three centuries ago. Our24ancestors were idle for want of a sufficient encouragement to industry. It is25better, says the proverb, to play for nothing, than to work for nothing. In26mercantile and manufacturing towns, where the inferior ranks of people27are chiefly maintained by the employment of capital, they are in general28industrious, sober, and thriving; as in many English, and in most Dutch29towns. In those towns which are principally supported by the constant or30occasional residence of a court, and in which the inferior ranks of people31are chiefly maintained by the spending of revenue, they are in general32idle, dissolute, and poor; as at Rome, Versailles, Compiegne, and Fontain-33bleau. If you except Rouen and Bourdeaux, there is little trade or industry34in any of the parliament towns of France;16 and the inferior ranks of people,35being chiefly maintained by the expence of the members of the courts of36justice, and of those who come to plead before them, are in general idle37and poor. The great trade of Rouen and Bourdeaux seems to be altogether38the effect of their situation.17 Rouen is necessarily the entrepôt of almost39all the goods which are brought either from foreign countries, or from thepg 336 1maritime provinces of France, for the consumption of the great city of2Paris. Bourdeaux is in the same manner the entrepôt of the wines [11] which3grow upon the banks of the Garonne, and of the rivers which run into it,4one of the richest wine countries in the world, and which seems to produce5the wine fittest for exportation, or best suited to the taste of foreign na-6tions. Such advantageous situations necessarily attract a great capital by7the great employment which they afford it; and the employment of this8capital is the cause of the industry of those two cities. In the other parlia-9ment towns of France, very little more capital seems to be employed than10what is necessary for supplying their own consumption; that is, little more11than the smallest capital which can be employed in them. The same thing12may be said of Paris, Madrid, and Vienna. Of those three cities, Paris is13by far the most industrious; but Paris itself is the principal market of all14the manufactures established at Paris, and its own consumption is the15principal object of all the trade which it carries on. London, Lisbon, and16Copenhagen, are, perhaps, the only three cities in Europe, which are both17the constant residence of a court, and can at the same time be considered18as trading cities, or as cities which trade not only for their own consump-19tion, but for that of other cities and countries. The situation of all the three20is extremely advantageous, and naturally fits them to be the entrepôts of a21great part of the goods destined for the consumption of distant places. In a22city where a great revenue is spent, to employ with advantage a capital23for any other purpose than for supplying the consumption of that city, is24[12] probably more difficult than in one in which the inferior ranks of25people have no other maintenance but what they derive from the employ-26ment of such a capital. The idleness of the greater part of the people who27are maintained by the expence of revenue, corrupts, it is probable, the28industry of those who ought to be maintained by the employment of capital,29and renders it less advantageous to employ a capital there than in other30places. There was little trade or industry in Edinburgh before the union.31When the Scotch parliament was no longer to be assembled in it, when it32ceased to be the necessary residence of the principal nobility and gentry of33Scotland, it became a city of some trade and industry. It still continues,34however, to be the residence of the principal courts of justice in Scotland,35of the boards of customs and excise, &c. A considerable revenue, therefore,36still continues to be spent in it. In trade and industry it is much inferior to37Glasgow, of which the inhabitants are chiefly maintained by the employ-38ment of capital. The inhabitants of a large village, it has sometimes been39observed, after having made considerable progress in manufactures, have40become idle and poor, in consequence of a great lord's having taken up his41residence in their neighbourhood.18

pg 33713 1The proportion between capital and revenue, therefore, seems every2where to regulate the proportion between industry and idleness. Where-3ever capital predominates, industry prevails: wherever revenue, idleness.4Every increase or [13] diminution of capital, therefore, naturally tends to5increase or diminish the real quantity of industry, the number of produc-6tive hands, and consequently the exchangeable value of the annual pro-7duce of the land and labour of the country, the real wealth and revenue of8all its inhabitants.

14 9Capitals are increased by parsimony, and diminished by prodigality10and misconduct.

15 11Whatever a person saves from his revenue he adds to his capital, and12either employs it himself in maintaining an additional number of produc-13tive hands, or enables some other person to do so, by lending it to him for14an interest, that is, for a share of the profits.19 As the capital of an individual15can be increased only by what he saves from his annual revenue or his16annual gains, so the capital of a society, which is the same with that of all17the individuals who compose it, can be increased only in the same manner.

16 18Parsimony, and not industry, is the immediate cause of the increase of19capital. Industry, indeed, provides the subject which parsimony accumu- Link 20lates. But whatever industry might acquire, if parsimony did not save and21store up, the capital would never be the greater.20

17 22Parsimony, by increasing the fund which is destined for the main-23tenance of productive hands, tends to increase the number of those hands24whose labour adds to the value of the subject upon which it is bestowed.25It tends therefore to increase the exchangeable value of the annual pro-[14] 26duce of the land and labour of the country. It puts into motion an additional27quantity of industry, which gives an additional value to the annual pro-28duce.

18 29What is annually saved is as regularly consumed as what is annuallypg 338 1spent, and nearly in the same time too; but it is consumed by a different2set of people.21 That portion of his revenue which a rich man annually Link 3spends, is in most cases consumed by idle guests, and menial servants, who4leave nothing behind them in return for their consumption. That portion5which he annually saves, as for the sake of the profit it is immediately6employed as a capital, is consumed in the same manner, and nearly in the7same time too, but by a different set of people, by labourers, manufac-8turers, and artificers, who re-produce with a profit the value of their annual9consumption. His revenue, we shall suppose, is paid him in money. Had10he spent the whole, the food, cloathing, and lodging which the whole could11have purchased, would have been distributed among the former set of12people. By saving a part of it, as that part is for the sake of the profit13immediately employed as a capital either by himself or by some other per-14son, the food, cloathing, and lodging, which may be purchased with it, are15necessarily reserved for the latter. The consumption is the same, but the16consumers are different.

19 17By what a frugal man annually saves, he not only affords maintenance to18an additional number of productive hands, for that or the ensuing [15] year,19but, like the founder of a publick workhouse, he establishes as it were a20perpetual fund for the maintenance of an equal number in all times to21come. The perpetual allotment and destination of this fund, indeed, is not Link 22always guarded by any positive law, by any trust-right or deed of mort-23main. It is always guarded, however, by a very powerful principle, the24plain and evident interest of every individual to whom any share of it shall25ever belong. No part of it can ever afterwards be employed to maintain26any but productive hands, without an evident loss to the person who thus27perverts it from its proper destination.22

pg 33920 1The prodigal perverts it in this manner. By not confining his expence2within his income, he encroaches upon his capital. Like him who perverts3the revenues of some pious foundation to profane purposes, he pays the4wages of idleness with those funds which the frugality of his forefathers5had, as it were, consecrated to the maintenance of industry. By diminishing6the funds destined for the employment of productive labour, he neces-7sarily diminishes, so far as citc depends upon him, the quantity of that8labour which adds a value to the subject upon which it is bestowed, and,9consequently, the value of the annual produce of the land and labour of10the whole country, the real wealth and revenue of its inhabitants. If the11prodigality of some was not compensated by the frugality of others, the12conduct of every prodigal, by feeding the idle with the bread of the in-13dustrious, tends not only [16] to beggar himself, but to impoverish his14country.

21 15Though the expence of the prodigal should be altogether in home-made,16and no part of it in foreign commodities, its effect upon the productive17funds of the society would still be the same.23 Every year there would still18be a certain quantity of food and cloathing, which ought to have main-19tained productive, employed in maintaining unproductive hands. Every20year, therefore, there would still be some diminution in what would other-21wise have been the value of the annual produce of the land and labour of22the country.

22 23This expence, it may be said indeed, not being in foreign goods, and not24occasioning any exportation of gold and silver, the same quantity of money25would remain in the country as before. But if the quantity of food and26cloathing, which were thus consumed by unproductive, had been dis-27tributed among productive hands, they would have reproduced, together28with a profit, the full value of their consumption. The same quantity of29money would in this case equally have remained in the country, and there30would besides have been a reproduction of an equal value of consumable31goods. There would have been two values instead of one.

23 32The same quantity of money, besides, cannot long remain in any coun-33try, in which the value of the annual produce diminishes. The sole use of34money is to circulate consumable goods.24 By means of it, provisions,35materials, and finished [17] work, are bought and sold, and distributed to36their proper consumers. The quantity of money, therefore, which can bepg 340 1annually employed in any country must be determined by the value of the2consumable goods annually circulated within it. These must consist3either in the immediate produce of the land and labour of the country4itself, or in something which had been purchased with some part of that5produce. Their value, therefore, must diminish as the value of that pro-6duce diminishes, and along with it the quantity of money which can be7employed in circulating them. But the money which by this annual di-8minution of produce is annually thrown out of domestick circulation will9not be allowed to lie idle. The interest of whoever possesses it, requires10that it should be employed. But having no employment at home, it will, in11spite of all laws and prohibitions, be sent abroad, and employed in pur-12chasing consumable goods which may be of some use at home.25 Its annual13exportation will in this manner continue for some time to add something to14the annual consumption of the country beyond the value of its own annual15produce. What in the days of its prosperity had been saved from that annual16produce, and employed in purchasing gold and silver, will contribute for17some little time to support its consumption in adversity. The exportation18of gold and silver is, in this case, not the cause, but the effect of its de-19clension, and may even, for some little time, alleviate the misery of that20declension.

24 21[18]Thequantityofmoney, on the contrary, must in every country natur-22ally increase as the value of the annual produce increases. The value of the23consumable goods annually circulated within the society being greater, will24require a greater quantity of money to circulate them. A part of the in-25creased produce, therefore, will naturally be employed in purchasing,26wherever it is to be had, the additional quantity of gold and silver necessary27for circulating the rest. The increase of those metals will in this case be the28effect, not the cause, of the publick prosperity. Gold and silver are pur-29chased every where in the same manner.26 The food, cloathing, and lodging,30the revenue and maintenance of all those whose labour or stock is employed31in bringing them from the mine to the market, is the price paid for them in32Peru as well as in England. The country which has this price to pay, will33never be long without the quantity of those metals which it has occasion for;34and no country will ever long retain a quantity which it has no occasion for.

25 35Whatever, therefore, we may imagine the real wealth and revenue of a36country to consist in, whether in the value of the annual produce of its37land and labour, as plain reason seems to dictate; or in the quantity of the38precious metals which circulate within it, as vulgar prejudices suppose;27 39in either view of the matter, every prodigal appears to be a publick enemy,40and every frugal man a publick benefactor.

26 41[19] The effects of misconduct are often the same as those of prodigality.pg 341 1Every injudicious and unsuccessful project in agriculture, mines, fisheries,2trade, or manufactures, tends in the same manner to diminish the funds3destined for the maintenance of productive labour.28 In every such project,4though the capital is consumed by productive hands only, yet, as by the5injudicious manner in which they are employed, they do not reproduce the6full value of their consumption, there must always be some diminution in7what would otherwise have been the productive funds of the society.

27 8It can seldom happen, indeed, that the circumstances of a great nation9can be much affected either by the prodigality or misconduct of individuals;10the profusion or imprudence of some being always more than compensated11by the frugality and good conduct of others.

28 12With regard to profusion, the principle, which prompts to expence, is13the passion for present enjoyment; which, though sometimes violent and14very difficult to be restrained, is in general only momentary and occasional.15But the principle which prompts to save, is the desire of bettering our16condition,29 a desire which, though generally calm and dispassionate,17comes with us from the womb, and never leaves us till we go into the grave.18In the whole interval which separates those two moments, there is scarce19perhaps a single dinstantd in which any man is so perfectly and completely20satisfied with his situation, as to be without any wish of alteration or im-[20] 21provement, of any kind. An augmentation of fortune is the means by which22the greater part of men propose and wish to better their condition.30 It is pg 3421the means the most vulgar and the most obvious; and the most likely way of2augmenting their fortune, is to save and accumulate some part of what they3acquire, either regularly and annually, or upon some extraordinary oc-4casions. Though the principle of expence, therefore, prevails in almost all5men upon some occasions, and in some men upon almost all occasions, yet6in the greater part of men, taking the whole course of their life at an average,7the principle of frugality seems not only to predominate, but to predomi-8nate very greatly.

29 9With regard to misconduct, the number of prudent and successful10undertakings is every where much greater than that of injudicious and11unsuccessful ones. After all our complaints of the frequency of bankrupt-12cies, the unhappy men who fall into this misfortune make but a very small13part of the whole number engaged in trade, and all other sorts of business;14not much more perhaps than one in a thousand. Bankruptcy is perhaps the Link 15greatest and most humiliating calamity which can befal an innocent man.16The greater part of men, therefore, are sufficiently careful to avoid it.17Some, indeed, do not avoid it; as some do not avoid the gallows.

30 18Great nations are never impoverished by private, though they sometimes19are by publick prodigality and misconduct. The whole, or almost the whole20publick revenue, is in most [21] countries employed in maintaining un-21productive hands. Such are the people who compose a numerous and22splendid court, a great ecclesiastical establishment, great fleets and armies,23who in time of peace produce nothing, and in time of war acquire nothing24which can compensate the expence of maintaining them, even while the25war lasts. Such people, as they themselves produce nothing, are all main-26tained by the produce of other men's labour. When multiplied, therefore,27to an unnecessary number, they may in a particular year consume so great a28share of this produce, as not to leave a sufficiency for maintaining the pro-29ductive labourers, who should reproduce it next year. The next year's30produce, therefore, will be less than that of the foregoing, and if the same31disorder should continue, that of the third year will be still less than that of32the second. Those unproductive hands, who should be maintained by a33part only of the spare revenue of the people, may consume so great a share34of their whole revenue, and thereby oblige so great a number to encroach35upon their capitals, upon the funds destined for the maintenance of pro-36ductive labour, that all the frugality and good conduct of individuals may37not be able to compensate the waste and degradation of produce occasioned38by this violent and forced encroachment.

31 39This frugality and good conduct, however, is upon most occasions, itpg 343 1appears from experience, sufficient to compensate, not only the private2prodigality and misconduct of indivi-[22]duals, but the publick extrava-3gance of government. The uniform, constant, and uninterrupted effort of4every man to better his condition, the principle from which publick and5national, as well as private opulence is originally derived, is frequently6powerful enough to maintain the natural progress of things toward7improvement, in spite both of the extravagance of government, and of the8greatest errors of administration.31 Like the unknown principle of animal9life, it frequently restores health and vigour to the constitution, in spite, not10only of the disease, but of the absurd prescriptions of the doctor.

32 11The annual produce of the land and labour of any nation can be increased12in its value by no other means, but by increasing either the number of its13productive labourers, or the productive powers of those labourers who14had before been employed.32 The number of its productive labourers, it is15evident, can never be much increased, but in consequence of an increase of16capital, or of the funds destined for maintaining them. The productive17powers of the same number of labourers cannot be increased, but in18consequence either of some addition and improvement to those machines19and instruments which facilitate and abridge labour; or of a more proper20division and distribution of employment.33 In either case an additional21capital is almost always required. It is by means of an additional capital22only that the undertaker of any work can either provide his workmen with23better machinery, or [23] make a more proper distribution of employment24among them. When the work to be done consists of a number of parts, to25keep every man constantly employed in one way, requires a much greater26capital than where every man is occasionally employed in every different27part of the work. When we compare, therefore, the state of a nation at two28different periods, and find, that the annual produce of its land and labour is29evidently greater at the latter than at the former, that its lands are better30cultivated, its manufactures more numerous and more flourishing, and its31trade more extensive, we may be assured that its capital must have increased32during the interval between those two periods, and that more must have33been added to it by the good conduct of some, than had been taken from it34either by the private misconduct of others, or by the publick extravagance35of government. But we shall find this to have been the case of almost all36nations, in all tolerably quiet and peaceable times, even of those who have37not enjoyed the most prudent and parsimonious governments. To form a38right judgment of it, indeed, we must compare the state of the country at39periods somewhat distant from one another. The progress is frequently so40gradual, that, at near periods, the improvement is not only not sensible,pg 344 1but from the declension either of certain branches of industry, or of certain2districts of the country, things which sometimes happen though the3country in general ebee in great prosperity, there frequently arises a [24] 4suspicion, that the riches and industry of the whole are decaying.

33 5The annual produce of the land and labour of England, for example, is6certainly much greater than it was, a little more than a century ago, at7the restoration of Charles II. Though at present, few people, I believe,8doubt of this, yet during this period, five years have seldom passed away9in which some book or pamphlet has not been published, written too with10such abilities as to gain some authority with the publick, and pretending to11demonstrate that the wealth of the nation was fast declining, that the coun-12try was depopulated, agriculture neglected, manufactures decaying, and Link 13trade undone. Nor have these publications been all party pamphlets, the14wretched offspring of falshood and venality. Many of them have been15written by very candid and very intelligent people; who wrote nothing but16what they believed, and for no other reason but because they believed it.

34 17The annual produce of the land and labour of England again, was cer-18tainly much greater at the restoration, than we can suppose it to have been19about an hundred years before, at the accession of Elizabeth. At this period20too, we have all reason to believe, the country was much more advanced in21improvement, than it had been about a century before, towards the close of22the dissensions between the houses of York and Lancaster. Even then it23was, probably, in a better condition than it had been at the Norman24conquest, and at the Norman conquest, than during the confusion [25] of25the Saxon Heptarchy. Even at this early period, it was certainly a more26improved country than at the invasion of Julius Caesar, when its inhabi-27tants were nearly in the same state with the savages in North America.34

35 28In each of those periods, however, there was, not only much private29and publick profusion, many expensive and unnecessary wars, great per-30version of the annual produce from maintaining productive to maintain31unproductive hands; but sometimes, in the confusion of civil discord,32such absolute waste and destruction of stock, as might be supposed, not33only to retard, as it certainly did, the natural accumulation of riches, but to34have left the country, at the end of the period, poorer than at the beginning.35Thus, in the happiest and most fortunate period of them all, that which has36passed since the restoration, how many disorders and misfortunes have37occurred, which, could they have been foreseen, not only the impoverish-38ment, but the total ruin of the country would have been expected from39them? The fire and the plague of London, the two Dutch wars, the dis-40orders of the revolution, the war in Ireland, the four expensive Frenchpg 345 1wars of 1688, f1702f, 1742, and 1756, together with the two rebellions of21715 and 1745. In the course of the four French wars, the nation has3contracted more than a hundred and forty-five millions of debt, over and4above all the other extraordinary annual expence which they occasioned,5so that the whole cannot be computed at less than two hundred millions.35 6So great a share of the annual [26] produce of the land and labour of the7country, has, since the revolution, been employed upon different occasions,8in maintaining an extraordinary number of unproductive hands. But had9not those wars given this particular direction to so large a capital, the greater10part of it would naturally have been employed in maintaining productive11hands, whose labour would have replaced, with a profit, the whole value of12their consumption. The value of the annual produce of the land and labour13of the country, would have been considerably increased by it every year,14and every year's increase would have augmented still more that of the15gfollowingg year. More houses would have been built, more lands would16have been improved, and those which had been improved before would17have been better cultivated, more manufactures would have been estab-18lished, and those which had been established before would have been19more extended; and to what height the real wealth and revenue of the20country might, by this time, have been raised, it is not perhaps very easy21even to imagine.36

36 22But though the profusion of government must, undoubtedly, have23retarded the natural progress of England towards wealth and improvement,24it has not been able to stop it. The annual produce of its land and labour is, Link 25undoubtedly, much greater at present than it was either at the restoration26or at the revolution. The capital, therefore, annually employed in culti-27vating this land, and in maintaining this labour, must likewise be much28greater. In the midst of all the [27] exactions of government, this capital29has been silently and gradually accumulated by the private frugality and30good conduct of individuals, by their universal, continual, and uninter-31rupted effort to better their own condition. It is this effort, protected by law32and allowed by liberty to exert itself in the manner that is most advan- Link 33tageous, which has maintained the progress of England towards opulence34and improvement in almost all former times, and which, it is to be hoped,35will do so in all future times.37 England, however, as it has never beenpg 346 1blessed with a very parsimonious government, so parsimony has at no time2been the characteristical virtue of its inhabitants. It is the highest im-3pertinence and presumption, therefore, in kings and ministers, to pretend4to watch over the œconomy of private people, and to restrain their expence5either by sumptuary laws, or by prohibiting the importation of foreign6luxuries.38 They are themselves always, and without any exception, the7greatest spendthrifts in the society. Let them look well after their own8expence, and they may safely trust private people with theirs. If their own9extravagance does not ruin the state, that of their subjects never will.

37 10As frugality increases, and prodigality diminishes the publick capital,11so the conduct of those, whose expence just equals their revenue, without12either accumulating or encroaching, neither increases nor diminishes it.13Some modes of expence, however, seem to contribute more to the growth14of publick opulence than others.

38 15[28] The revenue of an individual may be spent, either in things which16are consumed immediately, and in which one day's expence can neither17alleviate nor support that of another; or it may be spent in things more18durable, which can therefore be accumulated, and in which every day's19expence may, as he chuses, either alleviate or support and heighten the20effect of that of the following day.39 A man of fortune, for example, may21either spend his revenue in a profuse and sumptuous table, and in main-22taining a great number of menial servants, and a multitude of dogs and23horses; or contenting himself with a frugal table and few attendants, he24may lay out the greater part of it in adorning his house or his country villa,25in useful or ornamental buildings, in useful or ornamental furniture, in26collecting books, statues, pictures; or in things more frivolous, jewels,27baubles, ingenious trinkets of different kinds; or, what is most trifling of all,28in amassing a great wardrobe of fine cloaths, like the favourite and minister29of a great prince who died a few years ago.40 Were two men of equal for-30tune to spend their revenue, the one chiefly in the one way, the other in the31other, the magnificence of the person whose expence had been chiefly in32durable commodities, would be continually increasing, every day's expence33contributing something to support and heighten the effect of that of thepg 347 1following day: that of the other, on the contrary, would be no greater at2the end of the period than at the beginning. The former too would, at the3end of the period, [29] be the richer man of the two. He would have a4stock of goods of some kind or other, which, though it might not be worth5all that it cost, would always be worth something. No trace or vestige of6the expence of the latter would remain, and the effects of ten or twenty7years profusion would be as completely annihilated as if they had never8existed.

39 9As the one mode of expence is more favourable than the other to the10opulence of an individual, so is it likewise to that of a nation. The houses,11the furniture, the cloathing of the rich, in a little time, become useful to12the inferior and middling ranks of people.41 They are able to purchase them13when their superiors grow weary of them, and the general accommodation14of the whole people is thus gradually improved, when this mode of ex-15pence becomes universal among men of fortune. In countries which have16long been rich, you will frequently find the inferior ranks of people in17possession both of houses and furniture perfectly good and entire, but of18which neither the one could have been built, nor the other have been made19for their use. What was formerly a seat of the family of Seymour, is now an20inn upon the Bath road. The marriage-bed of James the First of Great21Britain, which his Queen brought with her from Denmark, as a present fit22for a sovereign to make to a sovereign, was, a few years ago, the ornament23of an alehouse at Dunfermline. In some ancient cities, which either have24been long stationary, or have gone somewhat to decay, you will sometimes25[30] scarce find a single house which could have been built for its present26inhabitants. If you go into those houses too, you will frequently find many27excellent, though antiquated pieces of furniture, which are still very fit for28use, and which could as little have been made for them. Noble palaces,29magnificent villas, great collections of books, statues, pictures, and other30curiosities, are frequently both an ornament and an honour, not only to31the neighbourhood, but to the whole country to which they belong. Ver-32sailles is an ornament and a honour to France, Stowe and Wilton to Eng-33land. Italy continues to command some sort of veneration by the number of34monuments of this kind which it possesses, though the wealth which pro-35duced them has decayed, and hthoughh the genius which planned them36seems to be extinguished, perhaps from not having the same employment.

40 37The expence too, which is laid out in durable commodities, is favourable,38not only to accumulation, but to frugality. If a person should at any time39exceed in it, he can easily reform without exposing himself to the censurepg 348 1of the publick.42 To reduce very much the number of his servants, to reform2his table from great profusion to great frugality, to lay down his equipage3after he has once set it up, are changes which cannot escape the observa-4tion of his neighbours, and which are supposed to imply some acknow-5ledgment of preceding bad conduct.43 Few, therefore, of those who have6once been so unfortunate as to launch out too far into this sort of expence,7[31] have afterwards the courage to reform, till ruin and bankruptcy oblige8them. But if a person has, at any time, been at too great an expence in build-9ing, in furniture, in books or pictures, no imprudence can be inferred from10his changing his conduct. These are things in which further expence is11frequently rendered unnecessary by former expence; and when a person12stops short, he appears to do so, not because he has exceeded his fortune,13but because he has satisfied his fancy.

41 14The expence, besides, that is laid out in durable commodities, gives15maintenance, commonly, to a greater number of people, than that which is16employed in the most profuse hospitality. Of two or three hundred weight17of provisions, which may sometimes be served up at a great festival, one- Link 18half, perhaps, is thrown to the dunghill, and there is always a great deal19wasted and abused. But if the expence of this entertainment had been20employed in setting to work, masons, carpenters, upholsterers, mechanicks,21i&c.i a quantity of provisions, of equal value, would have been distributedpg 349 1among a still greater number of people, who would have bought them in2penny-worths and pound weights, and not have lost or thrown away a3single ounce of them. In the one way, besides, this expence maintains4productive, in the other unproductive hands. In the one way, therefore, it5increases, in the other, it does not increase, the exchangeable value of the6annual produce of the land and labour of the country.

42 7[32] I would not, however, by all this be understood to mean, that the one8species of expence always betokens a more liberal or generous spirit than9the other. When a man of fortune spends his revenue chiefly in hospitality,10he shares the greater part of it with his friends and companions; but when11he employs it in purchasing such durable commodities, he often spends the12whole upon his own person, and gives nothing to any body without an13equivalent.44 The latter species of expence, therefore, especially when14directed towards frivolous objects, the little ornaments of dress and furni-15ture, jewels, trinkets, gewgaws, frequently indicates, not only a trifling, but16a base and selfish disposition. All that I mean is, that the one sort of ex-17pence, as it always occasions some accumulation of valuable commodities,18as it is more favourable to private frugality, and, consequently, to the in-19crease of the publick capital, and as it maintains productive, rather than20unproductive hands, conduces more than the other to the growth of pub-21lick opulence.

Notes

* Some French authors of great learning and ingenuity have used those words in a different sense. In the last chapter of the fourth book, I shall endeavour to show that their sense is an improper one.

Notes Settings

Notes

Editor’s Note
1 The term 'unproductive' is described at IV.ix.5 as a 'humiliating appellation'. IV.ix may acquire an added interest when read in conjunction with the present chapter.
Editor’s Note
2 The activities of merchants are described as productive, e.g. at II.v.6. and 8.
Editor’s Note
3 This doctrine is related to that of 'labour commanded' as used in the discussion of value in I.v.
Editor’s Note
4 Similar expressions to those used in the preceding two sentences occur at IV.ix.31.
Editor’s Note
5 But see below, V.i.a.14 and V.ii.i.7.
Editor’s Note
6 See below, IV.i.20 and V.i.a.11, where Smith discusses this point in relation to the costs of defence. In his essay 'Of Interest' Hume made the interesting point that 'lawyers and physicians beget no industry; and it is even at the expence of others they acquire their riches'. He went on, like Smith, to include merchants among the class who 'beget industry' by 'serving as canals to convey it through every corner of the state' (Essays Moral, Political, and Literary, ed. Green and Grose, i.326). Cantillon remarks, Essai, 61, ed. Higgs 47, that: 'As for those who exercise Professions which are not essential, like Dancers, Actors, Painters, Musicians, etc. they are only supported in the State for pleasure or for ornament, and their number is always very small in proportion to the other Inhabitants.'
Editor’s Note
7 The term 'useful' appears to be equated with 'productive' in the Introduction, § 6.
Editor’s Note
8 The rewards of opera singers etc are discussed in I.x.b.25. It is also suggested at V.i.g. 15 that the labour of those who provide public shows may be indirectly productive of benefit to the community.
Editor’s Note
9 It is to be emphasized that Smith does not deny that the kinds of unproductive labour cited have a value. For example, it is pointed out in the Imitative Arts II.1 that after 'the gratification of the bodily appetities, there seem to be none more natural to man than Music and Dancing' and refers to the 'delicious pleasure' to be derived from such arts, including the opera, and to the 'pleasure and delight' to be derived from a concert of instrumental music. He also suggests that a very high intellectual pleasure may be derived from such a source, not unlike that to be derived from 'the contemplation of a great system in any other science' (ibid., II.30). See below. IV.ix.31.
Editor’s Note
10 There is an interesting variant on the theme of this paragraph in Steuart's Principles, II.xxvi. Here Steuart draws a distinction between 'goods' which do, and those which do not, have an 'intrinsic substance' which is 'permanent and vendible'; i.e. a distinction between things which are 'corporeal' and those which are not.
The first species of things incorporeal, which may be purchased with money, is personal service; such as the attendance of a menial servant, the advice of a physician, of a lawyer, the assistance of skilful people in order to acquire knowledge, the service of those employed in the administration of public affairs at home and abroad, or for the defence of a kingdom by sea, or land; the residence of great men at court, who do honour to princes, and make their authority respected; and even when money is given to procure amusement, pleasure, or dissipation, when no durable and transferable value is given in return.' (Principles, i.369, ed. Skinner, i.318.)
Critical Apparatus
a-a his 〈corrected 4e-6〉
Editor’s Note
11 This subject is discussed in the preceding chapter.
Editor’s Note
12 See below, V.ii.k.43 and cf. II.i.8.
Editor’s Note
13 The point made in this paragraph is that funds used as capital (savings) directly employ productive labour, whereas funds used as revenue do not. Smith recognized, however, that all forms of consumption expenditure, whether emanating directly from the productive wage-earner, or from the expenditure of the player he pays, seem always ultimately to support productive labour through the purchase of commodities. As Smith points out at III.iv.11, the rich man who pays the price of a commodity 'indirectly contributes to the maintenance of all the workmen and their employers'. See also the concluding paragraphs of the present chapter where Smith comments on the different modes of expense and the ways in which they contribute to public opulence.
Editor’s Note
14 Smith took account of a particular problem facing indebted countries at V.iii.47, where it is argued that investment in public funds may turn capital away from productive to unproductive uses.
Editor’s Note
15 The figure of a third is cited at I.xi.c.20, II.v.12, and V.ii.a.17. Cf. above I.xi.p.2.
Editor’s Note
16 In 1776 the thirteen Parlements of France, with dates of foundation were: Paris (1302), Toulouse (1443), Grenoble (1451), Bordeaux (1462), Dijon (1476) Rouen (1499). Aix-en-Provence (1501), Rennes (1553), Pau (1620), Metz (1633), Besançon (1674), Douai (1686), Nancy (1775). The Encycopédie (1765), xii.1, did not, of course, list Nancy.
Editor’s Note
17 See above, I.iii.4, where Smith discusses the advantages of location on waterways
Editor’s Note
18 See LJ (B) 203205, ed. Cannan 154-6. It is argued at 204, ed. Cannan 155, that the development of industry reduces idleness and thus crime and that 'Nothing tends so much to corrupt mankind as dependencey, while independencey still encreases the honesty of the people.' Hence Smith suggested, 'In Glasgow where almost no body has more than one servant, there are fewer capital crimes than in Edinburgh.' Similar points are made at greater length in LJ (A) vi. 1-6, and see below. III.iv.13-15.
Editor’s Note
19 It is remarked at IV.vii.c.57 that capitals can be increased only through savings from revenue; see also IV.ix.33. Cf. Turgot (Reflections, LVIII): 'Anyone, who, whether in the form of revenue from his land, or of wages for his labour or his industry, receives each year more value than he needs to spend, can put this surplus into reserve and accumulate it: these accumulated values are what is called a capital.'
Editor’s Note
20 Cf. Mandeville (The Fable of the Bees, pt. i. 105-6, ed. Kaye i. 104-5): 'Frugality is like Honesty, a mean starving Virtue, that is only fit for small Societies of good peaceable Men, who are contented to be poor so they may be easy; but in a large stirring Nation you may have soon enough of it. 'Tis an idle dreaming Virtue that employs no Hands, and therefore very useless in a trading Country, where there are vast Numbers that one way or other must be all set to Work. Prodigality has a thousand Inventions to keep People from sitting still, that Frugality would never think of; and as this must consume a prodigious Wealth, so Avarice again knows innumerable Tricks to rake it together, which Frugality would scorn to make use of.'
Editor’s Note
21 The necessary condition being 'tolerable security', II.i.30. See also, IV.iii.c.15 and IV.ii.8. Cf. Turgot (Reflections, CI): 'In fact almost all savings are made only in the form of money … but none of the entrepreneurs make any other use of it than to convert it immediately into the different kinds of effects upon which their enterprise depends.' In the Ashley edition of the Reflections (London, 1898) the word 'immediately' is italicized.
Editor’s Note
22 TMS VI.i, which was added to the last edition of 1790, contains one of the most elaborate statements which Smith offered with regard to the psychology behind economic activity. Here Smith argued that if the pursuit of social status was the real objective of the drive to better our condition, then the means to this end are foresight and sacrifice—in short, prudence. He says also at VI.i.11 that such qualities attract general approval. Smith added that 'It is the consciousness of this merited approbation and esteem which is alone capable of supporting the agent in this tenour of conduct' (TMS IV.i.2.8). Cf. TMS VII.ii.3.16: 'The habits of œconomy, industry, discretion, attention, and application of thought, are generally supposed to be cultivated from self-interested motives, and at the same time are apprehended to be very praiseworthy qualities, which deserve the esteem and approbation of everybody.' See also TMS II.iii.3.3, where Smith emphasizes that we tend to approve of the actual achievement of fortune, not just the intention; of the end involved and not simply the means. Cf. Mandeville (Fable of the Bees. pt. 1.58, ed. Kaye i.68.) 'The Greediness we have after the Esteem of others, and the Raptures we enjoy in the Thoughts of being liked, and perhaps admired, are Equivalents that overpay the Conquest of the strongest Passions …'
Editor’s Note
23 In LJ (B) 2667, ed. Cannan 207-8, the view that 'no expence at home can be hurtful' is attributed to Mandeville and described as 'still another bad effect proceeding from that absurd notion that national opulence consists in. money'. The same point is made in LJ (A) vi.169, where the authority of'Dr John Mandeville' is cited. See below, IV.i. where Smith reviews the main doctrines of mercantilism.
Editor’s Note
24 See for example, II.ii.23, IV.i.18, and IV.vi.27.
Editor’s Note
25 This point is made above, II.ii.30.
Editor’s Note
26 See below, for example, IV.i.12.
Editor’s Note
27 The 'vulgar prejudices' are discussed in IV.i and vii.
Editor’s Note
28 See below, II.iv.15, where Smith justifies control of the rate of interest in terms of curtailing the activities of projectors; cf I.x.b.43. He was also prepared to curb prodigality through the use of taxation: see for example, V.ii.c.12 and cf. IV.vii.a.18.
Editor’s Note
29 The general term 'bettering our condition' is often used in the course of the present chapter. See also I.viii.44, III.iii.12, IV.v.b.43, and IV.ix.28. In Mandeville's Third Dialogue, Cleo. remarks that 'The restless Industry of Man to supply his Wants, and his constant Endeavours to meliorate his Condition upon Earth, have produced and brought to Perfection many useful Arts and Sciences …' (Fable of the Bees, pt. ii.132, ed. Kaye ii.128). A similar point occurs in the Fourth Dialogue where Horace inquires if the desire of 'meliorating our Condition' is so general that 'no Man is without it? Cleo. Not one that can be call'd a sociable Creature; and I believe this to be as much a Characteristick of our Species, as any can be named: For there is not a Man in the World, educated in Society, who, if he could compass it by wishing, would not have something added to, taken from, or alter'd in his Person, Possessions, Circumstances, or any part of the Society he belongs to. This is what is not to be perceiv'd in any Creature but Man'. (Ibid., pt. ii.200, ed. Kaye ii.181).
Critical Apparatus
d-d instance 5-6
Editor’s Note
30 In TMS I.iii.2.1 Smith inquires: 'what are the advantages which we propose by that great purpose of human life which we call bettering our condition? To be observed, to be attended to, to be taken notice of with sympathy, complacency, and approbation, are all the advantages which we can propose to derive from it.' Cf. TMS VI.i.3. Montesquieu also commented that 'It is pride that renders us polite; we are flattered with being taken notice of for behaviour that shows we are not of a mean condition'. (Esprit, IV.ii.12.) Mandeville made similar points several times. In 'An Enquiry into the Origin of Moral Virtue,' for example, he wrote: 'the great Recompence in view, for which the most exalted Minds have with so much Alacrity sacrificed their Quiet, Health, sensual Pleasures, and every Inch of themselves, has never been anything else but the Breath of Man, the Aerial Coin of Praise.' (Fable of the Bees, pt. i. 40, ed. Kaye 1. 54-5). In the Second Dialogue Cleo held: 'The true Object of Pride or Vain-glory is the Opinion of others; and the most superlative Wish, which a Man possess'd, and entirely fill'd with it can make, is, that he may be well thought of, applauded, and admired by the whole World…' (Ibid., pt. ii.47, ed. Kaye ii.64.)
Editor’s Note
31 Cf. V.iii.58. The extravagance of government is a recurring theme: see, for example, V.ii.a.4, V.iii.8 and 49.
Editor’s Note
34 The savage nations of North America are described as the 'lowest and rudest state of society'at V.i.a.2.
Editor’s Note
35 It is stated at IV.1.26 that the last war with France cost over £90 millions and added some £75 millions to the debt. See also IV.vii.c.64, IV.viii.53, and V.iii.92. The progress of the British national debt is reviewed in V.iii. The highest total of the national debt before 1776 was £134.2 million in 1764.
Editor’s Note
36 See below, V.iii.
Editor’s Note
37 Smith discusses the link between industry and security, for example, at II.i.30 and V.iii.7, and uses the point to explain the rapid progress of England at III.iii.12, IV.v.b.43, and IV.vii.c.54.
Editor’s Note
39 In TMS V.i.1.4, 'Of the Influence of Custom and Fashion upon our notions of Beauty and Deformity', Smith made the point that the durability of goods, e.g. buildings as contrasted with articles of apparel, is often related to the nature and extent of their influence on fashion. Thus he suggests that styles of dress change more rapidly than styles of furniture, and the latter more rapidly than architectural styles. See above, I.xi.c.31.
Editor’s Note
40 '… to what idol does that man offer incense, whom no less than three or four hundred suits of rich cloathes will satisfy ? Count Bruhl has collected all the finest colours of all the finest cloths, velvets and silks of all the manufacturers, not to mention the different kinds of lace and embroideries, of EUROPE. He calls for his book of patterns, which, are numbered, and chuses that suit which pleases his fancy for the day. They boast that he has boots and shoes in proportion to his cloathes.' (J. Hanway, An Historical Account of the British Trade over the Caspian Sea (London, 1753), ii.230.)
Editor’s Note
42 Cf. TMS TMS VI.i.3 'we cannot live long in the world without perceiving that the respect of our equals, our credit and rank in the society we live in, depend very much upon the degree in which we possess, or are supposed to possess, those advantages [of external fortune].' Cf. TMS I.iii.2.1.
Editor’s Note
43 In TMS VI.iii.37 Smith ascribes this behaviour to the vain man who seeks to claim 'both a higher rank and a greater fortune than really belong to him' and who thereby reduces himself to 'poverty and distress'. In TMS III.i.3.18 it is argued that the person who has been guilty of such misconduct will often be supported by his friends so as to avoid the public degradation of poverty or reduced circumstances. Smith gave a good deal of attention to problems of this kind and commented at TMS VI.i.6 that we suffer more 'when we fall from a better to a worse situation, than we ever enjoy when we rise from a worse to a better.' Cf. LJ(A) i.24-5: 'One of the chief studies of a man's life is to obtain a good name, to rise above those about and render himself some way their superiors. When therefore one is thrown back not only to one level, but even degraded below the common sort of men, he receives one of the most affecting and atrocious injuries that possibly can be inflicted on him.'
A related point is made in LJ (A) ii.22 in discussing pawnbroking: 'persons who enter into such agreements … are not inclined that their transactions should be known, … as it is an evident sign of their poverty and low circumstances.' It is pointed out at V.ii.k.3 that a 'creditable' labourer would be ashamed to appear in public without articles such as a linen shirt, the lack of which would be presumed to denote a degree of poverty caused by 'extreme bad conduct'. Smith also suggests at V.i.g.12 that the wealthy man 'is by his station the distinguished member of a great society, who attend to every part of his conduct'. This concern with the opinion of others also features in the discussion of net advantages, for example at I.x.b.25. The same idea was also applied to the political sphere, in the case of the American colonists, at IV.vii.c.74.
Editor’s Note
44 See below, III.iv.5, where Smith discusses the nature of feudal hospitality, linking it to the form of economy prevailing and with the self-interest of the great proprietors.
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