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


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.