Forthebetterillustrationoftheprinciple，letusputthefollowingcase。Aconsumermayexpendhisincomeeitherinbuyingservices，orcommodities。Hemayemploypartofitinhiringjourneymenbricklayerstobuildahouse，orexcavatorstodigartificiallakes，orlabourerstomakeplantationsandlayoutpleasuregrounds;or，insteadofthis，hemayexpendthesamevalueinbuyingvelvetandlace。Thequestionis，whetherthedifferencebetweenthesetwomodesofexpendinghisincomeaffectstheinterestofthelabouringclasses。Itisplainthatinthefirstofthetwocasesheemployslabourers，whowillbeoutofemployment，oratleastoutofthatemployment，intheoppositecase。ButthosefromwhomIdiffersaythatthisisofnoconsequence，becauseinbuyingvelvetandlaceheequallyemployslabourers，namely，thosewhomakethevelvetandlace。I
contend，however，thatinthislastcasehedoesnotemploylabourers;butmerelydecidesinwhatkindofworksomeotherpersonshallemploythem。Theconsumerdoesnotwithhisownfundspaytotheweaversandlacemakerstheirday’swages。Hebuysthefinishedcommodity，whichhasbeenproducedbylabourandcapital，thelabournotbeingpaidnorthecapitalfurnishedbyhim，butbythemanufacturer。Supposethathehadbeeninthehabitofexpendingthisportionofhisincomeinhiringjourneymenbricklayers，wholaidouttheamountoftheirwagesinfoodandclothing，whichwerealsoproducedbylabourandcapital。He，however，determinestoprefervelvet，forwhichhethuscreatesanextrademand。Thisdemandcannotbesatisfiedwithoutanextrasupply，norcanthesupplybeproducedwithoutanextracapital:where，then，isthecapitaltocomefrom？Thereisnothingintheconsumer’schangeofpurposewhichmakesthecapitalofthecountrygreaterthanitotherwisewas。Itappears，then，thattheincreaseddemandforvelvetcouldnotforthepresentbesupplied，wereitnotthattheverycircumstancewhichgaverisetoithassetatlibertyacapitaloftheexactamountrequired。Theverysumwhichtheconsumernowemploysinbuyingvelvet，formerlypassedintothehandsofjourneymenbricklayers，whoexpendeditinfoodandnecessaries，whichtheynoweithergowithout，orsqueezebytheircompetition，fromthesharesofotherlabourers。Thelabourandcapital，therefore，whichformerlyproducednecessariesfortheuseofthesebricklayers，aredeprivedoftheirmarket，andmustlookoutforotheremployment;andtheyfinditinmakingvelvetforthenewdemand。
Idonotmeanthattheverysamelabourandcapitalwhichproducedthenecessariesturnthemselvestoproducingthevelvet;
but，insomeoneorotherofahundredmodes，theytaketheplaceofthatwhichdoes。Therewascapitalinexistencetodooneoftwothingstomakethevelvet，ortoproducenecessariesforthejourneymenbricklayers;butnottodoboth。Itwasattheoptionoftheconsumerwhichofthetwoshouldhappen;andifhechoosesthevelvet，theygowithoutthenecessaries。
Forfurtherillustration，letussupposethesamecasereversed。Theconsumerhasbeenaccustomedtobuyvelvet，butresolvestodiscontinuethatexpense，andtoemploythesameannualsuminhiringbricklayers。Ifthecommonopinionbecorrect，thischangeinthemodeofhisexpendituregivesnoadditionalemploymenttolabour，butonlytransfersemploymentfromvelvet—makerstobricklayers。Oncloserinspection，however，itwillbeseenthatthereisanincreaseofthetotalsumappliedtotheremunerationoflabour。Thevelvetmanufacturer，supposinghimawareofthediminisheddemandforhiscommodity，diminishestheproduction，andsetsatlibertyacorrespondingportionofthecapitalemployedinthemanufacture。Thiscapital，thuswithdrawnfromthemaintenanceofvelvet—makers，isnotthesamefundwiththatwhichthecustomeremploysinmaintainingbricklayers;itisasecondfund。Thereare，therefore，twofundstobeemployedinthemaintenanceandremunerationoflabour，wherebeforetherewasonlyone。Thereisnotatransferofemploymentfromvelvet—makerstobricklayers;thereisanewemploymentcreatedforbricklayers，andatransferofemploymentfromvelvet—makerstosomeotherlabourers，mostprobablythosewhoproducethefoodandotherthingswhichthebricklayersconsume。
Inanswertothisitissaid，thatthoughmoneylaidoutinbuyingvelvetisnotcapital，itreplacesacapital;thatthoughitdoesnotcreateanewdemandforlabour，itisthenecessarymeansofenablingtheexistingdemandtobekeptup。Thefunds（itmaybesaid）ofthemanufacturer，whilelockedupinvelvet，cannotbedirectlyappliedtothemaintenanceoflabour;theydonotbegintoconstituteademandforlabouruntilthevelvetissold，andthecapitalwhichmadeitreplacedfromtheoutlayofthepurchaser;andthus，itmaybesaid，thevelvet—makerandthevelvet—buyerhavenottwocapitals，butonlyonecapitalbetweenthem，whichbytheactofpurchasethebuyertransferstothemanufacturer，andifinsteadofbuyingvelvethebuyslabour，hesimplytransfersthiscapitalelsewhere，extinguishingasmuchdemandforlabourinonequarterashecreatesinanother。
Thepremisesofthisargumentarenotdenied。Tosetfreeacapitalwhichwouldotherwisebelockedupinaformuselessforthesupportoflabour，is，nodoubt，thesamethingtotheinterestsoflabourersasthecreationofanewcapital。ItisperfectlytruethatifIexpend1000l。inbuyingvelvet，Ienablethemanufacturertoemploy1000l。inthemaintenanceoflabour，whichcouldnothavebeensoemployedwhilethevelvetremainedunsold:andifitwouldhaveremainedunsoldforeverunlessI
boughtit，thenbychangingmypurpose，andhiringbricklayersinstead，Iundoubtedlycreatenonewdemandforlabour:forwhileIemploy1000l。inhiringlabourontheonehand，Iannihilateforever1000l。ofthevelvet—maker’scapitalontheother。Butthisisconfoundingtheeffectsarisingfromthemeresuddennessofachangewiththeeffectsofthechangeitself。Ifwhenthebuyerceasedtopurchase，thecapitalemployedinmakingvelvetforhisusenecessarilyperished，thenhisexpendingthesameamountinhiringbricklayerswouldbenocreation，butmerelyatransfer，ofemployment。TheincreasedemploymentwhichIcontendisgiventolabour，wouldnotbegivenunlessthecapitalofthevelvet—makercouldbeliberated，andwouldnotbegivenuntilitwasliberated。Buteveryoneknowsthatthecapitalinvestedinanemploymentcanbewithdrawnfromit，ifsufficienttimebeallowed。Ifthevelvet—makerhadpreviousnotice，bynotreceivingtheusualorder，hewillhaveproduced1000l。lessvelvet，andanequivalentportionofhiscapitalwillhavebeenalreadysetfree。Ifhehadnopreviousnotice，andthearticleconsequentlyremainsonhishands，theincreaseofhisstockwillinducehimnextyeartosuspendordiminishhisproductionuntilthesurplusiscaRedoff。Whenthisprocessiscomplete，themanufacturerwillfindhimselfasrichasbefore，withundiminishedpowerofemployinglabouringeneral，thoughaportionofhiscapitalwillnowbeemployedinmaintainingsomeotherkindofit。Untilthisadjustmenthastakenplace，thedemandforlabourwillbemerelychanged，notincreased:butassoonasithastakenplace，thedemandforlabourisincreased。
Wheretherewasformerlyonlyonecapitalemployedinmaintainingweaverstomake1000l。worthofvelvet，thereisnowthatsamecapitalemployedinmakingsomethingelse，and1000l。distributedamongbricklayersbesides。Therearenowtwocapitalsemployedinremuneratingtwosetsoflabourers;whilebefore，oneofthosecapitals，thatofthecustomer，onlyservedasawheelinthemachinerybywhichtheothercapital，thatofthemanufacturer，carriedonitsemploymentoflabourfromyeartoyear。
ThepropositionforwhichIamcontendingisinrealityequivalenttothefollowing，whichtosomemindswillappearatruism，thoughtoothersitisaparadox:thatapersondoesgoodtolabourers，notbywhatheconsumesonhimself，butsolelybywhathedoesnotsoconsume。Ifinsteadoflayingout100l。inwineorsilk，Iexpenditinwages，thedemandforcommoditiesispreciselyequalinbothcases:intheone，itisademandfor100l。worthofwineorsilk，intheother，forthesamevalueofbread，beer，labourers’clothing，fuel，andindulgences:butthelabourersofthecommunityhaveinthelattercasethevalueof100l。moreoftheproduceofthecommunitydistributedamongthem。Ihaveconsumedthatmuchless，andmadeovermyconsumingpowertothem。Ifitwerenotso，myhavingconsumedlesswouldnotleavemoretobeconsumedbyothers;whichisamanifestcontradiction。Whenlessisnotproduced，whatonepersonforbearstoconsumeisnecessarilyaddedtotheshareofthosetowhomhetransfershispowerofpurchase。InthecasesupposedI
donotnecessarilyconsumelessultimately，sincethelabourerswhomIpaymaybuildahouseforme，ormakesomethingelseformyfutureconsumption。ButIhaveatalleventspostponedmyconsumption，andhaveturnedoverpartofmyshareofthepresentproduceofthecommunitytothelabourers。IfafteranintervalI
amindemnified，itisnotfromtheexistingproduce，butfromasubsequentadditionmadetoit。Ihavethereforeleftmoreoftheexistingproducetobeconsumedbyothers;andhaveputintothepossessionoflabourersthepowertoconsumeit。
TherecannotbeabetterreductioadabsurdumoftheoppositedoctrinethanthataffordedbythePoorLaw。IfitbeequallyforthebenefitofthelabouringclasseswhetherIconsumemymeansintheformofthingspurchasedformyownuse，orsetasideaportionintheshapeofwagesoralmsfortheirdirectconsumption，onwhatgroundcanthepolicybejustifiedoftakingmymoneyfrommetosupportpaupers？sincemyunproductiveexpenditurewouldhaveequallybenefitedthem，whileIshouldhaveenjoyedittoo。Ifsocietycanbotheatitscakeandhaveit，whyshoulditnotbeallowedthedoubleindulgence？Butcommonsensetellseveryoneinhisowncase（thoughhedoesnotseeitonthelargerscale），thatthepoorratewhichhepaysisreallysubtractedfromhisownconsumption，andthatnoshiftingofpaymentbackwardsandforwardswillenabletwopersonstoeatthesamefood。Ifhehadnotbeenrequiredtopaytherate，andhadconsequentlylaidouttheamountonhimself，thepoorwouldhavehadasmuchlessfortheirshareofthetotalproduceofthecountry，ashehimselfwouldhaveconsumedmore。（4*）
Itappears，then，thatademanddelayeduntiltheworkiscompleted，andfurnishingnoadvances，butonlyreimbursingadvancesmadebyothers，contributesnothingtothedemandforlabour;andthatwhatissoexpended，is，inallitseffects，sofarasregardstheemploymentofthelabouringclass，amerenullity;itdoesnotandcannotcreateanyemploymentexceptattheexpenseofotheremploymentwhichexistedbefore。
Butthoughademandforvelvetdoesnothingmoreinregardtotheemploymentforlabourandcapital，thantodeterminesomuchoftheemploymentwhichalreadyexisted，intothatparticularchannelinsteadofanyother;still，totheproducersalreadyengagedinthevelvetmanufacture，andnotintendingtoquitit，thisisoftheutmostimportance。Tothem，afallingoffinthedemandisarealloss，andonewhich，evenifnoneoftheirgoodsfinallyperishunsold，maymounttoanyheight，uptothatwhichwouldmakethemchoose，asthesmallerevil，toretirefromthebusiness。Onthecontrary，anincreaseddemandenablesthemtoextendtheirtransactions——tomakeaprofitonalargercapital，iftheyhaveit，orcanborrowit;and，turningovertheircapitalmorerapidly，theywillemploytheirlabourersmoreconstantly，oremployagreaternumberthanbefore。Sothatanincreaseddemandforacommoditydoesreally，intheparticulardepartment，oftencauseagreateremploymenttobegiventolabourbythesamecapital。Themistakeliesinnotperceivingthatinthecasessupposed，thisadvantageisgiventolabourandcapitalinonedepartment，onlybybeingwithdrawnfromanother;
andthatwhenthechangehasproduceditsnaturaleffectofattractingintotheemploymentadditionalcapitalproportionaltotheincreaseddemand，theadvantageitselfceases。
Thegroundsofaproposition，whenwellunderstood，usuallygiveatolerableindicationofthelimitationsofit。Thegeneralprinciple，nowstated，isthatdemandforcommoditiesDeterminesmerelythedirectionoflabour，andthekindofwealthproduced，butnotthequantityorefficiencyofthelabour，ortheaggregateofwealth。Buttothistherearetwoexceptions。First，whenlabourissupported，butnotfullyoccupied，anewdemandforsomethingwhichitcanproduce，maystimulatethelabourthussupportedtoincreasedexertions，ofwhichtheresultmaybeanincreaseofwealth，totheadvantageofthelabourersthemselvesandofothers。Workwhichcanbedoneinthesparehoursofpersonssubsistedfromsomeothersource，can（asbeforeremarked）beundertakenwithoutwithdrawingcapitalfromotheroccupations，beyondtheamount（oftenverysmall）requiredtocovertheexpenseoftoolsandmaterials，andeventhiswilloftenbeprovidedbysavingsmadeexpresslyforthepurpose。Thereasonofourtheoremthusfailing，thetheoremitselffails，andemploymentofthiskindmay，bythespringingupofademandforthecommodity，becalledintoexistencewithoutdeprivinglabourofanequivalentamountofemploymentinanyotherquarter。Thedemanddoesnot，eveninthiscase，operateonlabouranyotherwisethanthroughthemediumofanexistingcapital，butitaffordsaninducementwhichcausesthatcapitaltosetinmotionagreateramountoflabourthanitdidbefore。
Thesecondexception，ofwhichIshallspeakatlengthinasubsequentchapter，consistsintheknowneffectofanextensionofthemarketforacommodity，inrenderingpossibleanincreaseddevelopmentofthedivisionoflabour，andhenceamoreeffectivedistributionoftheproductiveforcesofsociety。This，liketheformer，ismoreanexception。inappearancethanitisinreality。Itisnotthemoneypaidbythepurchaser，whichremuneratesthelabour;itisthecapitaloftheproducer:thedemandonlydeterminesinwhatmannerthatcapitalshallbeemployed，andwhatkindoflabouritshallremunerate;butifitdeterminesthatthecommodityshallbeproducedonalargescale，itenablesthesamecapitaltoproducemoreofthecommodity，andmaybyanindirecteffectincausinganincreaseofcapital，produceaneventualincreaseoftheremunerationofthelabourer。
Thedemandforcommoditiesisaconsiderationofimportanceratherinthetheoryofexchange，thaninthatofproduction。
Lookingatthingsintheaggregate，andpermanently，theremunerationoftheproducerisderivedfromtheproductivepowerofhisowncapital。Thesaleoftheproduceformoney，andthesubsequentexpenditureofthemoneyinbuyingothercommodities，areamereexchangeofequivalentvaluesformutualaccommodation。Itistruethat，thedivisionofemploymentsbeingoneoftheprincipalmeansofincreasingtheproductivepoweroflabour，thepowerofexchanginggivesrisetoagreatincreaseoftheproduce;buteventhenitisproduction，notexchange，whichremunerateslabourandcapital。Wecannottoostrictlyrepresenttoourselvestheoperationofexchange，whetherconductedbybarterorthroughthemediumofmoney，asthemeremechanismbywhicheachpersontransformstheremunerationofhislabourorofhiscapitalintotheparticularshapeinwhichitismostconvenienttohimtopossessit;butinnowisethesourceoftheremunerationitself。
10。Theprecedingprinciplesdemonstratethefallacyofmanypopularargumentsanddoctrines，whicharecontinuallyreproducingthemselvesinnewforms。Forexample，ithasbeencontended，andbysomefromwhombetterthingsmighthavebeenexpected，thattheargumentfortheincome—tax，groundedonitsfallingonthehigherandmiddleclassesonly，andsparingthepoor，isanerror;somehavegonesofarastosay，animposture;
becauseintakingfromtherichwhattheywouldhaveexpendedamongthepoor，thetaxinjuresthepoorasmuchasifithadbeendirectlyleviedfromthem。Ofthisdoctrinewenowknowwhattothink。Sofar，indeed，aswhatistakenfromtherichintaxes，would，ifnotsotaken，havebeensavedandconvertedintocapital，orevenexpendedinthemaintenanceandwagesofservantsorofanyclassofunproductivelabourers，tothatextentthedemandforlabourisnodoubtdiminished，andthepoorinjuriouslyaffected，bythetaxontherich;andastheseeffectsarealmostalwaysproducedinagreaterorlessdegree，itisimpossiblesototaxtherichasthatnoportionwhateverofthetaxcanfallonthepoor。Butevenherethequestionarises，whetherthegovernment，afterreceivingtheamount，willnotlayoutasgreataportionofitinthedirectpurchaseoflabour，asthetaxpayerswouldhavedone。Inregardtoallthatportionofthetax，which，ifnotpaidtothegovernment，wouldhavebeenconsumedintheformofcommodities（orevenexpendedinservicesifthepaymenthasbeenadvancedbyacapitalist），this，accordingtotheprincipleswehaveinvestigated，fallsdefinitivelyontherich，andnotatallonthepoor。Thereisexactlythesamedemandforlabour，sofarasthisportionisconcerned，afterthetax，asbeforeit。Thecapitalwhichhithertoemployedthelabourersofthecountry，remains，andisstillcapableofemployingthesamenumber。Thereisthesameamountofproducepaidinwages，orallottedtodefraythefeedingandclothingoflabourers。
IfthoseagainstwhomIamnowcontendingwereintheright，itwouldbeimpossibletotaxanybodyexceptthepoor。Ifitistaxingthelabourers，totaxwhatislaidoutintheproduceoflabour，thelabouringclassespayallthetaxes。Thesameargument，however，equallyproves，thatitisimpossibletotaxthelabourersatall;sincethetax，beinglaidouteitherinlabourorincommodities，comesallbacktothem;sothattaxationhasthesingularproperoffallingonnobody。Onthesameshowing，itwoulddothelabourersnoharmtotakefromthemalltheyhave，anddistributeitamongtheothermembersofthecommunity。Itwouldallbe"spentamongthem，"whichonthistheorycomestothesamething。Theerrorisproducedbynotlookingdirectlyattherealitiesofthephenomena，butattendingonlytotheoutwardmechanismofpayingandspending。Ifwelookattheeffectsproducednotonthemoney，whichmerelychangeshands，butonthecommoditieswhichareusedandconsumed，weseethat，inconsequenceoftheincome—tax，theclasseswhopayitdoreallydiminishtheirconsumption。Exactlysofarastheydothis，theyarethepersonsonwhomthetaxfalls。Itisdefrayedoutofwhattheywouldotherwisehaveusedandenjoyed。Sofar，ontheotherhand，astheburthenfalls，notonwhattheywouldhaveconsumed，butonwhattheywouldhavesavedtomaintainproduction，orspentinmaintainingorpayingunproductivelabourers，tothatextentthetaxformsadeductionfromwhatwouldhavebeenusedandenjoyedbythelabouringclasses。Butifthegovernment，asisprobablythefact，expendsfullyasmuchoftheamountasthetax—payerswouldhavedoneinthedirectemploymentoflabour，asinhiringsailors，soldiers，andpolicemen，orinpayingoffdebt，bywhichlastoperationitevenincreasescapital;thelabouringclassesnotonlydonotloseanyemploymentbythetax，butmaypossiblygainsome，andthewholeofthetaxfallsexclusivelywhereitwasintended。
Allthatportionoftheproduceofthecountrywhichanyone，notalabourer，actuallyandliterallyconsumesforhisownuse，doesnotcontributeinthesmallestdegreetothemaintenanceoflabour。Nooneisbenefitedbymereconsumption，exceptthepersonwhoconsumes。Andapersoncannotbothconsumehisincomehimself，andmakeitovertobeconsumedbyothers。Takingawayacertainportionbytaxationcannotdeprivebothhimandthemofit，butonlyhimorthem。Toknowwhichisthesufferer，wemustunderstandwhoseconsumptionwillhavetoberetrenchedinconsequence:this，whoeveritbe，isthepersononwhomthetaxreallyfalls。
NOTES:
1。Anexceptionmustbeadmittedwhentheindustrycreatedorupheldbytherestrictivelawbelongstotheclassofwhatarecalleddomesticmanufactures。Thesebeingcarriedonbypersonsalreadyfed——bylabouringfamilies，intheintervalsofotheremployment——notransferofcapitaltotheoccupationisnecessarytoitsbeingundertaken，beyondthevalueofthematerialsandtools，whichisofteninconsiderable。If，therefore，aprotectingdutycausesthisoccupationtobecarriedon，whenitotherwisewouldnot，thereisinthiscasearealincreaseoftheproductionofthecountry。
Inordertorenderourtheoreticalpropositioninvulnerable，thispeculiarcasemustbeallowedfor;butitdoesnottouchthepracticaldoctrineoffreetrade。Domesticmanufacturescannot，fromtheverynatureofthings，requireprotection，sincethesubstanceofthelabourersbeingprovidedfromothersources，thepriceoftheproduct，howevermuchitmaybereduced，isnearlyallcleargain。If，therefore，thedomesticproducersretirefromthecompetition，itisneverfromnecessity，butbecausetheproductisnotworththelabouritcosts，intheopinionofthebestjudges，thosewhoenjoytheoneandundergotheother。Theypreferthesacrificeofbuyingtheirclothingtothelabourofmakingit。Theywillnotcontinuetheirlabourunlesssocietywillgivethemmoreforit，thaninthierownopinionitsproductisworth。
2。Itisworthwhiletodirectattentiontoseveralcircumstanceswhichtoacertainextentdiminishthedetrimentcausedtothegeneralwealthbytheprodigalityofindividuals，orraiseupacompensation，moreorlessample，asaconsequenceofthedetrimentitself。Oneoftheseis，thatspendthriftsdonotusuallysucceedinconsumingalltheyspend。Theirhabitualcarelessnessastoexpenditurecausesthemtobecheatedandrobbedonallquarters，oftenbypersonsoffrugalhabits。Largeaccumulationsarecontinuallymadebyagents，stewards，andevendomesticservants，ofimprovidentpersonsoffortune;andtheypaymuchhigherpricesforallpurchasesthanpeopleofcarefulhabits，whichaccountsfortheirbeingpopularascustomers。Theyare，therefore，acutallynotabletogetintotheirpossessionanddestroyaquantityofwealthbyanymeansequivalenttothefortunewhichtheydissipate。Muchofitismerelytransferredtoothers，bywhomapartmaybesaved。Anotherthingtobeobservedis，thattheprodigalityofsomemayreduceotherstoaforcedeconomy。Supposeasuddendemandforsomearticleofluxury，causedbythecapriceofaprodigal，whichnothavingbeencalculatedonbeforehand，therehasbeennoincreaseoftheusualsupply。Thepricewillrise;andmayrisebeyondthemeansortheinclinationsofsomeofthehabitualconsumers，whomayinconsequenceforegotheiraccustomedindulgence，andsavetheamount。Iftheydonot，butcontinuetoexpendasgreatavalueasbeforeonthecommodity，thedealersinitobtain，foronlythesamequantityofthearticle，areturnincreasedbythewholeofwhatthespendthrifthaspaid;andthustheamountwhichhelosesistransferredbodilytothem，andmaybeaddedtotheircapital;hisincreasedpersonalconsumptionbeingmadeupbytheprivationsoftheotherpurchasers，whohaveobtainedlessthanusualoftheiraccustomedgratificationforthesameequivalent。
Ontheotherhand，acounter—processmustbegoingonsomewhere，sincetheprodigalmusthavediminishedhispurchasesinsomeotherquartertobalancetheaugmentationinthis;hehasperhapscalledinfundsemployedinsustainingproductivelabour，andthedealersinsubsistenceandintheinstrumentsofproductionhavehadcommoditiesleftontheirhands，orhavereceived，fortheusualamountofcommodities，alessthanusualreturn。Butsuchlossesofincomeorcapital，byindustriouspersons，exceptwhenofextraordinaryamount，aregenerallymadeupbyincreasingpinchingandprivation;sothatthecapitalofthecommunitymaynotbe，onthewhole，impaired，andtheprodigalmayhavehadhisself—indulgenceattheexpensenotofthepermanentresources，butofthetemporarypleasuresandcomfortsofothers。Forineverycasethecommunityarepoorerbywhatanyonespends，unlessothersareinconsequenceledtocurtailtheirspending。
Thereareyetotherandmorereconditewaysinwhichtheprofusionofsomemaybringaboutitscompensationintheextrasavingsofothers;butthesecanonlybeconsideredinthatpartoftheFourthBook，whichtreatsofthelimitingprincipletotheaccumulationofcapital。
3。Ontheotherhand，itmustberememberedthatwarabstractsfromproductiveemploymentnotonlycapital，butlikewiselabourers;thatthefundswithdrawnfromtherenumerationofproductivelabourersarepartlyemployedinpayingthesameorotherindividualsforunproductivelabour;andthatbythisportionofitseffects，warexpenditureactsinpreciselytheoppositemannertothatwhichDr。Chalmerspointsout，and，sofarasitgoes，directlycounteractstheeffectsdescribedinthetext。Sofaraslabourersaretakenfromproduction，tomanthearmyandnavy，thelabouringclassesarenotdamaged，thecapitalistsarenotbenefited，andthegeneralproduceofthecountryisdiminished，bywarexpenditure。Accordingly，Dr。
Chalmers’sdoctrine，thoughtrueofthiscountry，iswhollyinapplicabletocountriesdifferentlycircumstanced;toFrance，forexample，duringtheNapoleonwars。AtthatperiodthedraughtonthelabouringpopulationofFrance，foralongseriesofyears，wasenormous，whilethefundswhichsupportedthewarweremostlysuppliedbycontributionsleviedonthecountriesoverrunbytheFrencharms，averysmallproportionaloneconsistingofFrenchcapital。InFrance，accordingly，thewagesoflabourdidnotfall，butrose;theemployersoflabourwerenotbenefited，butinjured;whilethewealthofthecountrywasimpairedbythesuspensionortotallossofsovastanamountofitsproductivelabour。InEnglandallthiswasreversed。Englandemployedcomparativelyfewadditionalsoldiersandsailorsofherown，whileshedivertedhundredsofmillionsofcapitalfromproductiveemployment，tosupplymunitionsofwarandsupportarmiesforherContinentalallies。Consequently，asshowninthetext，herlabourerssuffered，hercapitalistsprospered，andherpermanentproductiveresourcesdidnotfalloff。
4。Thefollowingcase，whichpresentstheargumentinasomewhatdifferentshape，mayserveforstillfurtherillustration。
Supposethatarichindividual，A，expendsacertainamountdailyinwagesoralms，which，assoonasreceived，isexpendedandconsumed，intheformofcoarsefood，bythereceivers。A
dies，leavinghispropertytoB，whodiscontinuesthisitemofexpenditure，andexpendsinlieuofitthesamesumeachdayindelicaciesforhisowntable，Ihavechosenthissupposition，inorderthtthetwocasesmaybesimilarinalltheircircumstances，exceptthatwhichisthesubjectofcomparison。Inordernottoobscuretheessentialfactsofthecasebyexhibitingthemthroughthehazymediumofamoneytransaction，letusfurthersupposethatA，andBafterhim，arelandlordsoftheestateonwhichboththefoodconsumedbytherecipientsofA’sdisbursements，andthearticlesofluxurysuppliedforB’stable，areproduced;andthattheirrentispaidtotheminkind，theygivingpreviousnoticewhatdescriptionofproducetheyshallrequire。Thequestionis，whetherB’sexpendituregivesasmuchemploymentorasmuchfoodtohispoorerneighboursasA’sgave。
Fromthecaseasstated，itseemstofollowthatwhileA
lived，thatportionofhisincomewhichheexpendedinwagesoralms，wouldbedrawnbyhimfromthefarmintheshapeoffoodforlabourers，andwouldbeusedassuch;whileB，whocameafterhim，wouldrequire，insteadofthis，anequivalentvalueinexpensivearticlesoffood，tobeconsumedinhisownhousehold:
thatthefarmer，therefore，would，underB’sregime，producethatmuchlessofordinaryfood，andmoreofexpensivedelicacies，foreachdayoftheyear，thanwasproducedinA’stime，andthattherewouldbethatamountlessoffoodshared，throughouttheyear，amongthelabouringandpoorerclasses。Thisiswhatwouldbeconformabletotheprincipleslaiddowninthetext。Thosewhothinkdifferently，must，ontheotherhand，supposethattheluxuriesrequiredbyBwouldbeproduced，notinsteadof，butinadditionto，thefoodpreviouslysuppliedtoA’slabourers，andthattheaggregateproduceofthecountrywouldbeincreasedinamount。Butwhenitisasked，howthisdoubleproductionwouldbeeffected，wouldbeenabledtosupplythenewwantsofB，withoutproducinglessofotherthings;theonlymodewhichpresentsitselfis，thatheshouldfirstproducethefood，andthen，givingthatfoodtothelabourerswhomAformerlyfed，shouldbymeansoftheirlabour，producetheluxurieswantedbyB。Thisaccordingly，whentheobjectorsarehardpressed，appearstobereallytheirmeaning。Butitisanobviousanswer，thatonthissupposition，Bmustwaitforhisluxuriestillthesecondyear，andtheyarewantedthisyear。Bytheoriginalhypothesis，heconsumeshisluxuriousdinnerdaybyday，paripassuwiththerationsofbreadandpotatoesformerlyservedoutbyAtohislabourers。Thereisnottimetofeedthelabourersfirst，andsupplyBafterwards:heandtheycannotbothhavetheirwantsministeredto:hecanonlysatisfyhisowndemandforcommodities，byleavingasmuchoftheirs，aswasformerlysuppliedfromthatfund，unsatisfied。
Itmay，indeed，berejoinedbyanobjector，thatsince，onthepresentshowing，timeistheonlythingwantingtorendertheexpenditureofBconsistentwithaslargeanemploymenttolabouraswasgivenbyA，whymaywenotsupposethatBpostponeshisincreasedconsumptionofpersonalluxuriesuntiltheycanbefurnishedtohimbythelabourofthepersonswhomAemployed？Inthatcase，itmaybesaid，hewouldemployandfeedasmuchlabourashispredecessors。Undoubtedlyhewould;butwhy？
Becausehisincomewouldbeexpendedinexactlythesamemannerashispredecessor’s;itwouldbeexpendedinwages。Areservedfromhispersonalconsumptionafundwhichhepaidawaydirectlytolabourers;Bdoesthesame，onlyinsteadofpayingittothemhimself，heleavesinthehandsofthefarmer，whopaysittothemforhim。Onthissupposition，B，inthefirstyear，neitherexpendingtheamount，asfarasheispersonallyconcerned，inA’smannernorinhisown，reallysavesthatportionofhisincome，andlendsittothefarmer。Andif，insubsequentyears，confininghimselfwithintheyear’sincome，heleavesthefarmerinarrearstothatamount，itbecomesanadditionalcapital，withwhichthefarmermaypermanentlyemployandfeedA’slabourers。
Nobodypretendsthatsuchachangeasthis，achangefromspendinganincomeinwagesoflabour，tosavingitforinvestment，deprivesanylabourersofemployment。Whatisaffirmedtohavethateffectis，thechangefromhiringlabourerstobuyingcommoditiesforpersonaluse;asrepresentedbyouroriginalhypothesis。
Inourillustrationwehavesupposednobuyingandselling，oruseofmoney。Butthecaseaswehaveputit，correspondswithactualfactineverythingexceptthedetailsofthemechanism。
Thewholeofanycountryisvirtuallyasinglefarmandmanufactory，fromwhicheverymemberofthecommunitydrawshisappointedshareoftheproduce，havingacertainnumberofcounters，calledpoundssterling，putintohishands，which，athisconvenience，hebringsbackandexchangesforsuchgoodsasheprefers，uptothelimitoftheamount。Hedoesnot，asinourimaginarycase，givenoticebeforehandwhatthingsheshallrequire;butthedealersandproducersarequitecapableoffindingitoutbyobservation，andanychangeinthedemandispromptlyfollowedbyanadaptationofthesupplytoit。Ifaconsumerchangesfrompayingawayapartofhisincomeinwages，tospendingitthatsameday（notsomesubsequentanddistantday）inthingsforhisownconsumption，andperseveresinthisalteredpracticeuntilproductionhashadtimetoadaptitselftothealterationofdemand，therewillfromthattimebelessfoodandotherarticlesfortheuseoflabourers，producedinthecountry，byexactlythevalueoftheextraluxuriesnowdemanded;
andthelabourers，asaclass，willbeworseoffbythepreciseamount。
ThePrinciplesofPoliticalEconomy
byJohnStuartMill
Book1，Chapter6
OnCirculatingandFixedCapital
1。Tocompleteourexplanationsonthesubjectofcapital，it
isnecessarytosaysomethingofthetwospeciesintowhichitis
usuallydivided。Thedistinctionisveryobvious，andthoughnot
named，hasbeenoftenadvertedto，inthetwoprecedingchapters:
butitisnowpropertodefineitaccurately，andtopointouta
fewofitsconsequences。
Ofthecapitalengagedintheproductionofanycommodity，
thereisapartwhich，afterbeingonceused，existsnolongeras
capital;isnolongercapableofrenderingservicetoproduction，
oratleastnotthesameservice，nortothesamesortof
production。Such，forexample，istheportionofcapitalwhich
consistsofmaterials。Thetallowandalkaliofwhichsoapis
made，onceusedinthemanufacture，aredestroyedasalkaliand
tallow;andcannotbeemployedanyfurtherinthesoap
manufacture，thoughintheiralteredcondition，assoap，theyare
capableofbeingusedasamaterialoraninstrumentinother
branchesofmanufacture。Inthesamedivisionmustbeplacedthe
portionofcapitalwhichispaidasthewages，orconsumedasthe
subsistence，oflabourers。Thepartofthecapitalofa
cottonspinnerwhichhepaysawaytohiswork—people，onceso
paid，existsnolongerashiscapital，orasacotton—spinner’s
capital:suchportionofitastheworkmenconsume，nolonger
existsascapitalatall:eveniftheysaveanypart，itmaynow
bemoreproperlyregardedasafreshcapital，theresultofa
secondactofaccumulation。Capitalwhichinthismannerfulfils
thewholeofitsofficeintheproductioninwhichitisengaged，
byasingleuse，iscalledCirculatingCapital。Theterm，which
isnotveryappropriate，isderivedfromthecircumstance，that
thisportionofcapitalrequirestobeconstantlyrenewedbythe
saleofthefinishedproduct，andwhenrenewedisperpetually
partedwithinbuyingmaterialsandpayingwages;sothatitdoes
itswork，notbybeingkept，butbychanginghands。
Anotherlargeportionofcapital，however，consistsin
instrumentsofproduction，ofamoreorlesspermanentcharacter;
whichproducetheireffectnotbybeingpartedwith，butbybeing
kept;andtheefficacyofwhichisnotexhaustedbyasingleuse。
Tothisclassbelongbuildings，machinery，andallormostthings
knownbythenameofimplementsortools。Thedurabilityofsome
oftheseisconsiderable，andtheirfunctionasproductive
instrumentsisprolongedthroughmanyrepetitionsofthe
productiveoperation。Inthisclassmustlikewisebeincluded
capitalsunk（astheexpressionis）inpermanentimprovementsof
land。Soalsothecapitalexpendedonceforall，inthe
commencementofanundertaking，topreparethewayforsubsequent
operations:theexpenseofopeningamine，forexample:of
cuttingcanals，ofmakingroadsordocks。Otherexamplesmightbe
added，butthesearesufficient。Capitalwhichexistsinanyof
thesedurableshapes，andthereturntowhichisspreadovera
periodofcorrespondingduration，iscalledFixedCapital。
Offixedcapital，somekindsrequiretobeoccasionallyor
periodicallyrenewed。Suchareallimplementsandbuildings:they
require，atintervals，partialrenewalbymeansofrepairs，and
areatlastentirelywornout，andcannotbeofanyfurther
serviceasbuildingsandimplements，butfallbackintotheclass
ofmaterials。Inothercases，thecapitaldoesnot，unlessasa
consequenceofsomeunusualaccident，requireentirerenewal:but
thereisalwayssomeoutlayneeded，eitherregularlyoratleast
occasionally，tokeepitup。Adockoracanal，oncemade，does
notrequire，likeamachine，tobemadeagain，unlesspurposely
destroyed，orunlessanearthquakeorsomesimilarcatastrophe
hasfilleditup:butregularandfrequentoutlaysarenecessary
tokeepitinrepair。Thecostofopeningamineneedsnotbe
incurredasecondtime;butunlesssomeonegoestotheexpense
ofkeepingthemineclearofwater，itissoonrendereduseless。
Themostpermanentofallkindsoffixedcapitalisthatemployed
ingivingincreasedproductivenesstoanaturalagent，suchas
land。ThedrainingofmarshyorinundatedtractsliketheBedford
Level，thereclaimingoflandfromthesea，oritsprotectionby
embankments，areimprovementscalculatedforperpetuity;but
drainsanddykesrequirefrequentrepairs。Thesamecharacterof
perpetuitybelongstotheimprovementoflandbysubsoil
draining，whichaddssomuchtotheproductivenessoftheclay
soils;orbypermanentmanures，thatis，bytheadditiontothe
soil，notofthesubstanceswhichenterintothecompositionof
vegetables，andwhicharethereforeconsumedbyvegetation，but
ofthosewhichmerelyaltertherelationofthesoiltoairand
water;assandandlimeontheheavysoils，clayandmarlonthe
light。Evensuchworks，however，requiresome，thoughitmaybe
verylittle，occasionaloutlaytomaintaintheirfulleffect。
Theseimprovements，however，bytheveryfactoftheir
deservingthattitle，produceanincreaseofreturn，which，after
defrayingallexpenditurenecessaryforkeepingthemup，still
leavesasurplus。Thissurplusformsthereturntothecapital
sunkinthefirstinstance，andthatreturndoesnot，asinthe
caseofmachinery，terminatebythewearingoutofthemachine，
butcontinuesforever。Theland，thusincreasedin
productiveness，bearsavalueinthemarket，proportionaltothe
increase:andhenceitisusualtoconsiderthecapitalwhichwas
invested，orsunk，inmakingtheimprovement，asstillexisting
intheincreasedvalueoftheland。Theremustbenomistake，
however。Thecapital，likeallothercapital，hasbeenconsumed。
Itwasconsumedinmaintainingthelabourerswhoexecutedthe
improvement，andinthewearandtearofthetoolsbywhichthey
wereassisted。Butitwasconsumedproductively，andhaslefta
permanentresultintheimprovedproductivenessofan
appropriatednaturalagent，theland。Wemaycalltheincreased
producethejointresultofthelandandofacapitalfixedin
theland。Butasthecapital，havinginrealitybeenconsumed，
cannotbewithdrawn，itsproductivenessisthenceforth
indissolublyblendedwiththatarisingfromtheoriginal
qualitiesofthesoil;andtheremunerationfortheuseofit
thenceforthdepends，notuponthelawswhichgovernthereturns
tolabourandcapital，butuponthosewhichgoverntherecompense
fornaturalagents。Whattheseare，weshallseehereafter。（1*）
2。Thereisagreatdifferencebetweentheeffectsof
circulatingandthoseoffixedcapital，ontheamountofthe
grossproduceofthecountry。Circulatingcapitalbeingdestroyed
assuch，oratanyratefinallylosttotheowner，byasingle
use;andtheproductresultingfromthatoneusebeingtheonly
sourcefromwhichtheownercanreplacethecapital，orobtain
anyremunerationforitsproductiveemployment;theproductmust
ofcoursebesufficientforthosepurposes，orinotherwords，
theresultofasingleusemustbeareproductionequaltothe
wholeamountofthecirculatingcapitalused，andaprofit
besides。This，however，isbynomeansnecessaryinthecaseof
fixedcapital。Sincemachinery，forexample，isnotwholly
consumedbyoneuse，itisnotnecessarythatitshouldbewholly
replacedfromtheproductofthatuse。Themachineanswersthe
purposeofitsownerifitbringsin，duringeachintervalof
time，enoughtocovertheexpenseofrepairs，andthe
deteriorationinvaluewhichthemachinehassustainedduringthe
sametime，withasurplussufficienttoyieldtheordinaryprofit
ontheentirevalueofthemachine。
Fromthisitfollowsthatallincreaseoffixedcapital，when
takingplaceattheexpenseofcirculating，mustbe，atleast
temporarily，prejudicialtotheinterestsofthelabourers。This
istrue，notofmachineryalone，butofallimprovementsbywhich
capitalissunk;thatis，renderedpermanentlyincapableofbeing
appliedtothemaintenanceandremunerationoflabour。Suppose
thatapersonfarmshisownland，withacapitaloftwothousand
quartersofcorn，employedinmaintaininglabourersduringone
year（forsimplicityweomittheconsiderationofseedand
tools），whoselabourproduceshimannuallytwothousandfour
hundredquarters，beingaprofitoftwentypercent。Thisprofit
weshallsupposethatheannuallyconsumes，carryingonhis
operationsfromyeartoyearontheoriginalcapitaloftwo
thousandquarters。Letusnowsupposethatbytheexpenditureof
halfhiscapitalheeffectsapermanentimprovementofhisland，
whichisexecutedbyhalfhislabourers，andoccupiesthemfora
year，afterwhichhewillonlyrequire，fortheeffectual
cultivationofhisland，halfasmanylabourersasbefore。The
remainderofhiscapitalheemploysasusual。Inthefirstyear
thereisnodifferenceintheconditionofthelabourers，except
thatpartofthemhavereceivedthesamepayforanoperationon
theland，whichtheypreviouslyobtainedforploughing，sowing，
andreaping。Attheendoftheyear，however，theimproverhas
not，asbefore，acapitaloftwothousandquartersofcorn。Only
onethousandquartersofhiscapitalhavebeenreproducedinthe
usualway:hehasnowonlythosethousandquartersandhis
improvement。Hewillemploy，inthenextandineachfollowing
year，onlyhalfthenumberoflabourers，andwilldivideamong
themonlyhalftheformerquantityofsubsistence。Thelosswill
soonbemadeuptothemiftheimprovedland，withthediminished
quantityoflabour，producestwothousandfourhundredquarters
asbefore，becausesoenormousanaccessionofgainwillprobably
inducetheimprovertosaveapart，addittohiscapital，and
becomealargeremployeroflabour。Butitisconceivablethat
thismaynotbethecase;for（supposing，aswemaydo，thatthe
improvementwilllastindefinitely，withoutanyoutlayworth
mentioningtokeepitup）theimproverwillhavegainedlargely
byhisimprovementifthelandnowyields，nottwothousandfour
hundred，butonethousandfivehundredquarters;sincethiswill
replacetheonethousandquartersforminghispresentcirculating
capital，withaprofitoftwenty—fivepercent（insteadoftwenty
asbefore）onthewholecapital，fixedandcirculatingtogether。
Theimprovement，therefore，maybeaveryprofitableonetohim，
andyetveryinjurioustothelabourers。
Thesupposition，inthetermsinwhichithasbeenstated，is
purelyideal;oratmostapplicableonlytosuchacaseasthat
oftheconversionofarablelandintopasture，which，though
formerlyafrequentpractice，isregardedbymodern
agriculturistsasthereverseofanimprovement。（2*）Butthis
doesnotaffectthesubstanceoftheargument。Supposethatthe
improvementdoesnotoperateinthemannersupposed——doesnot
enableapartofthelabourpreviouslyemployedonthelandtobe
dispensedwith——butonlyenablesthesamelabourtoraisea
greaterproduce。Suppose，too，thatthegreaterproduce，whichby
meansoftheimprovementcanberaisedfromthesoilwiththe
samelabour，isallwanted，andwillfindpurchasers。The
improverwillinthatcaserequirethesamenumberoflabourers
asbefore，atthesamewages。Butwherewillhefindthemeansof
payingthem？Hehasnolongerhisoriginalcapitaloftwo
thousandquartersdisposableforthepurpose。Onethousandof
themarelostandgone——consumedinmakingtheimprovement。If
heistoemployasmanylabourersasbefore，andpaythemas
highly，hemustborrow，orobtainfromsomeothersource，a
thousandquarterstosupplythedeficit。Butthesethousand
quartersalreadymaintained，orweredestinedtomaintain，an
equivalentquantityoflabour。Theyarenotafreshcreation;
theirdestinationisonlychangedfromoneproductiveemployment
toanother;andthoughtheagriculturisthasmadeupthe
deficiencyinhisowncirculatingcapital，thebreachinthe
circulatingcapitalofthecommunityremainsunrepaired。
Theargumentreliedonbymostofthosewhocontendthat
machinerycanneverbeinjurioustothelabouringclass，is，that
bycheapeningproductionitcreatessuchanincreaseddemandfor
thecommodity，asenables，erelong，agreaternumberofpersons
thanevertofindemploymentinproducingit。Thisargumentdoes
notseemtometohavetheweightcommonlyascribedtoit。The
fact，thoughtoobroadlystated，is，nodoubt，oftentrue。The
copyistswhowerethrownoutofemploymentbytheinventionof
printing，weredoubtlesssoonoutnumberedbythecompositorsand
pressmenwhotooktheirplace;andthenumberoflabouring
personsnowoccupiedinthecottonmanufactureismanytimes
greaterthanweresooccupiedpreviouslytotheinventionsof
HargreavesandArkwright，whichshowsthatbesidestheenormous
fixedcapitalnowembarkedinthemanufacture，italsoemploysa
farlargercirculatingcapitalthanatanyformertime。Butif
thiscapitalwasdrawnfromotheremployments;ifthefundswhich
tooktheplaceofthecapitalsunkincostlymachinery，were
suppliednotbyanyadditionalsavingconsequentonthe
improvements，butbydraftsonthegeneralcapitalofthe
community。whatbetterwerethelabouringclassesforthemere
transfer？Inwhatmannerwasthelosstheysustainedbythe
conversionofcirculatingintofixedcapitalmadeuptothembya
mereshiftingofpartoftheremainderofthecirculatingcapital
fromitsoldemploymentstoanewone？
Allattemptstomakeoutthatthelabouringclassesasa
collectivebodycannotsuffertemporarilybytheintroductionof
machinery，orbythesinkingofcapitalinpermanent
improvements，are，Iconceive，necessarilyfallacious。Thatthey
wouldsufferintheparticulardepartmentofindustrytowhich
thechangeapplies，isgenerallyadmitted，andobvioustocommon
sense;butitisoftensaid，thatthoughemploymentiswithdrawn
fromlabourinonedepartment，anexactlyequivalentemployment
isopenedforitinothers，becausewhattheconsumerssavein
theincreasedcheapnessofoneparticulararticleenablesthemto
augmenttheirconsumptionofothers，therebyincreasingthe
demandforotherkindsoflabour。Thisisplausible，but，aswas
showninthelastchapter，involvesafallacy;demandfor
commoditiesbeingatotallydifferentthingfromdemandfor
labour。Itistrue，theconsumershavenowadditionalmeansof
buyingotherthings;butthiswillnotcreatetheotherthings，
unlessthereiscapitaltoproducethem，andtheimprovementhas
notsetatlibertyanycapital，ifevenithasnotabsorbedsome
fromotheremployments。Thesupposedincreaseofproductionand
ofemploymentforlabourinotherdepartmentsthereforewillnot
takeplace;andtheincreaseddemandforcommoditiesbysome
consumers，willbebalancedbyacessationofdemandonthepart
ofothers，namely，thelabourerswhoweresupersededbythe
improvement，andwhowillnowbemaintained，ifatall，by
sharing，eitherinthewayofcompetitionorofcharity，inwhat
waspreviouslyconsumedbyotherpeople。