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Of Drawbacks
That The Division Of Labour Is Limited By The Extent Of The Market
Of The Wages Of Labour
Conclusion Of The Mercantile System
Of Bounties
Of Taxes
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Of The Rent Of Land
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Of The Real And Nominal Price Of Commodities Or Of Their Price In Labour And Their Price In Money


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Introduction To Stock Theory
Of The Different Employments Of Capitals
Of The Agricultural Systems Or Of Those Systems Of Political Economy Which Represent The Produce Of Land
Of The Accumulation Of Capital Or Of Productive And Unproductive Labour
Of The Profits Of Stock
Of The Component Part Of The Price Of Commodities
Of The Discouragement Of Agriculture In The Ancient State Of Europe After The Fall Of The Roman Empire
Of Stock Lent At Interest
Of Money Considered As A Particular Branch Of The General Stock Of The Society
Of The Principle Which Gives Occasion To The Division Of Labour


Of The Component Part Of The Price Of Commodities








In that early and rude state of society which precedes both the
accumulation of stock and the appropriation of land, the proportion
between the quantities of labour necessary for acquiring different
objects, seems to be the only circumstance which can afford any rule
for exchanging them for one another. If among a nation of hunters, for
example, it usually costs twice the labour to kill a beaver which it
does to kill a deer, one beaver should naturally exchange for or be
worth two deer. It is natural that what is usually the produce of two
days or two hours labour, should be worth double of what is usually the
produce of one day's or one hour's labour.

If the one species of labour should be more severe than the other, some
allowance will naturally be made for this superior hardship; and the
produce of one hour's labour in the one way may frequently exchange for
that of two hour's labour in the other.

Or if the one species of labour requires an uncommon degree of dexterity
and ingenuity, the esteem which men have for such talents, will
naturally give a value to their produce, superior to what would be due
to the time employed about it. Such talents can seldom be acquired but
in consequence of long application, and the superior value of their
produce may frequently be no more than a reasonable compensation for the
time and labour which must be spent in acquiring them. In the advanced
state of society, allowances of this kind, for superior hardship and
superior skill, are commonly made in the wages of labour; and something
of the same kind must probably have taken place in its earliest and
rudest period.

In this state of things, the whole produce of labour belongs to the
labourer; and the quantity of labour commonly employed in acquiring or
producing any commodity, is the only circumstance which can regulate
the quantity of labour which it ought commonly to purchase, command, or
exchange for.

As soon as stock has accumulated in the hands of particular persons,
some of them will naturally employ it in setting to work industrious
people, whom they will supply with materials and subsistence, in order
to make a profit by the sale of their work, or by what their labour adds
to the value of the materials. In exchanging the complete manufacture
either for money, for labour, or for other goods, over and above what
may be sufficient to pay the price of the materials, and the wages of
the workmen, something must be given for the profits of the undertaker
of the work, who hazards his stock in this adventure. The value which
the workmen 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 different
name for the wages of a particular sort of labour, the labour of
inspection and direction. They are, however, altogether different, are
regulated by quite different principles, and bear no proportion to the
quantity, the hardship, or the ingenuity of this supposed labour of
inspection and direction. They are regulated altogether by the value
of the stock employed, and are greater or smaller in proportion to
the extent of this stock. Let us suppose, for example, that in some
particular place, where the common annual profits of manufacturing stock
are ten per cent. there are two different manufactures, in each of which
twenty workmen are employed, 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 employed
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 properly 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 component 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 the owner of
the stock which employs him. Neither is the quantity of labour commonly
employed in acquiring or producing any commodity, the only circumstance
which can regulate the quantity which it ought commonly to purchase,
command or exchange for. An additional quantity, it is evident, must be
due for the profits of the stock which advanced the wages and furnished
the materials of that labour.

As soon as the land of any country has all become private property, 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 licence 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,
constitutes the rent of land, and in the price of the greater part of
commodities, 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 component 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 immediately 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 considered, 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 corn, the
profits of the miller, and the wages of his servants; in the price of
bread, the profits of the baker, and the wages of his servants; and in
the price of both, the labour of transporting the corn from the house of
the farmer to that of the miller, and from that of the miller to that of
the baker, together with the profits of those who advance the wages of
that labour.

The price of flax resolves itself into the same three parts as that of
corn. In the price of linen we must add to this price the wages of
the flax-dresser, of the spinner, of the weaver, of the bleacher, etc.
together with the profits of their respective employers.

As any particular commodity comes to be more manufactured, that part
of the price which resolves itself into wages and profit, comes to be
greater in proportion to that which resolves itself into rent. In the
progress of the manufacture, not only the number of profits increase,
but every subsequent profit is greater than the foregoing; because the
capital from which it is derived must always be greater. The capital
which employs the weavers, for example, must be greater than that which
employs the spinners; because it not only replaces that capital with its
profits, but pays, besides, the wages of the weavers: and the profits
must always bear some proportion to the capital.

In the most improved societies, however, there are always a few
commodities of which the price resolves itself into two parts only the
wages of labour, and the profits of stock; and a still smaller number,
in which it consists altogether in the wages of labour. In the price of
sea-fish, for example, one part pays the labour of the fisherman, and
the other the profits of the capital employed in the fishery. Rent very
seldom makes any part of it, though it does sometimes, as I shall shew
hereafter. It is otherwise, at least through the greater part of Europe,
in river fisheries. A salmon fishery pays a rent; and rent, though it
cannot well be called the rent of land, makes a part of the price of a
salmon, as well as wares and profit. In some parts of Scotland, a few
poor people make a trade of gathering, along the sea-shore, those little
variegated stones commonly known by the name of Scotch pebbles. The
price which is paid to them by the stone-cutter, is altogether the wages
of their labour; neither rent nor profit makes an part of it.

But the whole price of any commodity must still finally resolve itself
into some one or other or all of those three parts; as whatever part of
it remains after paying the rent of the land, and the price of the whole
labour employed in raising, manufacturing, and bringing it to market,
must necessarily be profit to somebody.

As the price or exchangeable value of every particular commodity, taken
separately, resolves itself into some one or other, or all of those
three parts; so that of all the commodities which compose the whole
annual produce of the labour of every country, taken complexly, must
resolve itself into the same three parts, and be parcelled out among
different inhabitants of the country, either as the wages of their
labour, the profits of their stock, or the rent of their land. The whole
of what is annually either collected or produced by the labour of every
society, or, what comes to the same thing, the whole price of it, is in
this manner originally distributed among some of its different members.
Wages, profit, and rent, are the three original sources of all revenue,
as well as of all exchangeable value. All other revenue is ultimately
derived from some one or other of these.

Whoever derives his revenue from a fund which is his own, must draw it
either from his labour, from his stock, or from his land. The revenue
derived from labour is called wages; that derived from stock, by the
person who manages or employs it, is called profit; that derived from it
by the person who does not employ it himself, but lends it to another,
is called the interest or the use of money. It is the compensation
which the borrower pays to the lender, for the profit which he has
an opportunity of making by the use of the money. Part of that profit
naturally belongs to the borrower, who runs the risk and takes the
trouble of employing it, and part to the lender, who affords him the
opportunity of making this profit. The interest of money is always a
derivative revenue, which, if it is not paid from the profit which is
made by the use of the money, must be paid from some other source of
revenue, unless perhaps the borrower is a spendthrift, who contracts a
second debt in order to pay the interest of the first. The revenue
which proceeds altogether from land, is called rent, and belongs to the
landlord. The revenue of the farmer is derived partly from his labour,
and partly from his stock. To him, land is only the instrument which
enables him to earn the wages of this labour, and to make the profits of
this stock. All taxes, and all the revenue which is founded upon them,
all salaries, pensions, and annuities of every kind, are ultimately
derived from some one or other of those three original sources of
revenue, and are paid either immediately or mediately from the wages of
labour, the profits of stock, or the rent of land.

When those three different sorts of revenue belong to different persons,
they are readily distinguished; but when they belong to the same, they
are sometimes confounded with one another, at least in common language.

A gentleman who farms a part of his own estate, after paying the expense
of cultivation, should gain both the rent of the landlord and the profit
of the farmer. He is apt to denominate, however, his whole gain, profit,
and thus confounds rent with profit, at least in common language. The
greater part of our North American and West Indian planters are in this
situation. They farm, the greater part of them, their own estates: and
accordingly we seldom hear of the rent of a plantation, but frequently
of its profit.

Common farmers seldom employ any overseer to direct the general
operations of the farm. They generally, too, work a good deal with their
own hands, as ploughmen, harrowers, etc. What remains of the crop, after
paying the rent, therefore, should not only replace to them their stock
employed in cultivation, together with its ordinary profits, but pay
them the wages which are due to them, both as labourers and overseers.
Whatever remains, however, after paying the rent and keeping up the
stock, is called profit. But wages evidently make a part of it. The
farmer, by saving these wages, must necessarily gain them. Wages,
therefore, are in this case confounded with profit.

An independent manufacturer, who has stock enough both to purchase
materials, and to maintain himself till he can carry his work to market,
should gain both the wages of a journeyman who works under a master,
and the profit which that master makes by the sale of that journeyman's
work. His whole gains, however, are commonly called profit, and wages
are, in this case, too, confounded with profit.

A gardener who cultivates his own garden with his own hands, unites in
his own person the three different characters, of landlord, farmer, and
labourer. His produce, therefore, should pay him the rent of the
first, the profit of the second, and the wages of the third. The whole,
however, is commonly considered as the earnings of his labour. Both rent
and profit are, in this case, confounded with wages.

As in a civilized country there are but few commodities of which the
exchangeable value arises from labour only, rent and profit contributing
largely to that of the far greater part of them, so the annual produce
of its labour will always be sufficient to purchase or command a much
greater quantity of labour than what was employed in raising, preparing,
and bringing that produce to market. If the society were annually to
employ all the labour which it can annually purchase, as the quantity
of labour would increase greatly every year, so the produce of every
succeeding year would be of vastly greater value than that of the
foregoing. But there is no country in which the whole annual produce is
employed in maintaining the industrious. The idle everywhere consume a
great part of it; and, according to the different proportions in which
it is annually divided between those two different orders of people, its
ordinary or average value must either annually increase or diminish, or
continue the same from one year to another.





Next: Of The Natural And Market Price Of Commodities

Previous: Of The Real And Nominal Price Of Commodities Or Of Their Price In Labour And Their Price In Money



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