[§ 7. What Circumstances regulate the Price of Commodities.]

Of every commodity there are two different prices, which though apparently independent, will be found to have a necessary connexion, viz. the natural price and the market price1. Both of these are regulated by certain circumstances. When men are induced to a certain species of industry, rather than any other2, they must make as Edition: current; Page: [174] much by the employment as will maintain them while they are employed. An arrow-maker must be sure to exchange as much surplus product as will maintain him during as long time as he took to make them. But upon this principle in the different trades there must be a considerable difference, because some trades, such as those of the tailor and weaver, are not learned by casual observation and a little experience, like that of the day-labourer, but take a great deal of time and pains before they are acquired. When a person begins them, for a considerable time his work is of no use to his master or any other person, and therefore his master must be compensated, both for what maintains him and for what he spoils. When he comes to exercise his trade, he must be repaid what he has laid out, both of expenses and of apprentice fee, and as his life is not worth above ten or twelve years’ purchase at most, his wages must be high on account of the risk he runs of not having the whole made up1. But again, there are many Edition: current; Page: [175] arts which require more extensive knowledge than is to be got during the time of an apprenticeship. A blacksmith and weaver may learn their business well enough without any previous knowledge of mathematics, but a watchmaker must be acquainted with several sciences in order to undertake his business well, such as arithmetic, geometry, and astronomy with regard to the equation of time, and their wages must be high in order to compensate the additional expense1. In general, this is the case in all the liberal arts, because after they have spent a long time in their education, it is ten to one if ever they make anything by it. Their wages therefore must be higher in proportion to the expense they have been at, the risk of not living long enough, and the risk of not having dexterity enough to manage their business. Among the lawyers there is not one among twenty that attains such knowledge and dexterity in his business as enables him to get back the expenses of his education, and many of them never make the price of their gown, as we say. The fees of lawyers are so far from being extravagant, as they are generally thought, that they are rather low in proportion. It is the eminence of the profession, and not the money made by it, that is the temptation for applying to it, and the dignity of that rank is to be considered as a part of what is made by it2.

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In the same manner we shall find that the price of gold and silver is not extravagant, if we consider it in this view, for in a gold or silver mine there is a great chance of missing it altogether. If we suppose an equal number of men employed in raising corn and digging silver, the former will make more than the latter, because perhaps of forty or fifty employed in a mine, only twenty make anything at all. Some of the rest may indeed make fortunes, but every corn man succeeds in his undertakings, so that upon the whole there is more made this way than the other. It is the ideal acquisition which is the principal temptation in a mine.

A man then has the natural price of his labour, when it is sufficient to maintain him during the time of labour, to defray the expense of education, and to compensate the risk of not living long enough, and of not succeeding in the business. When a man has this, there is sufficient encouragement to the labourer, and the commodity will be cultivated in proportion to the demand1.

The market price of goods is regulated by quite other circumstances. When a buyer comes to the market, he never asks of the seller what expenses he has been at in producing them. The regulation of the market price of goods depends on the three following articles:—

First, the demand, or need for the commodity. There is no demand for a thing of little use; it is not a rational object of desire.

Secondly, the abundance or scarcity of the commodity in proportion to the need of it. If the commodity be scarce, the price is raised, but if the quantity be more than is sufficient to supply the demand, the price falls. Thus it is that diamonds and other precious stones Edition: current; Page: [177] are dear, while iron, which is much more useful, is so many times cheaper, though this1 depends principally on the last cause, viz.:—

Thirdly, the riches or poverty of those who demand. When there is not enough produced to serve everybody, the fortune of the bidders is the only regulation of the price. The story which is told of the merchant and the carrier in the deserts of Arabia is an evidence of this. The merchant gave 10,000 ducats for a certain quantity of water. His fortune here regulated the price, for if he had not had them, he could not have given them, and if his fortune had been less, the water would have been cheaper. When the commodity is scarce, the seller must be content with that degree of wealth which they have who buy it. The case is much the same as in an auction. If two persons have an equal fondness for a book, he whose fortune is largest will carry it. Hence things that are very rare go always to rich countries. The King of France only could purchase that large diamond of so many thousand pounds value2. Upon this principle, everything is dearer or cheaper according as it is the purchase of a higher or lower set of people. Utensils of gold are comeatable only by persons in certain circumstances. Those of silver fall to another set of people, and their prices are regulated by what the majority can give. The prices of corn and beer are regulated by what all the world can give, and on this account the wages of the day-labourer have a great influence upon the price of corn. When the price of corn rises, wages rise also, and vice versa3; when the quantity of corn falls short, as in Edition: current; Page: [178] a sea-voyage, it always occasions a famine, and then the price becomes enormous. Corn then becomes the purchase of a higher set of people, and the lower must live on turnips and potatoes.

Thus we have considered the two prices, the natural and the market price, which every commodity is supposed to have. We observed before that however seemingly independent they appear to be, they are necessarily connected. This will appear from the following considerations. If the market price of any commodity is very great, and the labour very highly rewarded, the market is prodigiously crowded with it, greater quantities of it are produced, and it can be sold to the inferior ranks of people. If for every ten diamonds there were ten thousand, they would become the purchase of everybody, because they would become very cheap, and would sink to their natural price. Again, when the market is overstocked, and there is not enough got for the labour of the manufacture, nobody will bind to it, they cannot have a subsistence by it, because the market price falls then below the natural price. It is alleged that as the price of corn sink[s], the wages of the labourer should sink, as he is then better rewarded. It is true that if provisions were long cheap, as more people would flock to this labour where the wages are high, through this concurrence of labour, the wages would come down, but we find that when the price of corn is doubled, the wages continue the same as before, because the labourers have no other way to turn themselves. The same is the case with menial servants1.

From the above we may observe that whatever police tends to raise the market price above the natural, tends to diminish public opulence. Dearness and scarcity are in effect the same thing. When commodities are in abundance, they can be sold to the inferior ranks of people, who Edition: current; Page: [179] can afford to give less for them, but not if they are scarce. So far, therefore, as goods are a conveniency to the society, the society lives less happy when only the few can possess them. Whatever therefore keeps goods above their natural price for a permanency, diminishes [a] nation’s opulence. Such are

First, all taxes upon industry, upon leather, and upon shoes, which people grudge most, upon salt, beer, or whatever is the strong drink of the country, for no country wants1 some kind of it. Man is an anxious animal, and must have his care swept off by something that can exhilarate the spirits. It is alleged that this tax upon beer is an artificial security against drunkenness, but if we attend to it, [we will find] that it by no means prevents it. In countries where strong liquors are cheap, as in France and Spain, the people are generally sober, but in northern countries, where they are dear, they do not get drunk with beer, but with spirituous liquors; nobody presses his friend to a glass of beer, unless he choose it2.

Secondly, monopolies also destroy public opulence. The price of the monopolized goods is raised above what is sufficient for encouraging the labour. When only a certain person or persons have the liberty of importing a commodity, there is less of it imported than would otherwise be; the price of it is therefore higher, and fewer people supported by it. It is the concurrence of different labourers which always brings down the price. In monopolies, such as the Hudson’s Bay and East India companies, the people engaged in them make the price what they please.

Thirdly, exclusive privileges of corporations have the same effect. The butchers and bakers raise the price of their goods as they please, because none but their Edition: current; Page: [180] own corporation is allowed to sell in the market, and therefore their meat must be taken, whether good or not. On this account there is always required a magistrate to fix the prices. For any free commodity, such as broad cloth, there is no occasion for this, but it is necessary with bakers, who may agree among themselves to make the quantity and price what they please. Even a magistrate is not a good enough expedient for this, as he must always settle the price at the outside, else the remedy must be worse than the disease, for nobody would apply to these businesses, and a famine would ensue. On this account bakers and brewers have always profitable trades1.

As what raises the market price above the natural one diminishes public opulence, so what brings it down below it has the same effect.

It is only upon manufactures to be exported that this can usually be done by any law or regulation, such as the bounty allowed by the government upon coarse linen, by which it becomes exportable, when under twelve pence a yard2. The public paying a great part of the price, it can be sold cheaper to foreigners than what is sufficient for encouraging the labour. In the same manner, by the bounty of five shillings upon the quarter of corn when sold under forty3 shillings, as the public pays an eighth part of the price, it can be sold just so much cheaper at a foreign market. By this bounty the commodity is rendered more comeatable, and a greater quantity of it produced, but then it breaks what may be called the natural balance of industry. The disposition to apply to Edition: current; Page: [181] the production of that commodity is not proportioned to the natural cause of the demand, but to both that and the annexed bounty. It1 has not only this effect with regard to the particular commodity, but likewise people are called from other productions which are less encouraged, and thus the balance of industry is broken.

Again, after the ages of hunting and fishing, in which provisions were the immediate produce of their labour, when manufactures were introduced, nothing could be produced without a great deal of time. It was a long time before the weaver could carry to the market the cloth which he bought in flax. Every trade therefore requires a stock of food, clothes, and lodging to carry it on2. Suppose then, as is really the case in every country, that there is in store a stock of food, clothes, and lodging, the number of people that are employed must be in proportion to it3. If the price of one commodity is sunk below its natural price, while another is above it, there is a smaller quantity of the stored stock left to support the whole. On account of the natural connexion of all trades in the stock, by allowing bounties to one4 you take away the stock from the rest. This has been the real consequence of the corn bounty.

The price of corn being sunk, the rent of the farms sinks also, yet the bounty upon corn, which was laid on at the time of the taxes5, was intended to raise the rent, and had the effect for some time, because the tenants were assured of a price for their corn, both at home and abroad. But though the effects of the bounty encouraging Edition: current; Page: [182] agriculture brought down the price of corn, yet it raised the grass farms, for the more corn the less grass. The price of grass being raised, butchers’ meat, in consequence of its dependence upon it, must be raised also, so that if the price of corn is diminished, the price of other commodities is necessarily raised. The price of corn has indeed fallen from forty-two to thirty-five1, but the price of hay has risen from twenty-five to near fifty shillings. As the price of hay has risen, horses are not so easily kept, and therefore the price of carriage has risen also. But whatever increases the price of carriage diminishes plenty in the market2. Upon the whole, therefore, it is by far the best police to leave things to their natural course, and allow no bounties, nor impose taxes on commodities.

Thus we have shown what circumstances regulate the price of commodities, which was the first thing proposed.