seed in it, his labour ends there. But when the harvest is reaped the value of the crop must far exceed the cost of the labour of sowing the corn; and it is manifest that it is out of this excess of value that all profits and rent must come. Smith therefore justly says" In agriculture, too, nature labours along with man ; and though its labour costs no expense, its produce has its value, as well as that of the most expensive workman."—"The labourer and the labouring cattle therefore employed in agriculture not only occasion, like the workmen in manufactures, the reproduction of a value equal to their own consumption or the capital which employs them, together with its owner's profits, but of a much greater value. Over and above the capital of the farmer and all its profits, they regularly occasion the reproduction of the rent of the landlord. This rent may be considered as the produce of those powers of nature, the use of which the landlord lends to the farmer. is greater or smaller according to the supposed extent of these powers, or, in other words, according to the supposed natural or improved fertility of the land. It is the work of nature which remains after deducting or compensating everything which can be regarded as the work of man."

It

6. This doctrine of Smith is manifestly true and consonant to fact, and yet he has been completely misrepresented by Say?— "We shall see afterwards that this production which is caused by nature adds to the revenue of men not only a value in use, the only one which Smith and Ricardo attribute to it, but also a value in exchange."—" When one cuts down a tree, the spontaneous product of nature, is not society put in possession of a product superior in value to that which the labour of the woodcutter can procure for it?

"I think therefore that Smith has not on this occasion given a complete idea of the phenomena of production; which has led him to this false consequence, namely, the idea that the value of all products represents recent or former labour of men; or, in other words, that wealth is nothing but accumulated labour; from which comes a second consequence which appears to me equally doubtful, that labour is the sole measure of wealth, or of the value of products."

We have shewn most clearly that Smith does not commit the 1 Wealth of Nations, B. 2, ch. 5.

2 Traité, B. I., ch. 4.

absurdity imputed to him by Say; but Ricardo adopts this opinion, and says" But these natural agents, though they add greatly to value in use, never add exchangeable value, of which Say is speaking, to a commodity . . . they are serviceable to us by increasing the abundance of productions, by making men richer, by adding to value in use; but as they perform their work gratuitously, as nothing is paid for the use of air, of heat, of water, the assistance which they afford us adds nothing to value in exchange."

The reader has only to reflect upon the absurdity of the assertion in this last paragraph. It requires no refutation. It is perfectly manifest that unless the value of the product exceeded its cost of production, there could be no such thing at all as profit

or rent.

7. Smith has seen this very clearly in other passages. He says "It sometimes happens, indeed, that the quantity of land which can be fitted for some particular produce is too small to supply the effectual demand. The whole produce can be disposed, of to those who are willing to give somewhat more than what is sufficient to pay the whole rent, wages, and profit necessary for raising and bringing it to market, according to their natural rates at which they are paid in the greater part of other cultivated land. The surplus part of the price which remains after defraying the whole expense of improvement and cultivation may commonly in this case, and in this case only, bear no regular proportion to the like surplus in corn or pasture, but may exceed it in almost any degree; and the greater part of this excess naturally goes to the rent of the landlord.

"The vine is more affected by the difference of soils than any other fruit tree. From some it derives a flavour which no culture or management can equal, it is supposed, in any other. This flavour, real or imaginary, is sometimes peculiar to the produce of a few vineyards; sometimes it extends through the greater part of a small district, and sometimes through a considerable part of a large province. The whole quantity of such wines that is brought to market falls short of the effectual demand, or the demand of those who would be willing to pay the whole rent, profit, and wages 1 Principles of Political Economy, ch. 20.

2 Wealth of Nations, B. I., ch. 11.

necessary for preparing and bringing them thither according to the ordinary rate, or according to the rate at which they are paid in common vineyards. The whole quantity, therefore, can be disposed of to those who are willing to pay more, which necessarily raises the price above that of common wine. The difference is greater or less, according as the fashionableness and scarcity of the wine render the competition of the buyers more or less eager. Whatever it may be, the greater part of it goes to the rent of the landlord. For though such vineyards are in general more carefully cultivated than most others, the high price of the wines seems to be not so much the effect as the cause of this careful cultivation.”

Now here we have the doctrine that it is value which is the inducement to labour, most clearly and unequivocally admitted. This is manifestly contradictory to the doctrine so generally attributed to him, that it is labour which is the cause of value. Both these contradictory doctrines cannot be admitted into the same science. There can be only one dominating principle admitted as the basis of the science, and, if true at all, it must be universally true. It is quite impossible that it should be true in some cases, and its opposite true in other cases.

8. We must now request our readers' attention to a subject of the most importance, which is indeed at the basis of the whole science. It is very commonly supposed that Smith's doctrine is that labour is the principle of all wealth, and the cause of all Value: in fact, that wealth is nothing but accumulated labour-a doctrine attributed to him by Say and Ricardo. The preceding extracts shew that such an idea is entirely erroneous. It is of the greatest consequence to understand what his doctrine really is, but to explain it clearly, it is necessary to state the history of ideas on the point.

The Physiocrates maintained that the earth is the sole source of all wealth, and that the labour employed in obtaining the rude produce of the earth is the only species which is productive, by which they meant that it adds to the wealth of the nation. They held that all other labour, such as that employed in manufactures and commerce, is sterile and unproductive, and adds nothing to the wealth of a country. They admitted that the labour adds to the value of a particular product, but they said that the maintenance of the labourers during the period of manu

facture costs an equal sum, and therefore that there is an equal value destroyed to what is produced, and consequently, upon the whole, there is no addition to value in general. They said that all commerce is merely the exchange of equal values, and therefore it cannot add to value in general. In fact, they maintained that agricultural labour is the only species in which the value of the product exceeds the cost, and therefore augments value in general.

If this doctrine were true, no doubt the Physiocrate doctrine would be true. But it is entirely erroneous. It is a mere arbitrary assertion, which the slightest appeal to facts shews to be absurd. It is a matter of the most common notoriety that manufacturers make enormous fortunes, and that multitudes of cities have become immensely wealthy by commerce. And this comes from the fact that in manufactures the value of the product exceeds the value of the cost; and out of this excess comes all profit, precisely in the same manner as it does in agricultural industry.

9. These extraordinary doctrines of the Physiocrates, so contrary to the plainest facts, provoked a reaction, and the main object of Smith's work was to refute them, and to demonstrate that Labour and Commerce are productive, as well as agriculture. And, as usually happens in scientific reaction, error proceeds from one extreme to the other.

In order to mark the opposition of his system to that of the Physiocrates, Smith begins his work—" The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life, which it annually consumes, and which consists always either in the immediate produce of that labour, or in what is purchased with that produce from other nations." And, though he gives no actual definition of wealth, he constantly speaks of the "annual produce of land and labour" as the real wealth of a country. We have already shewn how inconsistent his subsequent doctrines are with such a definition.

Now, even if it were true that Labour is the sole source of wealth-which it is quite easy to shew is erroneous—and that all wealth is obtained by labour, it does not follow from that doctrine that all VALUE is the sole result of labour: and this appears most clearly from Smith himself.

It might perhaps be said that the wealth of the agriculturist is derived from his labour. Unless he prepares and labours the ground and sows the crop, he can have no harvest, and no wealth.

So with the owner of the quarry or the kelp-shore, unless labour is bestowed in obtaining and preparing the produce of nature, there will be no wealth, and therefore labour might perhaps be called the source from which their wealth flowed. But is all the VALUE of the product due to Labour? That is, have they no value beyond the labour bestowed upon them? We have seen most clearly that Smith expressly admits that these products have a value in excess of the cost of producing them. Hence, in these, and in numerous other cases, there is a very considerable part of the value of the product which can by no possibility be said to be due to labour. And whence does this value arise? Simply from the Intensity of the Demand and the Limitation of the Supply. Now, if there were no Demand for the product it would not be wealth, however much labour had been bestowed upon it. But where there is a demand it is wealth. Hence it is clear that Demand is the sole essence of all value, and that Labour is only the accident. It is clear that the product has not value because labour has been bestowed upon it, but labour is bestowed upon it because it has value. As Condillac says, things have not great value because they have cost much, but people bestow much cost upon them because they have great value; and Whately says that pearls have not a high price because people dive for them, but people dive for them because they have a high value, i. e., people will give a great deal to possess them. So timber trees and cattle have a value, though no labour was ever bestowed on them A diamond picked up by chance has precisely the same value as if it had been found after a year's labour. And this shews the entire absurdity of McCulloch's doctrine that the products of the earth are always destitute of value. For that would mean that no one would give anything to possess them before labour has been bestowed upon them: a doctrine so absurd that it requires no refutation. Hence we see that all Value depends exclusively on the Demand and the Supply of the product, quite independently of the labour bestowed upon it. Hence it is not Labour which is the cause of Value; but Value which is the inducement to Labour, as we have so often inculcated: and all changes in Value arise from variations in the Intensity of Demand or the Limitation of Supply and all Profit arises from the Demand for the product being so great, and the Supply so limited, that its Value exceeds its cost.

: