lender; and four or five per cent. may, in the greater part of trades, be both a sufficient profit upon the risk of this insurance, and a sufficient recompense for the trouble of employing the stock. But the proportion between interest and clear profit might not be the same in countries where the ordinary rate of profit was either a good deal lower, or a good deal higher. If it were a good deal lower, one half of it perhaps could not be afforded for interest; and more might be afforded if it were a good deal higher.

In countries which are fast advancing to riches, the low rate of profit may, in the price of many commodities, compensate the high wages of labour, and enable those countries to sell as cheap as their less thriving neighbours, among whom the wages of labour may be lower.

In reality high profits tend much more to raise the price of work than high wages. If in the linen manufacture, for example, the wages of the different working people, the flax-dressers, the spinners, the weavers, &c. should, all of them, be advanced twopence a day, it would be necessary to heighten the price of a piece of linen only by a number of twopences equal to the number of people that had been employed about it, multiplied by the number of days during which they had been so employed. That part of the price of the commodity which resolved itself into wages would, through all the different stages of the manufacture, rise only in arithmetical proportion to this rise of wages. But if the profits

of all the different employers of those working people should be raised five per cent. that part of the price of the commodity which resolved itself into profit would, through all the different stages of the manufacture, rise in geometrical proportion to this rise of profit. The employer of the flax-dressers would, in selling his flax, require an additional five per cent. upon the whole value of the materials and wages which he advanced to his workmen. The employer of the spinners would require an additional five per cent. both upon the advanced price of the flax and upon the wages of the spinners. And the employer of the weavers would require a like five per cent. both upon the advanced price of the linen yarn and upon the wages of the weavers. In raising the price of commodities, the rise of wages operates in the same manner as simple interest does in the accumulation of debt. The rise of profit operates like compound interest. Our merchants and master manufacturers complain much of the bad effects of high wages in raising the price, and thereby lessening the sale of their goods both at home and abroad. They say nothing concerning the bad effects of high profits. They are silent with regard to the pernicious effects of their own gains. They complain only of those of other people.

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NOTE

ON CHAPTERS VIII. AND IX., Book I.

As wages and profits are the terms by which we ex press the reward of labour and capital, as labour and capital obtain by way of reward certain shares of the produce which they raise, as either share of anything that is divided into two parts must necessarily be regulated by the other share, and as the absolute amount of one or other share, if not of both, must depend on the amount to be divided, the subjects of these two chapters appear so intimately connected, that I have thought it desirable to remark on them under one head.

Since the publication of the Wealth of Nations, two principles, or general truths, have been discovered, which as they throw new and most important light on the subject of wages and profits, must be noticed here, though briefly.

In the first place, it has been established that population has a tendency to double its numbers in little more than twenty years. Why, then, does not population everywhere increase at that rate? Because the means of subsistence cannot be increased at that rate. But why not? Because, speaking

generally, the land from which a society derives its subsistence is of limited extent; so that when all the best soils have been cultivated, more food cannot be obtained without resorting to inferior soils, which give a less return to capital and labour, or, if all the land be of the same quality, without employing on the land already cultivated more capital and labour which yield a smaller return. At length, through the continual increase of capital and people, all the land is cultivated which will return enough to provide a motive for cultivating it; or, if all the land be of the same quality, no more capital and labour can be applied to agriculture with a remunerating return. At this point the means of subsistence can be no further increased. But the tendency of population to increase remains as before. Thus there is a tendency in population to increase beyond the means of subsistence. This tendency has been called the Principle of Population.

In the next place, during the process by which a society arrives at the utmost limit to its supply of food, a circumstance occurs, by which the amount of that part of the produce of capital and labour which is divided between capitalists and labourers comes to be continually diminished. The owners of land, in a word, come to obtain a continually increasing portion of that produce. The continual increase of that share of the produce raised by capital and labour, which falls to the owners of land, will be explained by referring to what happens on one occasion when more capital and labour are em

ployed with a less return. In consequence of a certain increase of capital and people, capitalists are ready to invest their property with a smaller return. He who used to raise a hundred quarters of corn with a thousand pounds, is now ready to invest two thousand pounds in raising a hundred and fifty quarters. The second thousand pounds will produce only fifty quarters. But if one capitalist is content with fifty quarters as the return for a thousand pounds, competition will make all capitalists of the same mind with respect to all their capital; and their competition for the use of land will induce them to pay to the owner of land whatever return their capitals may bring above the ordinary rate of fifty quarters for a thousand pounds. Thus he who did employ a thousand pounds in raising a hundred quarters, will now raise a hundred and fifty quarters with two thousand pounds, and pay fifty quarters to the landlord. He will pay so much to the landlord, because, if he did not, some other would. This principle has been called the Theory of Rent.

The Principle of Population and the Theory of Rent acknowledge three elements of production; land, capital, and labour. By a strange oversight, some of the most distinguished writers on political economy have imagined that there are but two elements of production; capital and labour: and from this view of the subject they have drawn the following conclusion.

What shares, say they, of the produce of capital