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Tuesday. April. 5th. 1763 — - Adam Smith, Glasgow Edition of the Works and Correspondence Vol. 5 Lectures On Jurisprudence 
Lectures On Jurisprudence, ed. R.. L. Meek, D. D. Raphael and P. G. Stein, vol. V of the Glasgow Edition of the Works and Correspondence of Adam Smith (Indianapolis: Liberty Fund, 1982).
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Tuesday. April. 5th. 1763 —
Having given an account of the nature of opulence and the things in which the riches of a state might consist, I proceeded to shew that this was greatly promoted by the division of labour, which took its rise from the disposition to truck, etc., as well as the means by which it produced that effect.—We may observe on this head that as the division of labour is occasioned [by]w immediately by the market one has for his commodities, by which he is enabled to exchange one thing for every thing, so is this division greater or less according to the market. If there was no market every one would be obliged to exercise every trade in the propor|tion in which he stood in need of it. If the market be small he can’t produce much of any commodity. If there are but 10 persons who will purchase it he must not produce as much as will supply 100, otherwise he would reap no benefit by it; far less will he be induced to bring about the great increase which follows on the farther improvement of this division. The being of a market first occasioned the division[ed] of labour, and the greatness of it is what puts it in ones power to divide it much. A wright in the country is a cart–wright, a house–carpenter, a square wright or cabinet maker, and a carver in wood, each of which in a town makes a seperate business. A merchant in Glasgow or Aberdeen who deals in linnen will have in his warehouse Irish, Scots, and Hamburgh linnens, but at London there are seperate dealers in each of these. The greatness of the market enables one to lay out his whole stock not only on one commodity but on one species of a commodity and one assortment of it. This also lessens his corresspondence and gives | him less trouble; besides that as he deals inx a large quantity he will get them cheaper and consequently can get the higher profit. Hence as commerce becomes more and more extensive the division of labour becomes more and more perfect.y From this also we may see the necessity of a safe and easy conveyance betwixt the different places from whence the commodities are carried. If there is no conveyance of this sort the labour of the person will not be extended beyond the parish in which he lives. If the roads are infested by robbers the commodities will bear a higher price on account of the risque. If the roads are bad in winter the commerce is then greatly retarded, if not altogether stopped. A horse in a bad road in winter will take 4 times the time he took before to carry his loading of equall quantity, that is, will carry 1/4 of the goods he formerly did, whereas when they are good, winter and summer makes no odds. And hence we see that the turnpikes of England have within these 30 or 40 years increased the opulence of the inland parts. | This may shew us also the vast benefit of waterz carriage thro the country. Four or 5 men will navigate a vessel betwixt Scotland and England, Norway, etc. which may contain perhaps 200 tons. The whole expense of the carriage is the tear and wear of the ship and the wages of these men backwards and forwards, that is, if we suppose she returns empty; but if she returns loaded this will be born in half by the 2d cargo. If we should suppose that this should be carried by land the expence is far greater. If a waggon carries 5 tons, it will be requisite to have 40 wag. for 200 t. Each of these have 6 or 8 horsesa with 2 men. The expense here will be much greater. The tear and wear is much the same, but the wages is much higher, besides that the ship does it in a much shorter time. Land carriage therefore obstructs theb supply of goods and the greatness of the market. Hence also we may see the great benefit of commerce, not as it brings in money into the country, which is but a fancifull advantage, but as it promotes industry,c manufactures, and opulence and plenty made by it at home.
| I had begun also to treat of the prices of commodities. There are in every species of goods two seperate prices to be considered, the natural and the market price. The 1st is that which is necessary <?to induce> one to apply to a particular business. Thus one would not become a hackneywriter unless he had a prospect of maintaining himself and recompensing the expense of education. Maintenan<ce> is the first thing necessary to be afforded by every business. But if this trade gives no more than bare maintenance this will not induce any one to enter into it. I perhaps having by some accident fallen into some strange out–of–the–way business, may by dint of application make a miserable lively hood of it, but if this be all, the trade will end in me. No one will apply to <it> if it be one which requires any education, as by being a day–labourer he can get his maintenance without any previous education and with much greater certainty. Most businesses require some education; there is then the expense of food, cloaths, and lodging, in which I have been maintaind during that time by my parents, which as well as an apprentice fee is to be laid to the charge of this business. There is here a stock which must be repayd by anyd trade, not | only in principall but with the interest and profit which I might have made of it. This must also be done in a reasonable time, that the risque of dying before this is repayed may be counterballanced. Many trades also require[s] not only the knowledge of the method of handling the tools of that trade, but also of severall other branches of learning. The liberall professions of law and physick muste also be recompensed for the chance there is that the person, tho he live, will make nothing of it. This is the case in many other arts besides the liberall ones. Thus in the business of mining for the precious metalls, if we consider the expence of the work and the risque there is of not getting any of the metall and losing their labour either in prosecuting the old veins or discovering new ones, we will find the price of silver is noways extravagant. If we take an equall number of people employed in working of mines and of raising corn, we will find that on the whole the latter are as abundantly rewarded as the others for the expence they are at and the risque they runf of never getting in their money. If we take a hundered persons who | cultivate corn with the same number of hands and the same expence as 100 othersg <who> work in mines, we will find the profits of the first not to be the least. Of the 100, perhaps 75 make nothing at all. The remaining 25 must therefore be equall inh their profits to all that should havei made the profits of the 100.—Tho some therefore raise great fortunes others have nothing at all, and on the whole the estates made by the 100 are not more than the moderate fortunes raised by each of the 100 farmers. So that we may perhaps justly apply here a saying used in a very different sense, that there is not a worse trade in the world than a gold finder. If mining should give no greater profits than were sufficient to maintain the labourers in it, this would tempt no one to engage in it. Three fourths of those who do lose all their labour; the others must therefore be so great as equall what should have maintaind the whole number.—These are the circumstances which regulate the naturall price, and when it is equall to all these there is sufficient temptation to induc<e> people to engage in it.
| The market price often differs considerably from this, and is regulated by other circumstances. When goods are brought to the market we seldom enquire what profits the person will have if he get such or such a p<r>ice. Other circumstances determine what he shall have. These arej 1st, the demand or need for it (whether this be real or capricious<)>; 2dly, the abundance of it in proportion to this demand; and 3dly, the wea<l>th of the demand, or demanders.
1st, a thing of no use, as <a> lump of clay, brought into the market will give no price, as no one demands it. If it be usefull the price will be regulated according to the demand, ask this use is generall or not, and the plenty there is to supply it. A thing which is hardly of any use, yet if the quantity be not sufficient to supply the demand, will give a high price; hence the great price of diamonds. Precious metalls, which are certainly not so usefull as gold, bear a far greater price, partly on this account. Abundance on the other hand such as does more than supply all possible demands, | renders water of no price at all and other things of a price the next thing to nothing. The scarcity on the other hand raises the price immoderately.—This also depends on the other circumstance, viz the riche[r]s or poverty of the demand. We are told that a merchant and a traveller, whose tombs are still to be seen, meeting in the desarts of Arabia, the merchant, in want of water, gave the travellerr 10000 crowns for one cruise of water. This price, however necessitated, he could not have given had he had only 100 crowns about him. If there is less than is sufficient to supply the demand, the parties contend who shall have it. The case is here the very same as at an auction. If there be two persons equally in fancy with any thing and equally earnest to have it, they will bid equally according to their abilities, whether theirl desire for it be reasonable or unreasonable. The richest however will always get it as he is best able to bid high<e>st. The price is in this manner regulated by the demand and the quantity there is to | supply this demand; and whenever the quantity is not sufficient the price will be regulated by the fortunes of those who are the purchasers.—So that in some things where the demand is little the price is still high, as there is not enough to answer even this small demand. The demand for water exceeds that for any thing else whatever, but as the abundance is more than sufficient to answer all the possible demands water bears no price; whilst other things of no real value whose use we can hardly conceive, yet being but in very small quantities bear an immence price as becoming only the purchase of a few. This is the case with jewels and precious stones. The famous Pits diamond33 would not have been purchased for £250000 had there not been a prince so vain and proud, as well as rich, as Lewis 12 of France. The other sovereigns of Europe would not have given so much, so that perhaps £50000 would have been the highest price it would have given. And had such an one been brought into Europem 150 years before it would | not have drawn nearly so high a price. There was then not near so much wealth in any European nation. The price would not only have been less in the money paid for it, for that is nothing to the purpose, but for the reall wealth which could have been purchased by it. Every thing is dearer or cheaper according as the quantity of it makes it the purchase of the rich or of the poor. Diamonds, antiques, medalls, and such like are only the purchase of those who are extremely rich. Golden vessels of all sorts, being very scarce, become the purchase of those only who are vastly rich. Silver work, being in greater plenty, can not be disposed of intirely to those who are immensely rich; those of more moderate fortunes become purchasers and the pricen accordingly falls, being regulated by the fortunes of the majority of the purchasers. Bread and beer, being produced in | great quantities and being necessary likewise to all, become the purchase of the whole people (the nobles can not consume the whole); that is, become[s] the purchase of those of whom 99 in a hundred are of the poorer sort, for not above 1 in 100 has what we call a gentlemany fortune. The price of these commodities therefore is regulated by the abilities of the populace. This must depend on the price of labour, or to speak more properly the price of labour must depend on the quantity and price of the corn which is their support.—When therefore corn is cheap labour will be cheap; also when it is dear labour will likewise be so. Tho this is said to be contrary to experience in this count<r>y, it does not any way contradict the generall rule that when corn is low priced or <?high> priced labour will accompany it.
These therefor are the circumstances which regulate the price of commodities in exchange betwixt | the buyer and the seller.—Corn and beer are nec<e>ssary for the rich, but as all others must have them the price is not regulated by the rich. The quantity is so great as that it can not be made use of by the rich;o if the raisers of it have a mind to dispose of the whole they must sell to the poor, that is, to 99 of 100, and must be spread amongst the whole. The meanest of the people become able to purchase it, and they being the majority the price they can afford is that which regulates it. When the quantity of any of these is small the price rises proportionably, as the corn in this case becomes the purchase of those only who have great fortunes, the lower sort being obliged to live on turnips or other roots. Thus is it that water and bread rise so high in the time of a famine or siege.
These two different prices, which appear at first sight to be noway connected nor to have the least dependance on each other, are very intimately related, tho the circumstances | which regulate them appear also independent. For if the market price be so high as to be more than sufficient to make up the naturall price, and answers all those things for which every tradesman has a demand (as above mentiond), this will appear to be a vastly profitable trade and all will croud into it with expectations of making a fortune. As the number of hands increases so will the quantity of work done, and consequently it will become the purchase of a lower rank of men and fall down to its naturall price.p For plenty and cheapness are one and the same.q If the paintings equall to those of Raphaels had been in great abundance they would not as now sell for £10000 but perhaps for £10. If a business be such that any one who applys to it makes mony by it, every father and mother will bread his son to it, and the price will soon be reduced to the naturall one. If the trade by this or any other means becomes overstocked, and instead of the great price for this work they do not get even the | price ordinary in other trades, then no one will enter into it, and many who have engaged <in> it will learn some other, even when far advanced in life, rather than continue at so unprofitable a business in which the labourers do not even get their due reward. The quantity of goods made immediately diminishes and the price[s] rises up to the naturall one, in the same manner as when it is above the naturall price all rush into it, the quantity increases, and the price again comes down. The quantity of diamonds being very small, they are the purchase only of the richest people; but if by any industry their quantity could be multiplied, and instead of 100 pound, which is more than is in all Britain, 100000 pounds could be brought into the kingdom every year, they would become the purchase of the lowest people and a diamond would be bought for a shilling.—It is evident therefore that the market and naturall price of commodities are | very strictly connected.— —
I observed that where grain is cheap, there wages will be cheap also; on the other hand where corn is at high price, there labour will be dear. The price of labour ought in this manner to rise or fall with that of corn.—The cheaper the labourer can subsist the greater will his profit be, as he will have the more above his maintenance. And if corn was to be cheap for a considerable time, all would apply themselves to that business where they got the highest wages, tho the corn was cheap. Ther work done would also be increased. When meal is cheap the reward given is really greater, tho the price be very small. The price will therefore fall to the naturall rate; and on the conterary when meal is dear, for instance at double the ordinary price, then the same money reward is but in reality one half of what it was formerly. A labourer who earned 1sh. per day has in reality but a 6d when | the price of provisions is doubled.—The price of labour therefore should rise. But we are told that it is found by experience that in a dear year labour is cheap and in a cheap year labour is dear. But this observation is in a great measure false, as there is only one sort <of> labour in which it holds, viz that of meniall servants. In all other sorts of labour the rule holds that when provisions are cheap labour is so, and e contra. But here this is not the case. Every one abhors naturally the subjected and mean condition of a meniall servant, liables tot the caprice and extravagance of a master; he will work for days wages much more willingly than become your servant. When therefore the naturall and market price ofu labour do not regulate each otherv in an instant, as they never can, a man who before could not maintain himself by his industry finds when commodities become cheap that | he can easily do it. He eagerly runs out of service, where he gets less than he can by his labour in the manufactures, wherew the price keeps up for some time above the naturall one. The maid servant who had been employed at spinning sets up for herself, tho before she could not have lived by her own labour. All therefore withdraw from service, and they will also do more work for themselves than they did when in service. The price of labour would of consequence fall in some time to its naturall standard. We see as a sign that labour of other sorts is cheap at the time when corn is so, that tho one pays more to a servant who spinns in the house yet the spinning out of the house is cheaper than before. In the same manner these prices do not regulate themselves at once when provisions are dear. Necessity obliges all to croud into service to get the bread which the price of other labour will not afford them. But if the deart<h> | or the cheapness was to continue overx severall years the prices would then regulate themselves; in the dearth, labour would be dear, and in the cheap season, cheap.— — — — —
[y]‘and so this’ deleted
[c]Replaces an illegible word
[i]The last two words replace ‘was’
[j]Illegible word deleted
[33 ]The Pitt or Regent diamond, bought for £20,000 by Thomas Pitt, Governor of Madras, and subsequently in 1717 sold for £80,000 according to one account, or £135,000 according to another, to the Duke of Orleans, Regent of France during the minority of Louis XV.
[m]Replaces ‘the country’
[o]Illegible word deleted
[p]At this point the following words are struck out: ‘But if in such a case as this the trade should happen to be overstocked’
[q]This sentence is interlined above the first eight of the deleted words referred to in the previous footnote
[t]The last two words replace ‘and’
[u]‘commodities or of’ deleted
[v]The last two words replace ‘themselves’