An inquiry into the nature and causes of the wealth of

56

The Wealth of Nations

ducing them, may not be sufficient to supply the effectual de-

mand. The whole quantity brought to market, therefore, may be

disposed of to those who are willing to give more than what is

sufficient to pay the rent of the land which produced them, to-

gether with the wages of the labour and the profits of the stock

which were employed in preparing and bringing them to market,

according to their natural rates. Such commodities may continue

for whole centuries together to be sold at this high price; and that

part of it which resolves itself into the rent of land, is in this case

the part which is generally paid above its natural rate. The rent of

the land which affords such singular and esteemed productions,

like the rent of some vineyards in France of a peculiarly happy soil

and situation, bears no regular proportion to the rent of other

equally fertile and equally well cultivated land in its neighbourhood.

The wages of the labour, and the profits of the stock employed in

bringing such commodities to market, on the contrary, are sel-

dom out of their natural proportion to those of the other employ-

ments of labour and stock in their neighbourhood.

Such enhancements of the market price are evidently the effect

of natural causes, which may hinder the effectual demand from

ever being fully supplied, and which may continue, therefore, to

operate for ever.

A monopoly granted either to an individual or to a trading com-

pany, has the same effect as a secret in trade or manufactures. The

monopolists, by keeping the market constantly understocked by

never fully supplying the effectual demand, sell their commodi-

ties much above the natural price, and raise their emoluments,

whether they consist in wages or profit, greatly above their natural

rate.

The price of monopoly is upon every occasion the highest which

can be got. The natural price, or the price of free competition, on

the contrary, is the lowest which can be taken, not upon every

occasion indeed, but for any considerable time together. The one

is upon every occasion the highest which can be squeezed out of

the buyers, or which it is supposed they will consent to give; the

other is the lowest which the sellers can commonly afford to take,

and at the same time continue their business.

The exclusive privileges of corporations, statutes of apprentice-

ship, and all those laws which restrain in particular employments,

the competition to a smaller number than might otherwise go

into them, have the same tendency, though in a less degree. They

are a sort of enlarged monopolies, and may frequently, for ages

together, and in whole classes of employments, keep up the mar-

ket price of particular commodities above the natural price, and

maintain both the wages of the labour and the profits of the stock

employed about them somewhat above their natural rate.

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57

Adam Smith

Such enhancements of the market price may last as long as the

regulations of policy which give occasion to them.

The market price of any particular commodity, though it may

continue long above, can seldom continue long below, its natural

price. Whatever part of it was paid below the natural rate, the

persons whose interest it affected would immediately feel the loss,

and would immediately withdraw either so much land or no much

labour, or so much stock, from being employed about it, that the

quantity brought to market would soon be no more than suffi-

cient to supply the effectual demand. Its market price, therefore,

would soon rise to the natural price; this at least would be the case

where there was perfect liberty.

The same statutes of apprenticeship and other corporation laws,

indeed, which, when a manufacture is in prosperity, enable the

workman to raise his wages a good deal above their natural rate,

sometimes oblige him, when it decays, to let them down a good

deal below it. As in the one case they exclude many people from

his employment, so in the other they exclude him from many

employments. The effect of such regulations, however, is not near

so durable in sinking the workman’s wages below, as in raising

them above their natural rate. Their operation in the one way may

endure for many centuries, but in the other it can last no longer

than the lives of some of the workmen who were bred to the busi-

ness in the time of its prosperity. When they are gone, the number

of those who are afterwards educated to the trade will naturally

suit itself to the effectual demand. The policy must be as violent as

that of Indostan or ancient Egypt (where every man was bound by

a principle of religion to follow the occupation of his father, and

was supposed to commit the most horrid sacrilege if he changed it

for another), which can in any particular employment, and for

several generations together, sink either the wages of labour or the

profits of stock below their natural rate.

This is all that I think necessary to be observed at present con-

cerning the deviations, whether occasional or permanent, of the

market price of commodities from the natural price.

The natural price itself varies with the natural rate of each of its

component parts, of wages, profit, and rent; and in every society

this rate varies according to their circumstances, according to their

riches or poverty, their advancing, stationary, or declining condi-

tion. I shall, in the four following chapters, endeavour to explain,

as fully and distinctly as I can, the causes of those different varia-

tions.

First, I shall endeavour to explain what are the circumstances

which naturally determine the rate of wages, and in what manner

those circumstances are affected by the riches or poverty, by the

advancing, stationary, or declining state of the society.

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