An inquiry into the nature and causes of the wealth of

46

The Wealth of Nations

who hazards his stock in this adventure. The value which the work-

men add to the materials, therefore, resolves itself in this case into

two parts, of which the one pays their wages, the other the profits of

their employer upon the whole stock of materials and wages which

he advanced. He could have no interest to employ them, unless he

expected from the sale of their work something more than what was

sufficient to replace his stock to him; and he could have no interest

to employ a great stock rather than a small one, unless his profits

were to bear some proportion to the extent of his stock.

The profits of stock, it may perhaps be thought, are only a dif-

ferent name for the wages of a particular sort of labour, the labour

of inspection and direction. They are, however, altogether differ-

ent, are regulated by quite different principles, and bear no pro-

portion to the quantity, the hardship, or the ingenuity of this sup-

posed labour of inspection and direction. They are regulated alto-

gether by the value of the stock employed, and are greater or smaller

in proportion to the extent of this stock. Let us suppose, for ex-

ample, that in some particular place, where the common annual

profits of manufacturing stock are ten per cent. there are two dif-

ferent manufactures, in each of which twenty workmen are em-

ployed, at the rate of fifteen pounds a year each, or at the expense

of three hundred a-year in each manufactory. Let us suppose, too,

that the coarse materials annually wrought up in the one cost only

seven hundred pounds, while the finer materials in the other cost

seven thousand. The capital annually employed in the one will, in

this case, amount only to one thousand pounds; whereas that em-

ployed in the other will amount to seven thousand three hundred

pounds. At the rate of ten per cent. therefore, the undertaker of

the one will expect a yearly profit of about one hundred pounds

only; while that of the other will expect about seven hundred and

thirty pounds. But though their profits are so very different, their

labour of inspection and direction may be either altogether or

very nearly the same. In many great works, almost the whole labour

of this kind is committed to some principal clerk. His wages prop-

erly express the value of this labour of inspection and direction.

Though in settling them some regard is had commonly, not only

to his labour and skill, but to the trust which is reposed in him,

yet they never bear any regular proportion to the capital of which

he oversees the management; and the owner of this capital, though

he is thus discharged of almost all labour, still expects that his

profit should bear a regular proportion to his capital. In the price

of commodities, therefore, the profits of stock constitute a com-

ponent part altogether different from the wages of labour, and

regulated by quite different principles.

In this state of things, the whole produce of labour does not

always belong to the labourer. He must in most cases share it with

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47

Adam Smith

the owner of the stock which employs him. Neither is the quan-

tity of labour commonly employed in acquiring or producing any

commodity, the only circumstance which can regulate the quan-

tity which it ought commonly to purchase, command or exchange

for. An additional quantity, it is evident, must be due for the prof-

its of the stock which advanced the wages and furnished the mate-

rials of that labour.

As soon as the land of any country has all become private prop-

erty, the landlords, like all other men, love to reap where they

never sowed, and demand a rent even for its natural produce. The

wood of the forest, the grass of the field, and all the natural fruits

of the earth, which, when land was in common, cost the labourer

only the trouble of gathering them, come, even to him, to have an

additional price fixed upon them. He must then pay for the li-

cence to gather them, and must give up to the landlord a portion

of what his labour either collects or produces. This portion, or,

what comes to the same thing, the price of this portion, consti-

tutes the rent of land, and in the price of the greater part of com-

modities, makes a third component part.

The real value of all the different component parts of price, it

must be observed, is measured by the quantity of labour which

they can, each of them, purchase or command. Labour measures

the value, not only of that part of price which resolves itself into

labour, but of that which resolves itself into rent, and of that which

resolves itself into profit.

In every society, the price of every commodity finally resolves

itself into some one or other, or all of those three parts; and in

every improved society, all the three enter, more or less, as compo-

nent parts, into the price of the far greater part of commodities.

In the price of corn, for example, one part pays the rent of the

landlord, another pays the wages or maintenance of the labourers

and labouring cattle employed in producing it, and the third pays

the profit of the farmer. These three parts seem either immedi-

ately or ultimately to make up the whole price of corn. A fourth

part, it may perhaps be thought is necessary for replacing the stock

of the farmer, or for compensating the wear and tear of his labouring

cattle, and other instruments of husbandry. But it must be con-

sidered, that the price of any instrument of husbandry, such as a

labouring horse, is itself made up of the same time parts; the rent

of the land upon which he is reared, the labour of tending and

rearing him, and the profits of the farmer, who advances both the

rent of this land, and the wages of this labour. Though the price of

the corn, therefore, may pay the price as well as the maintenance

of the horse, the whole price still resolves itself, either immediately

or ultimately, into the same three parts of rent, labour, and profit.

In the price of flour or meal, we must add to the price of the

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