Theannualproduceofthelandandlabourofanynationcanbeincreasedinitsvaluebynoothermeansbutbyincreasingeitherthenumberofitsproductivelabourers，ortheproductivepowersofthoselabourerswhohadbeforebeenemployed。Thenumberofitsproductivelabourers，itisevident，canneverbemuchincreased，butinconsequenceofanincreaseofcapital，orofthefundsdestinedformaintainingthem。Theproductivepowersofthesamenumberoflabourerscannotbeincreased，butinconsequenceeitherofsomeadditionandimprovementtothosemachinesandinstrumentswhichfacilitateandabridgelabour;orofamoreproperdivisionanddistributionofemployment。Ineithercaseanadditionalcapitalisalmostalwaysrequired。Itisbymeansofanadditionalcapitalonlythattheundertakerofanyworkcaneitherprovidehisworkmenwithbettermachineryormakeamoreproperdistributionofemploymentamongthem。Whentheworktobedoneconsistsofanumberofparts，tokeepeverymanconstantlyemployedinonewayrequiresamuchgreatercapitalthanwhereeverymanisoccasionallyemployedineverydifferentpartofthework。Whenwecompare，therefore，thestateofanationattwodifferentperiods，andfind，thattheannualproduceofitslandandlabourisevidentlygreateratthelatterthanattheformer，thatitslandsarebettercultivated，itsmanufacturesmorenumerousandmoreflourishing，anditstrademoreextensive，wemaybeassuredthatitscapitalmusthaveincreasedduringtheintervalbetweenthosetwoperiods，andthatmoremusthavebeenaddedtoitbythegoodconductofsomethanhadbeentakenfromiteitherbytheprivatemisconductofothersorbythepublicextravaganceofgovernment。Butweshallfindthistohavebeenthecaseofalmostallnations，inalltolerablyquietandpeaceabletimes，evenofthosewhohavenotenjoyedthemostprudentandparsimoniousgovernments。Toformarightjudgmentofit，indeed，wemustcomparethestateofthecountryatperiodssomewhatdistantfromoneanother。Theprogressisfrequentlysogradualthat，atnearperiods，theimprovementisnotonlynotsensible，butfromthedeclensioneitherofcertainbranchesofindustry，orofcertaindistrictsofthecountry，thingswhichsometimeshappenthoughthecountryingeneralbeingreatprosperity，therefrequentlyarisesasuspicionthattherichesandindustryofthewholearedecaying。
　　TheannualproduceofthelandandlabourofEngland，forexample，iscertainlymuchgreaterthanitwas，alittlemorethanacenturyago，attherestorationofCharlesII。Though，atpresent，fewpeople，Ibelieve，doubtofthis，yetduringthisperiod，fiveyearshaveseldompassedawayinwhichsomebookorpamphlethasnotbeenpublished，written，too，withsuchabilitiesastogainsomeauthoritywiththepublic，andpretendingtodemonstratethatthewealthofthenationwasfastdeclining，thatthecountrywasdepopulated，agricultureneglected，manufacturesdecaying，andtradeundone。Norhavethesepublicationsbeenallpartypamphlets，thewretchedoffspringoffalsehoodandvenality。Manyofthemhavebeenwrittenbyverycandidandveryintelligentpeople，whowrotenothingbutwhattheybelieved，andfornootherreasonbutbecausetheybelievedit。
　　TheannualproduceofthelandandlabourofEngland，again，wascertainlymuchgreaterattheRestoration，thanwecansupposeittohavebeenaboutanhundredyearsbefore，attheaccessionofElizabeth。Atthisperiod，too，wehaveallreasontobelieve，thecountrywasmuchmoreadvancedinimprovementthanithadbeenaboutacenturybefore，towardsthecloseofthedissensionsbetweenthehousesofYorkandLancaster。Eventhenitwas，probably，inabetterconditionthanithadbeenattheNormanConquest，andattheNormanConquestthanduringtheconfusionoftheSaxonHeptarchy。Evenatthisearlyperiod，itwascertainlyamoreimprovedcountrythanattheinvasionofJuliusCaesar，whenitsinhabitantswerenearlyinthesamestatewiththesavagesinNorthAmerica。
　　Ineachofthoseperiods，however，therewasnotonlymuchprivateandpublicprofusion，manyexpensiveandunnecessarywars，greatperversionoftheannualproducefrommaintainingproductivetomaintainunproductivehands;butsometimes，intheconfusionofcivildiscord，suchabsolutewasteanddestructionofstock，asmightbesupposed，notonlytoretard，asitcertainlydid，thenaturalaccumulationofriches，buttohaveleftthecountry，attheendoftheperiod，poorerthanatthebeginning。Thus，inthehappiestandmostfortunateperiodofthemall，thatwhichhaspassedsincetheRestoration，howmanydisordersandmisfortuneshaveoccurred，which，couldtheyhavebeenforeseen，notonlytheimpoverishment，butthetotalruinofthecountrywouldhavebeenexpectedfromthem？ThefireandtheplagueofLondon，thetwoDutchwars，thedisordersoftheRevolution，thewarinIreland，thefourexpensiveFrenchwarsof1688，1702，1742，and1756，togetherwiththetworebellionsof1715and1745。InthecourseofthefourFrenchwars，thenationhascontractedmorethanahundredandforty—fivemillionsofdebt，overandabovealltheotherextraordinaryannualexpensewhichtheyoccasioned，sothatthewholecannotbecomputedatlessthantwohundredmillions。Sogreatashareoftheannualproduceofthelandandlabourofthecountryhas，sincetheRevolution，beenemployedupondifferentoccasionsinmaintaininganextraordinarynumberofunproductivehands。Buthadnotthosewarsgiventhisparticulardirectiontosolargeacapital，thegreaterpartofitwouldnaturallyhavebeenemployedinmaintainingproductivehands，whoselabourwouldhavereplaced，withaprofit，thewholevalueoftheirconsumption。Thevalueoftheannualproduceofthelandandlabourofthecountrywouldhavebeenconsiderablyincreasedbyiteveryyear，andeveryyear’sincreasewouldhaveaugmentedstillmorethatofthefollowingyear。Morehouseswouldhavebeenbuilt，morelandswouldhavebeenimproved，andthosewhichhadbeenimprovedbeforewouldhavebeenbettercultivated，moremanufactureswouldhavebeenestablished。andthosewhichhadbeenestablishedbeforewouldhavebeenmoreextended;andtowhatheighttherealwealthandrevenueofthecountrymight，bythistime，havebeenraised，itisnotperhapsveryeasyeventoimagine。
　　Butthoughtheprofusionofgovernmentmust，undoubtedly，haveretardedthenaturalprogressofEnglandtowardswealthandimprovement，ithasnotbeenabletostopit。Theannualproduceofitslandandlabouris，undoubtedly，muchgreateratpresentthanitwaseitherattheRestorationorattheRevolution。Thecapital，therefore，annuallyemployedincultivatingthisland，andinmaintainingthislabour，mustlikewisebemuchgreater。Inthemidstofalltheexactionsofgovernment，thiscapitalhasbeensilentlyandgraduallyaccumulatedbytheprivatefrugalityandgoodconductofindividuals，bytheiruniversal，continual，anduninterruptedefforttobettertheirowncondition。Itisthiseffort，protectedbylawandallowedbylibertytoexertitselfinthemannerthatismostadvantageous，whichhasmaintainedtheprogressofEnglandtowardsopulenceandimprovementinalmostallformertimes，andwhich，itistobehoped，willdosoinallfuturetimes。England，however，asithasneverbeenblessedwithaveryparsimoniousgovernment，soparsimonyhasatnotimebeenthecharacteristicalvirtueofitsinhabitants。Itisthehighestimpertinenceandpresumption，therefore，inkingsandministers，topretendtowatchovertheeconomyofprivatepeople，andtorestraintheirexpense，eitherbysumptuarylaws，orbyprohibitingtheimportationofforeignluxuries。Theyarethemselvesalways，andwithoutanyexception，thegreatestspendthriftsinthesociety。Letthemlookwellaftertheirownexpense，andtheymaysafelytrustprivatepeoplewiththeirs。Iftheirownextravagancedoesnotruinthestate，thatoftheirsubjectsneverwill。
　　Asfrugalityincreasesandprodigalitydiminishesthepubliccapital，sotheconductofthosewhoseexpensejustequalstheirrevenue，withouteitheraccumulatingorencroaching，neitherincreasesnordiminishesit。Somemodesofexpense，however，seemtocontributemoretothegrowthofpublicopulencethanothers。
　　Therevenueofanindividualmaybespenteitherinthingswhichareconsumedimmediately，andinwhichoneday’sexpensecanneitheralleviatenorsupportthatofanother，oritmaybespentinthingsmoredurable，whichcanthereforebeaccumulated，andinwhicheveryday’sexpensemay，ashechooses，eitheralleviateorsupportandheightentheeffectofthatofthefollowingday。Amanoffortune，forexample，mayeitherspendhisrevenueinaprofuseandsumptuoustable，andinmaintainingagreatnumberofmenialservants，andamultitudeofdogsandhorses;orcontentinghimselfwithafrugaltableandfewattendants，hemaylayoutthegreaterpartofitinadorninghishouseorhiscountryvilla，inusefulorornamentalbuildings，inusefulorornamentalfurniture，incollectingbooks，statues，pictures;orinthingsmorefrivolous，jewels，baubles，ingenioustrinketsofdifferentkinds;or，whatismosttriflingofall，inamassingagreatwardrobeoffineclothes，likethefavouriteandministerofagreatprincewhodiedafewyearsago。Weretwomenofequalfortunetospendtheirrevenue，theonechieflyintheoneway，theotherintheother，themagnificenceofthepersonwhoseexpensehadbeenchieflyindurablecommodities，wouldbecontinuallyincreasing，everyday’sexpensecontributingsomethingtosupportandheightentheeffectofthatofthefollowingday:thatoftheother，onthecontrary，wouldbenogreaterattheendoftheperiodthanatthebeginning。Theformer，too，would，attheendoftheperiod，betherichermanofthetwo。Hewouldhaveastockofgoodsofsomekindorother，which，thoughitmightnotbeworthallthatitcost，wouldalwaysbeworthsomething。Notraceorvestigeoftheexpenseofthelatterwouldremain，andtheeffectsoftenortwentyyearsprofusionwouldbeascompletelyannihilatedasiftheyhadneverexisted。
　　Astheonemodeofexpenseismorefavourablethantheothertotheopulenceofanindividual，soisitlikewisetothatofanation。Thehouses，thefurniture，theclothingoftherich，inalittletime，becomeusefultotheinferiorandmiddlingranksofpeople。Theyareabletopurchasethemwhentheirsuperiorsgrowwearyofthem，andthegeneralaccommodationofthewholepeopleisthusgraduallyimproved，whenthismodeofexpensebecomesuniversalamongmenoffortune。Incountrieswhichhavelongbeenrich，youwillfrequentlyfindtheinferiorranksofpeopleinpossessionbothofhousesandfurnitureperfectlygoodandentire，butofwhichneithertheonecouldhavebeenbuilt，northeotherhavebeenmadefortheiruse。WhatwasformerlyaseatofthefamilyofSeymourisnowaninnupontheBathroad。Themarriage—bedofJamestheFirstofGreatBritain，whichhisqueenbroughtwithherfromDenmarkasapresentfitforasovereigntomaketoasovereign，was，afewyearsago，theornamentofanalehouseatDunfermline。Insomeancientcities，whicheitherhavebeenlongstationary，orhavegonesomewhattodecay，youwillsometimesscarcefindasinglehousewhichcouldhavebeenbuiltforitspresentinhabitants。Ifyougointothosehousestoo，youwillfrequentlyfindmanyexcellent，thoughantiquatedpiecesoffurniture，whicharestillveryfitforuse，andwhichcouldaslittlehavebeenmadeforthem。Noblepalaces，magnificentvillas，greatcollectionsofbooks，statues，picturesandothercuriosities，arefrequentlybothanornamentandanhonour，notonlytotheneighbourhood，buttothewholecountrytowhichtheybelong。VersaillesisanornamentandanhonourtoFrance，StoweandWiltontoEngland。Italystillcontinuestocommandsomesortofvenerationbythenumberofmonumentsofthiskindwhichitpossesses，thoughthewealthwhichproducedthemhasdecayed，andthoughthegeniuswhichplannedthemseemstobeextinguished，perhapsfromnothavingthesameemployment。
　　Theexpensetoo，whichislaidoutindurablecommodities，isfavourable，notonlytoaccumulation，buttofrugality。Ifapersonshouldatanytimeexceedinit，hecaneasilyreformwithoutexposinghimselftothecensureofthepublic。Toreduceverymuchthenumberofhisservants，toreformhistablefromgreatprofusiontogreatfrugality，tolaydownhisequipageafterhehasoncesetitup，arechangeswhichcannotescapetheobservationofhisneighbours，andwhicharesupposedtoimplysomeacknowledgmentofprecedingbadconduct。Few，therefore，ofthosewhohaveoncebeensounfortunateastolaunchouttoofarintothissortofexpense，haveafterwardsthecouragetoreform，tillruinandbankruptcyobligethem。Butifapersonhas，atanytime，beenattoogreatanexpenseinbuilding，infurniture，inbooksorpictures，noimprudencecanbeinferredfromhischanginghisconduct。Thesearethingsinwhichfurtherexpenseisfrequentlyrenderedunnecessarybyformerexpense;andwhenapersonstopsshort，heappearstodoso，notbecausehehasexceededhisfortune，butbecausehehassatisfiedhisfancy。
　　Theexpense，besides，thatislaidoutindurablecommoditiesgivesmaintenance，commonly，toagreaternumberofpeoplethanthatwhichisemployedinthemostprofusehospitality。Oftwoorthreehundredweightofprovisions，whichmaysometimesbeservedupatagreatfestival，onehalf，perhaps，isthrowntothedunghill，andthereisalwaysagreatdealwastedandabused。Butiftheexpenseofthisentertainmenthadbeenemployedinsettingtoworkmasons，carpenters，upholsterers，mechanics，etc。，aquantityofprovisions，ofequalvalue，wouldhavebeendistributedamongastillgreaternumberofpeoplewhowouldhaveboughttheminpennyworthsandpoundweights，andnothavelostorthrownawayasingleounceofthem。
　　Intheoneway，besides，thisexpensemaintainsproductive，intheotherunproductivehands。Intheoneway，therefore，itincreases，intheother，itdoesnotincrease，theexchangeablevalueoftheannualproduceofthelandandlabourofthecountry。
　　Iwouldnot，however，byallthisbeunderstoodtomeanthattheonespeciesofexpensealwaysbetokensamoreliberalorgenerousspiritthantheother。Whenamanoffortunespendshisrevenuechieflyinhospitality，hesharesthegreaterpartofitwithhisfriendsandcompanions;butwhenheemploysitinpurchasingsuchdurablecommodities，heoftenspendsthewholeuponhisownperson，andgivesnothingtoanybodywithoutanequivalent。Thelatterspeciesofexpense，therefore，especiallywhendirectedtowardsfrivolousobjects，thelittleornamentsofdressandfurniture，jewels，trinkets，gewgaws，frequentlyindicates，notonlyatrifling，butabaseandselfishdisposition。AllthatImeanis，thattheonesortofexpense，asitalwaysoccasionssomeaccumulationofvaluablecommodities，asitismorefavourabletoprivatefrugality，and，consequently，totheincreaseofthepubliccapital，andasitmaintainsproductive，ratherthanunproductivehands，conducesmorethantheothertothegrowthofpublicopulence。
　　CHAPTERIV
　　OfStockLentatInterestTHEstockwhichislentatinterestisalwaysconsideredasacapitalbythelender。Heexpectsthatinduetimeitistoberestoredtohim，andthatinthemeantimetheborroweristopayhimacertainannualrentfortheuseofit。Theborrowermayuseiteitherasacapital，orasastockreservedforimmediateconsumption。Ifheusesitasacapital，heemploysitinthemaintenanceofproductivelabourers，whoreproducethevaluewithaprofit。Hecan，inthiscase，bothrestorethecapitalandpaytheinterestwithoutalienatingorencroachinguponanyothersourceofrevenue。Ifheusesitasastockreservedforimmediateconsumption，heactsthepartofaprodigal，anddissipatesinthemaintenanceoftheidlewhatwasdestinedforthesupportoftheindustrious。Hecan，inthiscase，neitherrestorethecapitalnorpaytheinterestwithouteitheralienatingorencroachinguponsomeothersourceofrevenue，suchasthepropertyortherentofland。
　　Thestockwhichislentatinterestis，nodoubt，occasionallyemployedinboththeseways，butintheformermuchmorefrequentlythaninthelatter。Themanwhoborrowsinordertospendwillsoonberuined，andhewholendstohimwillgenerallyhaveoccasiontorepentofhisfolly。Toborrowortolendforsuchapurpose，therefore，isinallcases，wheregrossusuryisoutofthequestion，contrarytotheinterestofbothparties;andthoughitnodoubthappenssometimesthatpeopledoboththeoneandtheother;yet，fromtheregardthatallmenhavefortheirowninterest，wemaybeassuredthatitcannothappensoveryfrequentlyaswearesometimesapttoimagine。Askanyrichmanofcommonprudencetowhichofthetwosortsofpeoplehehaslentthegreaterpartofhisstock，tothosewho，hethinks，willemployitprofitably，ortothosewhowillspenditidly，andhewilllaughatyouforproposingthequestion。
　　Evenamongborrowers，therefore，notthepeopleintheworldmostfamousforfrugality，thenumberofthefrugalandindustrioussurpassesconsiderablythatoftheprodigalandidle。
　　Theonlypeopletowhomstockiscommonlylent，withouttheirbeingexpectedtomakeanyveryprofitableuseofit，arecountrygentlemenwhoborrowuponmortgage。Eventheyscarceeverborrowmerelytospend。Whattheyborrow，onemaysay，iscommonlyspentbeforetheyborrowit。Theyhavegenerallyconsumedsogreataquantityofgoods，advancedtothemuponcreditbyshopkeepersandtradesmen，thattheyfinditnecessarytoborrowatinterestinordertopaythedebt。Thecapitalborrowedreplacesthecapitalsofthoseshopkeepersandtradesmen，whichthecountrygentlemencouldnothavereplacedfromtherentsoftheirestates。Itisnotproperlyborrowedinordertobespent，butinordertoreplaceacapitalwhichhadbeenspentbefore。
　　Almostallloansatinterestaremadeinmoney，eitherofpaper，orofgoldandsilver。Butwhattheborrowerreallywants，andwhatthelenderreallysupplieshimwith，isnotthemoney，butthemoney’sworth，orthegoodswhichitcanpurchase。Ifhewantsitasastockforimmediateconsumption，itisthosegoodsonlywhichhecanplaceinthatstock。Ifhewantsitasacapitalforemployingindustry，itisfromthosegoodsonlythattheindustriouscanbefurnishedwiththetools，materials，andmaintenancenecessaryforcarryingontheirwork。Bymeansoftheloan，thelender，asitwere，assignstotheborrowerhisrighttoacertainportionoftheannualproduceofthelandandlabourofthecountrytobeemployedastheborrowerpleases。
　　Thequantityofstock，therefore，or，asitiscommonlyexpressed，ofmoneywhichcanbelentatinterestinanycountry，isnotregulatedbythevalueofthemoney，whetherpaperorcoin，whichservesastheinstrumentofthedifferentloansmadeinthatcountry，butbythevalueofthatpartoftheannualproducewhich，assoonasitcomeseitherfromtheground，orfromthehandsoftheproductivelabourers，isdestinednotonlyforreplacingacapital，butsuchacapitalastheownerdoesnotcaretobeatthetroubleofemployinghimself。Assuchcapitalsarecommonlylentoutandpaidbackinmoney，theyconstitutewhatiscalledthemoniedinterest。Itisdistinct，notonlyfromthelanded，butfromthetradingandmanufacturinginterests，asintheselasttheownersthemselvesemploytheirowncapitals。
　　Eveninthemoniedinterest，however，themoneyis，asitwere，butthedeedofassignment，whichconveysfromonehandtoanotherthosecapitalswhichtheownersdonotcaretoemploythemselves。Thosecapitalsmaybegreaterinalmostanyproportionthantheamountofthemoneywhichservesastheinstrumentoftheirconveyance;thesamepiecesofmoneysuccessivelyservingformanydifferentloans，aswellasformanydifferentpurchases。A，forexample，lendstoWathousandpounds，withwhichWimmediatelypurchasesofBathousandpounds’worthofgoods。Bhavingnooccasionforthemoneyhimself，lendstheidenticalpiecestoX，withwhichX
　　immediatelypurchasesofCanotherthousandpounds’worthofgoods。Cinthesamemanner，andforthesamereason，lendsthemtoY，whoagainpurchasesgoodswiththemofD。Inthismannerthesamepieces，eitherofcoinorpaper，mayinthecourseofafewdays，serveastheinstrumentofthreedifferentloans，andofthreedifferentpurchases，eachofwhichis，invalue，equaltothewholeamountofthosepieces。WhatthethreemoniedmenA，B，andCassigntothethreeborrowers，W，X，Y，isthepowerofmakingthosepurchases。Inthispowerconsistboththevalueandtheuseoftheloans。Thestocklentbythethreemoniedmenisequaltothevalueofthegoodswhichcanbepurchasedwithit，andisthreetimesgreaterthanthatofthemoneywithwhichthepurchasesaremade。Thoseloanshowever，maybeallperfectlywellsecured，thegoodspurchasedbythedifferentdebtorsbeingsoemployedas，induetime，tobringback，withaprofit，anequalvalueeitherofcoinorofpaper。Andasthesamepiecesofmoneycanthusserveastheinstrumentofdifferentloanstothree，orforthesamereason，tothirtytimestheirvalue，sotheymaylikewisesuccessivelyserveastheinstrumentofrepayment。
　　Acapitallentatinterestmay，inthismanner，beconsideredasanassignmentfromthelendertotheborrowersofacertainconsiderableportionoftheannualproduce;uponconditionthattheborrowerinreturnshall，duringthecontinuanceoftheloan，annuallyassigntothelenderasmallerportion，calledtheinterest;andattheendofitaportionequallyconsiderablewiththatwhichhadoriginallybeenassignedtohim，calledtherepayment。Thoughmoney，eithercoinorpaper，servesgenerallyasthedeedofassignmentbothtothesmallerandtothemoreconsiderableportion，itisitselfaltogetherdifferentfromwhatisassignedbyit。
　　Inproportionasthatshareoftheannualproducewhich，assoonasitcomeseitherfromtheground，orfromthehandsoftheproductivelabourers，isdestinedforreplacingacapital，increasesinanycountry，whatiscalledthemoniedinterestnaturallyincreaseswithit。Theincreaseofthoseparticularcapitalsfromwhichtheownerswishtoderivearevenue，withoutbeingatthetroubleofemployingthemthemselves，naturallyaccompaniesthegeneralincreaseofcapitals;or，inotherwords，asstockincreases，thequantityofstocktobelentatinterestgrowsgraduallygreaterandgreater。
　　Asthequantityofstocktobelentatinterestincreases，theinterest，orthepricewhichmustbepaidfortheuseofthatstock，necessarilydiminishes，notonlyfromthosegeneralcauseswhichmakethemarketpriceofthingscommonlydiminishastheirquantityincreases，butfromothercauseswhicharepeculiartothisparticularcase。Ascapitalsincreaseinanycountry，theprofitswhichcanbemadebyemployingthemnecessarilydiminish。
　　Itbecomesgraduallymoreandmoredifficulttofindwithinthecountryaprofitablemethodofemployinganynewcapital。Therearisesinconsequenceacompetitionbetweendifferentcapitals，theownerofoneendeavouringtogetpossessionofthatemploymentwhichisoccupiedbyanother。Butuponmostoccasionshecanhopetojostlethatotheroutofthisemploymentbynoothermeansbutbydealinguponmorereasonableterms。Hemustnotonlysellwhathedealsinsomewhatcheaper，butinordertogetittosell，hemustsometimes，too，buyitdearer。Thedemandforproductivelabour，bytheincreaseofthefundswhicharedestinedformaintainingit，growseverydaygreaterandgreater。
　　Labourerseasilyfindemployment，buttheownersofcapitalsfinditdifficulttogetlabourerstoemploy。Theircompetitionraisesthewagesoflabourandsinkstheprofitsofstock。Butwhentheprofitswhichcanbemadebytheuseofacapitalareinthismannerdiminished，asitwere，atbothends，thepricewhichcanbepaidfortheuseofit，thatis，therateofinterest，mustnecessarilybediminishedwiththem。
　　Mr。Locke，Mr。Law，andMr。Montesquieu，aswellasmanyotherwriters，seemtohaveimaginedthattheincreaseofthequantityofgoldandsilver，inconsequenceofthediscoveryoftheSpanishWestIndies，wastherealcauseoftheloweringoftherateofinterestthroughthegreaterpartofEurope。Thosemetals，theysay，havingbecomeoflessvaluethemselves，theuseofanyparticularportionofthemnecessarilybecameoflessvaluetoo，andconsequentlythepricewhichcouldbepaidforit。
　　Thisnotion，whichatfirstsightseemsplausible，hasbeensofullyexposedbyMr。Humethatitis，perhaps，unnecessarytosayanythingmoreaboutit。Thefollowingveryshortandplainargument，however，mayservetoexplainmoredistinctlythefallacywhichseemstohavemisledthosegentlemen。
　　BeforethediscoveryoftheSpanishWestIndies，tenpercentseemstohavebeenthecommonrateofinterestthroughthegreaterpartofEurope。Ithassincethattimeindifferentcountriessunktosix，five，four，andthreepercent。Letussupposethatineveryparticularcountrythevalueofsilverhassunkpreciselyinthesameproportionastherateofinterest;
　　andthatinthosecountries，forexample，whereinteresthasbeenreducedfromtentofivepercent，thesamequantityofsilvercannowpurchasejusthalfthequantityofgoodswhichitcouldhavepurchasedbefore。Thissuppositionwillnot，Ibelieve，befoundanywhereagreeabletothetruth，butitisthemostfavourabletotheopinionwhichwearegoingtoexamine;andevenuponthissuppositionitisutterlyimpossiblethattheloweringofthevalueofsilvercouldhavethesmallesttendencytolowertherateofinterest。Ifahundredpoundsareinthosecountriesnowofnomorevaluethanfiftypoundswerethen，tenpoundsmustnowbeofnomorevaluethanfivepoundswerethen。Whateverwerethecauseswhichloweredthevalueofthecapital，thesamemustnecessarilyhaveloweredthatoftheinterest，andexactlyinthesameproportion。Theproportionbetweenthevalueofthecapitalandthatoftheinterestmusthaveremainedthesame，thoughtheratehadbeenaltered。Byalteringtherate，onthecontrary，theproportionbetweenthosetwovaluesisnecessarilyaltered。Ifahundredpoundsnowareworthnomorethanfiftywerethen，fivepoundsnowcanbeworthnomorethantwopoundstenshillingswerethen。Byreducingtherateofinterest，therefore，fromtentofivepercent，wegivefortheuseofacapital，whichissupposedtobeequaltoonehalfofitsformervalue，aninterestwhichisequaltoonefourthonlyofthevalueoftheformerinterest。
　　Anyincreaseinthequantityofsilver，whilethatofthecommoditiescirculatedbymeansofitremainedthesame，couldhavenoothereffectthantodiminishthevalueofthatmetal。
　　Thenominalvalueofallsortsofgoodswouldbegreater，buttheirrealvaluewouldbepreciselythesameasbefore。Theywouldbeexchangedforagreaternumberofpiecesofsilver;butthequantityoflabourwhichtheycouldcommand，thenumberofpeoplewhomtheycouldmaintainandemploy，wouldbepreciselythesame。Thecapitalofthecountrywouldbethesame，thoughagreaternumberofpiecesmightberequisiteforconveyinganyequalportionofitfromonehandtoanother。Thedeedsofassignment，liketheconveyancesofaverboseattorney，wouldbemorecumbersome，butthethingassignedwouldbepreciselythesameasbefore，andcouldproduceonlythesameeffects。Thefundsformaintainingproductivelabourbeingthesame，thedemandforitwouldbethesame。Itspriceorwages，therefore，thoughnominallygreater，wouldreallybethesame。Theywouldbepaidinagreaternumberofpiecesofsilver;buttheywouldpurchaseonlythesamequantityofgoods。Theprofitsofstockwouldbethesamebothnominallyandreally。Thewagesoflabourarecommonlycomputedbythequantityofsilverwhichispaidtothelabourer。Whenthatisincreased，therefore，hiswagesappeartobeincreased，thoughtheymaysometimesbenogreaterthanbefore。Buttheprofitsofstockarenotcomputedbythenumberofpiecesofsilverwithwhichtheyarepaid，butbytheproportionwhichthosepiecesbeartothewholecapitalemployed。
　　Thusinaparticularcountryfiveshillingsaweekaresaidtobethecommonwagesoflabour，andtenpercentthecommonprofitsofstock。Butthewholecapitalofthecountrybeingthesameasbefore，thecompetitionbetweenthedifferentcapitalsofindividualsintowhichitwasdividedwouldlikewisebethesame。
　　Theywouldalltradewiththesameadvantagesanddisadvantages。
　　Thecommonproportionbetweencapitalandprofit，therefore，wouldbethesame，andconsequentlythecommoninterestofmoney;
　　whatcancommonlybegivenfortheuseofmoneybeingnecessarilyregulatedbywhatcancommonlybemadebytheuseofit。
　　Anyincreaseinthequantityofcommoditiesannuallycirculatedwithinthecountry，whilethatofthemoneywhichcirculatedthemremainedthesame，would，onthecontrary，producemanyotherimportanteffects，besidesthatofraisingthevalueofthemoney。Thecapitalofthecountry，thoughitmightnominallybethesame，wouldreallybeaugmented。Itmightcontinuetobeexpressedbythesamequantityofmoney，butitwouldcommandagreaterquantityoflabour。Thequantityofproductivelabourwhichitcouldmaintainandemploywouldbeincreased，andconsequentlythedemandforthatlabour。Itswageswouldnaturallyrisewiththedemand，andyetmightappeartosink。Theymightbepaidwithasmallerquantityofmoney，butthatsmallerquantitymightpurchaseagreaterquantityofgoodsthanagreaterhaddonebefore。Theprofitsofstockwouldbediminishedbothreallyandinappearance。Thewholecapitalofthecountrybeingaugmented，thecompetitionbetweenthedifferentcapitalsofwhichitwascomposedwouldnaturallybeaugmentedalongwithit。Theownersofthoseparticularcapitalswouldbeobligedtocontentthemselveswithasmallerproportionoftheproduceofthatlabourwhichtheirrespectivecapitalsemployed。Theinterestofmoney，keepingpacealwayswiththeprofitsofstock，might，inthismanner，begreatlydiminished，thoughthevalueofmoney，orthequantityofgoodswhichanyparticularsumcouldpurchase，wasgreatlyaugmented。
　　Insomecountriestheinterestofmoneyhasbeenprohibitedbylaw。Butassomethingcaneverywherebemadebytheuseofmoney，somethingoughteverywheretobepaidfortheuseofit。
　　Thisregulation，insteadofpreventing，hasbeenfoundfromexperiencetoincreasetheevilofusury;thedebtorbeingobligedtopay，notonlyfortheuseofthemoney，butfortheriskwhichhiscreditorrunsbyacceptingacompensationforthatuse。Heisobliged，ifonemaysayso，toinsurehiscreditorfromthepenaltiesofusury。
　　Incountrieswhereinterestispermitted，thelaw，inordertopreventtheextortionofusury，generallyfixesthehighestratewhichcanbetakenwithoutincurringapenalty。Thisrateoughtalwaystobesomewhatabovethelowestmarketprice，orthepricewhichiscommonlypaidfortheuseofmoneybythosewhocangivethemostundoubtedsecurity。Ifthislegalrateshouldbefixedbelowthelowestmarketrate，theeffectsofthisfixationmustbenearlythesameasthoseofatotalprohibitionofinterest。Thecreditorwillnotlendhismoneyforlessthantheuseofitisworth，andthedebtormustpayhimfortheriskwhichherunsbyacceptingthefullvalueofthatuse。Ifitisfixedpreciselyatthelowestmarketprice，itruinswithhonestpeople，whorespectthelawsoftheircountry，thecreditofallthosewhocannotgivetheverybestsecurity，andobligesthemtohaverecoursetoexorbitantusurers。Inacountry，suchasGreatBritain，wheremoneyislenttogovernmentatthreepercentandtoprivatepeopleuponagoodsecurityatfourandfourandahalf，thepresentlegalrate，fivepercent，isperhapsasproperasany。
　　Thelegalrate，itistobeobserved，thoughitoughttobesomewhatabove，oughtnottobemuchabovethelowestmarketrate。IfthelegalrateofinterestinGreatBritain，forexample，wasfixedsohighaseightortenpercent，thegreaterpartofthemoneywhichwastobelentwouldbelenttoprodigalsandprojectors，whoalonewouldbewillingtogivethishighinterest。Soberpeople，whowillgivefortheuseofmoneynomorethanapartofwhattheyarelikelytomakebytheuseofit，wouldnotventureintothecompetition。Agreatpartofthecapitalofthecountrywouldthusbekeptoutofthehandswhichweremostlikelytomakeaprofitableandadvantageoususeofit，andthrownintothosewhichweremostlikelytowasteanddestroyit。Wherethelegalrateofinterest，onthecontrary，isfixedbutaverylittleabovethelowestmarketrate，soberpeopleareuniversallypreferred，asborrowers，toprodigalsandprojectors。
　　Thepersonwholendsmoneygetsnearlyasmuchinterestfromtheformerashedarestotakefromthelatter，andhismoneyismuchsaferinthehandsoftheonesetofpeoplethaninthoseoftheother。Agreatpartofthecapitalofthecountryisthusthrownintothehandsinwhichitismostlikelytobeemployedwithadvantage。
　　Nolawcanreducethecommonrateofinterestbelowthelowestordinarymarketrateatthetimewhenthatlawismade。
　　Notwithstandingtheedictof1766，bywhichtheFrenchkingattemptedtoreducetherateofinterestfromfivetofourpercent，moneycontinuedtobelentinFranceatfivepercent，thelawbeingevadedinseveraldifferentways。
　　Theordinarymarketpriceofland，itistobeobserved，dependseverywhereupontheordinarymarketrateofinterest。Thepersonwhohasacapitalfromwhichhewishestoderivearevenue，withouttakingthetroubletoemployithimself，deliberateswhetherheshouldbuylandwithitorlenditoutatinterest。Thesuperiorsecurityofland，togetherwithsomeotheradvantageswhichalmosteverywhereattenduponthisspeciesofproperty，willgenerallydisposehimtocontenthimselfwithasmallerrevenuefromlandthanwhathemighthavebylendingouthismoneyatinterest。Theseadvantagesaresufficienttocompensateacertaindifferenceofrevenue;buttheywillcompensateacertaindifferenceonly;andiftherentoflandshouldfallshortoftheinterestofmoneybyagreaterdifference，nobodywouldbuyland，whichwouldsoonreduceitsordinaryprice。Onthecontrary，iftheadvantagesshouldmuchmorethancompensatethedifference，everybodywouldbuyland，whichagainwouldsoonraiseitsordinaryprice。Wheninterestwasattenpercent，landwascommonlysoldfortenandtwelveyears’purchase。Asinterestsunktosix，five，andfourpercent，thepriceoflandrosetotwenty，five—and—twenty，andthirtyyears’purchase。ThemarketrateofinterestishigherinFrancethaninEngland;andthecommonpriceoflandislower。InEnglanditcommonlysellsatthirty，inFranceattwentyyears’
　　purchase。
　　CHAPTERV
　　OftheDifferentEmploymentofCapitalsTHOUGHallcapitalsaredestinedforthemaintenanceofproductivelabouronly，yetthequantityofthatlabourwhichequalcapitalsarecapableofputtingintomotionvariesextremelyaccordingtothediversityoftheiremployment;asdoeslikewisethevaluewhichthatemploymentaddstotheannualproduceofthelandandlabourofthecountry。
　　Acapitalmaybeemployedinfourdifferentways:either，first，inprocuringtherudeproduceannuallyrequiredfortheuseandconsumptionofthesociety;or，secondly，inmanufacturingandpreparingthatrudeproduceforimmediateuseandconsumption;or，thirdly，intransportingeithertherudeormanufacturedproducefromtheplaceswheretheyaboundtothosewheretheyarewanted;or，lastly，individingparticularportionsofeitherintosuchsmallparcelsassuittheoccasionaldemandsofthosewhowantthem。Inthefirstwayareemployedthecapitalsofallthosewhoundertaketheimprovementorcultivationoflands，mines，orfisheries;inthesecond，thoseofallmastermanufacturers;inthethird，thoseofallwholesalemerchants;andinthefourth，thoseofallretailers。Itisdifficulttoconceivethatacapitalshouldbeemployedinanywaywhichmaynotbeclassedundersomeoneorotherofthosefour。
　　Eachofthesefourmethodsofemployingacapitalisessentiallynecessaryeithertotheexistenceorextensionoftheotherthree，ortothegeneralconveniencyofthesociety。
　　Unlessacapitalwasemployedinfurnishingrudeproducetoacertaindegreeofabundance，neithermanufacturesnortradeofanykindcouldexist。
　　Unlessacapitalwasemployedinmanufacturingthatpartoftherudeproducewhichrequiresagooddealofpreparationbeforeitcanbefitforuseandconsumption，iteitherwouldneverbeproduced，becausetherecouldbenodemandforit;orifitwasproducedspontaneously，itwouldbeofnovalueinexchange，andcouldaddnothingtothewealthofthesociety。