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Wednesday. April. 6th. 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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Wednesday. April. 6th. 1763 —
The market price as I observed sinks or rises in the same manner as the naturall one, being intimately connected with it, altho the circumstances which regulate the naturall price seem to be noways connected with those which regulate the market price, viz the greatness of the demand, the quantity there is to answer this demand, and the riches or poverty of the demandants. Whenever the quantity of the goods is not altogether sufficient to supply all possible demands, those goods will bear a certain price which will be regulated according to the fortunes of those who | make the demand, or bidders for them.—Those things which are scarcest bear the highest price, as they become the purchase of the richest persons who can afford to bid highest. They alone purchase diamonds, rubies, and all manufactures which by the work required are scarce, tho of no great additionall reall worth, and in generall all productions whether of art or of nature which are scarce and ill to be come at. But if more of these things was produced whether by art or nature, altho they be of no real value or a small, yet they would become the purchase of the middling ranks. If again there be something which all stand in need of in some degree, and not enough to supply all possible demands, tho more than the richest sort or the middling sort can consume, these will bear a price, but must necessarily become the purchase of the common people, and be regulated by them as the great majority, being 99 of each 100.—The price of corn therefore depends on the price they get for their labour; or more properly, as I | said, the p<r>ice of their labour depends on the price of corn. For corn is one of those things which all demand, but as there is not such plenty as we might fall upon a shift to consume, it bears a price; this must be regulated by what the people, the great majority of the purchasers, can afford. If corn be high so will labour, and e contrâ. As the concourse into any trade where the wages are too high brings it down, and if it be overstocked the desertion of the hands occasions a diminution of the quantity and raises the price at least to the naturall height. The market and naturall price therefore naturally coincide, unless they be hindered by some bad police. If more money is made by it than recompence<s> the labourer in every shape all run into it, the quantity done is increased, it becomes the purchase of inferior people; this sinks the price perhaps below the naturall one, on which many quit that trad<e> and the price again rises.
| Whatever policy tends to raise the market price above the naturall one diminishes publick opulence and naturall wea<l>th of the state. For dearness and scarcity, abundance and cheapness, are we may say synonimous terms. For whatever abounds much will be sold to the inferior people, whereas what is scarce will be sold to those only of superior fortune, and the quantity will consequently be small. So far therefore as any thing is a convenience or necessary of life and tends to the happiness of mankind, so far is the dearness detrimentall as it confinesy the necessary to a few and diminishes the happiness of the inferior sort. Whatever therefore raises or keeps up the price of them diminishes the opulence and happiness and ease of the country. As far as watches are a conveniency of life, the taxes which raise there price diminish[es] the generall and nationall opulencez by confining them to | fewer hands. Hence it is evident that all taxes on industry must diminish the national opulence as they raise the market price of the commodities. Thus the tax on leather occasions shous to be much dearer, and we see accordingly that there is no part of dress of the dearth of which the country people complain so much. And tho they being absolutely necessary are still worn by all, yet the dearness we may say confines them to fewer persons, as they are much more sparing and saving of them. The tax on salt and small–beer have the same effect. Strong liquors are allmost a nec<e>ssary in every nation. Man is a carefull animall, has many wants and necessities, and is in continuall care and anxiety for his support. This he prevents in some shape by laws and government, which protect every one and make their livelyhood easier come at. Strong liquors are an expedient to the same purpose which all nations have fallen upon, and | they are therefore become allmost necessaries of life, and when used in moderation probably conduce to health. Whatever taxes raisea their price diminish opulence in this point. It is said indeed that taxes on those liquors prevent drunkeness, but the conterary is probably the case. By raising their price they make them an object of their desire, and such as good–fellowship requires them to press on their guests. We see accordingly that in Spain and France, where all liquors are very cheap, there is less drunkeness than in this country. We may see also that this is the case here. A gentleman drunk with ale is a sight never to be seen, whereas one drunk with wine is not so uncommon. One will never press his friend to drink a glass of ale, as he never imagines that he will scruple him that. But good fellowship requires that he should press him to drink wine, which costs him all he can well afford.
| In the same manner also as all monopolies raise the pric<e> of commodities they must be detrimentall to the opulence of the nation. In this manner the Hudsons Bay Company, having the sole priviledg<e> of importing furrs, render the opulence of the nation less as far as they are a necessary or conveniency of life. The company will always bring in less of them than if the trade was free. What they bring in also is sold higher; fewer persons therefore are supplied with them. The manufactures are also worse supplied with them if necessary and are consequently the higher priced. All such companys prevent a free concurrence, which brings down the price of every thing to its naturall height. A few persons can never make this concurrence, and these few can easily lay their heads together and join in bringing in a small quantity and selling it very high, | which would be prevented by a free concurrence. For if any trade is overprofitable all throng into it till they bring it to the naturall price, that is, the maintenance of the person and the recompence of the risque he runs; that is, what is sufficient to maintain the person according to his rank and station. As all companies such as the East Indian, Turky, and Hudsons Bay diminish the opulence with regard to these commodities, so do all corporations, which tho formerly very usefull are now a publick nuisance.34 Such are those of butchers, brewers, bakers, etc., etc. They prevent a concourse and by that means raise the price of these commodities. And accordingly there is generally a magistrate who settles the price of all these commodities. But as there is no corporation of the dealers in cloth there is no one who regulates the price of it. It is found absolutely necessary in the others. The | corporation produces but a small quantity and take<s> a great price for it; this gives them the same profit, and at less troubleb than if they had made a greater quantity. It is the same thing to a baker whether he makes £50 by making 1000 or 100000 loaves in the year. And when there are few in any branch of business they can easily agree amongst themselves to do this. There is therefore a magistrate or clerk of the market appointed who regulates the price of thisc according to that of corn or oats in the neighbourhood. This expedient, tho necessary where corporations are allowed, does not answer the end of a plentifull market in any shape so well as that of allowing a free concurrence. A considerable profit must be allowed on each branch above the naturall price else no one will engage in it. Thus we are told that Blank in MS.35 occasioned a most grievous famine at Antioch | by endeavouring to give plenty by appointing a low price of corn, which being a little too low made all who had corn to transport it to other places. The assizer therefore fixes the price generally considerably above the naturall price; if he fixes it below, it will make a most intollerable scarcity. All succh commodities are therefore very dear. A baker, whose trade is very soond learnt, is a very profitable business, and so is that of a brewer; this would be remedied by a free concurrence. Every discouragement to industry therefore hurts opulence in the nation. This is the case with all the revenues on commodities, as that on salt. The price of the work is the same, but to this must be added the tax, principall and interest, and the expense of collecting it. Salt therefore as a necessary of life becomes dearer, and the consumption of it, if not excludede from some, is greatly lessend.—Not only | does every thing hinder the opulence which raises the market price above the naturall, but every thing which tends to sink it below, tho from a different cause. Nothing can do this but a bounty given by the publick on some branch of manufacture or exportation of som<e> commodity. Thus there is a bounty in this country in all coarse linnen at less than a shilling per yard,36 the greatest part of which is made for exportation. This bounty is about 3d per yard. Now if we suppose the cloth to be worth 6d, the publick pays about 1/4 part of the price. So that the foreign merchant can get for 1/4 part less than would have been a sufficient price to the workman if no bounty had been attending the making it. In the same manner there is a bounty of 5 shillings per quarter on all corn exported when it is above 30 or 35 shil.,37 which is the ordinary price. So that here also the publick pays an eight part of the price, and thence it can be sold 1/8 cheaper to the foreign merchant than otherwise it could have been afforded. This therefore makes the price of corn lower | and causes more purchasers for it, or what is the same thing causes the purchasers to take greater quantities. This encourages the raising of corn and makes in this manner an artificiall abundance. This also is hurtfull to the opulence of the nation by overturning the naturall balance of industry. The industrious people naturally apply themselves to the different branches of trade just in proportion to the demand that is for those commodities. Whatever breaks this naturall balance by giving either an extraordinary discouragement by taxes and duties, or [by] an extraordinary encouragement by bounties or otherwise, tends to hurt the naturall38 opulence. When any branch of trade has a bounty on it all croud into it, and work not so much with expectation of answering a great demand but from a desire of making a fortune by thisf bounty, and proportion their work to it rather than to the demand. When things are left to their naturall course, according as the demand is, the quantity made is greater or less in each commodity. | As far as you encourage by bounty you make the quantity greater than the publick has a demand for, and consequently sink the price below what is necessary to encourage the labourers at an other time. In order to make the produce greater in this branch, you call away as many hands from other employments as you add to this.—The number of hands employed ing business depends on the stored <stock> in the kingdom, and in every particular branch on the stored stock of the employers. Many goods produce nothing for a great while. The grower, the spinner, the dresser of flax have no immediate profit. The flax must pass thro a vast number of hands ere it can bring any price. All these must be maintaind by the stor’d stock of the manufacturer, as they gain nothing of themselves. This stored stock thro the kingdom, tho it may be continually increasing, does not readily alter at any particular time.—The quantity of money may rise or fall but | the stored stock which can afford the labourers food, cloaths, and lodging continues much the same, and it is in proportion to it that the number of hands is regulated. Whenever therefore you call more hands than are naturally engaged in it to any particular business, you sink inde<e>d the price of that commodity to the foreign merchant, but you raise the price or perhaps of all others proportionably at home. There is then no concurrence in those branches equall to what there was formerly. The manufacturer in each branch requires a particular stock. The man who employs 5 or 6 weavers must have a certain stock as he can not sell the produce of their labour from day to day; one who has 25 or 100 requires proportionably a greater stored stock to enable him to want his money perhaps for 3, 4, 5, or 6 months. This stock is limited by the quantity of food, cloaths, and other necessaries which the | manufacturer can afford them. A certain number can therefore be employed in each branch. When therefore you increase the number in one branch you necessarily diminish those in others. The price of that commodity fall<s>, but those of all or some others rise[s]. We see that the bounty on corn has sunk the price of it continually, the necessary consequence of which was that the rent of corn farms should sink also. The rent of a farm intended to produce 1000 qur of corn must be less when corn is low priced than when it is high, the 1000 qurs not being worth so much as formerly. This bounty however was at first laiedh oni to raise the rents of the corn farms. The landholders were told that by giving them a ready vent for their corn it would enable them to bear the land tax without any hurt.j This it did indeed for some time by causin<g> a great deal of waste ground to be taken into tillage, and other ground greatly improved. But this effect has been long since answered, as the ground in most places of the country is as far improved | in the raising of corn as it can well be. It has consequently for some time diminished the quantity of grass below what it was formerly, and below the naturall quantity. More ground has been turnd into corn and consequently less has been left for the production of grass. The quantity of grass being diminished the price of it necessarily rises, and along with it the price of butcher meat which must depend on it. And we see that the price of butcher meat is much greater in the richest parts of England and Ireland than it is here, proportionally to the difference of opulence. Thus tho corn becomes cheaper, another commodity no less usefull rises in its price. The price of hay must also rise as well as that of pasture grass. The quarter of corn formerly gave 40 or 45 shill., but has now been found to be about 30 or 35, so that it has fallen about 1/8. The load of hay gives now 20 or 23 sh, which is double of its former price. This was partly owing to the fall of corn and partly to other causes. The maintenance of horses is therefore | become much higher. If this extended to saddle horses only the grievance would not be intollerable. But as horses are necessary for the facilitating of land carriage thro the [the] kingdom, by raising this maintenance the expense of transportation is increased and the inland commerce of the kingdom greatly embarrassed. The market of commodities becomes more confined and the concurrence is lessend, which necessarily lessens opulence or plenty. So that the best police would be to leave every thing to its naturall course, without any bounty or an<y> discouragement.k
We come now to the 2d thing proposed, viz money, and 1st we are to consider it as the measure of values. At first when men dealt in a few species of goods, any species might be the common measure of the value of the rest. Thus if they dealt in corn, sheep, and black–cattle they might have an account that so many measures of corn were equall in value to 1 sheep | or two,l and thence again that 4 sheep were of equall value with an ox. These relative values would be easily remembered. But if we should suppose that they dealt in 100 different commodities, not to say 100,000 as there is in this and many other countries, every one will there be compared to 99 others and have as many different values, so that there will be in all 9900 values to be remembered. This puts them on fixing on some particular commodity as the common standard, for in that case there will be only 99 different values to be remembered. This common measure has always been that with which they were best acquainted. In Gre<e>ce cattle were the most generally used commodity, and this was for some time the measure. In Homer every thing is valued as worth so many oxen; the arms of Glaucus were worth 100 oxen and those of Diomede worth 9.39 Italy again, being a hilly country, was more stored with sheep; they therefore were the measure of value, as [were] they were amongst the Tuscans; and in generall they would compare all others | with that commodity with which they were best acquainted. But it would soon be found that one ox was not of equall value with an other; besides the difference of size and age there are many other varieties. Hence every wise man when he had dealt some time in merchandize would attempt to form a better measure. They wanted a more certain and accurate measure of value than cattle could be, of which equall quantities should have equall values. This in the same country is pretty nearly the case with all metalls, but more expecially with gold and silver, as the quantity of alloy in them is much more easily ascertaind than the temper or quality on which depends the value of iron or brass, and with far greater accuracy, tho that can not be done even here with the utmost facility or precision.m
These metalls are the only commodities whose value is the same in proportion to the quantity, and the proportion of which can be easily ascertaind. They have accordingly in all countries been found to be much better measures of | value than cattle or sheep, and have therefore been used as such sooner or later. In the same manner as they changed the naturall measures of length into artificiall ones, so did they those of value. All measures were originally taken from the human body; a fathom was measured by the stretch of a mans arms, a yard was the half of this, a span an inch or digit, a foot a pace, etc. These natu<rall>n measures could not long satisfy them, as these would vary greatly, not only in different men but even in the same one at different times and in different tempers. Prudent men therefore contrived, and the publick established, artificiall yards, fathoms, feet, inches, etc. which should be the measures of all different lengths. For the same reason they converted the originall and naturall measures of value into others not so naturall, but more convenient than any of those naturally used by men in the rudero ages of society.
[34 ]Cf. ii.34–41 above.
[35 ]Blank in MS. Probably the Emperor Julian: Ammianus Marcellinus, XXII.14.1; Libanius, Orations, I.126 and XVIII.195; Julian, Misopogon, 369c.
[36 ]The bounty varied from ½d. to 1½d. per yard: 29 George II, c. 15 (1756).
[37 ]In fact 48 shillings: 1 William and Mary, c. 12 (1688).
[38 ]Sic. Probably ‘national’ was intended.
[f]Illegible word deleted
[g]Illegible word deleted
[i]‘a’ apparently deleted
[j]Replaces an illegible word
[l]Reading of last four words doubtful
[39 ]Iliad, vi.236; Pufendorf, V.5.1.