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Wednesday April 13. 1763 - Adam Smith, Glasgow Edition of the Works and Correspondence Vol. 5 Lectures On Jurisprudence [1762]

Edition used:

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).

Part of: The Glasgow Edition of the Works and Correspondence of Adam Smith, 7 vols.

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Wednesday April 13. 1763

I began yesterday to give some account of those badn practicall effects which proceeded from that system or theory which placed the opulence of a nation on its coin and money. The first of these was the regulations concerning coin and bullion with regard to exportation. It was thought that to accumulate money and to accumulate wea<l>th was one and the same thing. Every method would therefore be taken to bring into the country all | the money which could be got and to prevent any from going out of it. With this view the Spaniards, having discovered the silver mines in Peru and not knowing of those of Brazil, imagining they had the whole silver at their disposal, [and] thought that if they could keep it at home to themselves alone they would grow not only the most powerfull but the most wealthy kingdom in Europe. They, therefore, and the Portugese afterwards on the same plan, prohibited the exportation of gold and silver. This as I said is in a great measure ineffectuall as the balance of trade, which is against them, must go out in gold and silver. The goods the<y> want are likewise all bought at a dissadvantage. The Portugese merchant who byes of an English one pays not only for the price of the goods but also for the risque he runns in getting out the money, 3, 4, 5, or perhaps ten per cent. The English merchant, when he has got the price, runns a risque of never getting <?> and therefore takeso something more of the merchant as an | insurance against this risque. In as far as they are effectual they are also prejudiciall. They damn up money to <an> unnatural height, and tho it goes out the damn still keeps it up, as an equall quantity comes in. This being more than is necessary for circulation lies as dead stock upon their hands, and when by any means it is forced into the channell of circulation it can produce no other effect than that of raising every thing to a price unnaturally high. If this damn was bored,p gold going out of these kingdoms would soon bring things to their naturall price; the gold and silver would be less, but the godds68 would be brought in in greater abundance and at a lower rate. The channel of circulation is by this damm kept quite full, and all goods and all labour are so excessively dear that nothing can be made for the forreign market. Nothing was ever seen in any country which came from Spain but what was the naturall produce of the country. {Spain is the finest sheep country in the world, being all sandy hills covered with an excellent herbage.} They have wool without which | no broad cloth can be made in Europe, and yet no one ever saw Spanish broad cloth in the market; nor is any other thing else to be met with. The only things to be met with of Spanish growth are their fruits and their wines, which are allmost the <?only> naturall productions of that fine country. The only other production we meet with is Spanish steel, which is of a peculiarly excellent quality, but the quantity of it is but very inconsiderable. Regulations were alsso made in Britain in King Will.s time; these I have already mentiond, as well as the bad consequences of them with reggard to the melting down and exportation of coin and the method by which it might be remedied. But all attempts of this kind must be idle as the channel of circulation can never contain above a certain quantity.

It has also produced many other bad effects with regard to the regulations of trade and commerce. As money was the only wealth of the kingdom, all those trades were con<si>dered as pernicious which carried money out of the kingdom, and those again which brought in money were reckond | highly beneficial. The French trade was therefore discouraged as it was thought to carry wealth out of the kingdom, they having most of the manufactures as well as all the productions we have, and severall manufactures and naturall productions which we have not. They have wine, which we have not, and the species of lint of which the finest cambricks are made will not grow in this country. As therefore our importation from France exceeds our exportation to it, the balance must be paid in money, and therefore (according to this notion) such a trade was to be discouraged. The French trade is therefore allmost intirely locked up from us by high duties on many comm<o>dities, which amount to the same thing as a prohibition, and express prohibitions on others, as on cambricks, proceeding partly from this consideration and partly from the mutuall enmity and jealousy of the nations, from which they can never be pleased in being supplied by each other[s].69 A free commerce on a fair consideration must appear to be advantageous | on both sides. We see that it must be so betwixt individualls, unless one of them be a fool and makes a bargain plainly ruinous; but betwixt prudent men it must always be advantageous. For the very cause of the exchange must be that you need my goods more than I need them, and that I need yours more than you do yourself; and if the bargain be managed with ordinary prudence it must be profitable to both. It is the same thing with regard to nations. The exchange must always be profitable if they act with prudence, and as the number of the prudent will be pretty much the same on both sides, and this will be the far greater part, the benefit will be mutual. For it is evident that the other nation stands more in need of it than the other does of its own, and this must be the case on both sides. Thus to take an instance, tho most unlikely: if claret was not of mo<r>e value here than in Franc<e>, or the money he sends for it is here, he could have no temptation to send out for it. He would not import it if he did not get more here than he gave in France. Perhaps he will give 1000 pound in France for what will here be | worth £1100. This gold is sent out of the nation, but it is returnd in a largerq quantity of wine, which adds to the opulence of the nation. ’Tis true indeed that the gold lasts for a long time and the claret is very soon consumed, but this makes no odds. For to what purpose do all those things which a nation possesses serve? To no other but the maintaining the people? And how is <it> that this end is answered? By being consumed. It is the consumptibility of a thing which makes it usefull. To what purpose does industry serve but to produce the greatest quantity of these necessaries. It is nor matter therefore what the time be in which they are consumd, whether 3, 30, or 300 years. Commercy and industry ar<e> more promoted by the former than the latter. The business of commerce and indust<r>y is to produce the greatest quantity of the necessaries of life for the consumption of the nation, or exchanging one commodity for another which is more wanted. It is on the power of this exchange that the division of labour depends, which as has been shewn to the satisfaction of the whole of you is the great foundation of opulence, as it occasions the | production of a greater quantity of the severall things wrought in. The production of the necessaries of life is the sole benefit of industry. If you do not use them, what is the benefit of the greatest abundance. What would be the advantage of employing a number of hands and cherishing the cultivation of the arts. The whole benefit of wea<l>th and industry is that you either employ a greater number or give those already employed a more comfortable subsistence, and there is no trade which, carried on properly, will not answer this end. There is requisite for this end a certain quantity of money to promote the circu<la>tion of the rest. To what purpose would it serve to keep this gold at home. The channel of circulation is always of itself sufficiently filled. If it becomes scrimp, money will soon be poured into it on all hands from other nations; or the plate at home will be melted down and turnd into coin. If it is too full, it must sink by exportation to foreign countries and the melting pot. So that it can neither be filled above, nor can it fall below, the just propor|tion to the goods. Now if it be at the proper illegible words as it ordinarily <is>, wherefore ort how would you or could you add any more to it. 30 mills answers all the purposes of it; why should any more be added. It is universally acknowledged that to prohibit any branch of exportation altogether is hurtfull to that branch of manufactures or improvement. If this be <the> case, as there is no question it is, it must be prejudiciall to hinder the exportation to any one country, as so much the less will be produced as was nec<e>ssary to supply that country, and this loss is the greatest when the country to which the exportation is prohibited is that to which the exportation and traffick is most profitable. If it be prejudiciall to prohibit the exportation to the richest and best country, it must also be prejudiciall to prohibit the exchange of this commodity for the best and most profitable the country affords. The prohibition of the exportation of cloth and corn is nou doubt prejudicial, and therefore to prohibit the | exportation to France must be so also, as the corn and cloth which would be raised to go there is no longer necessary; and if you should prohibit the exportation of it for claret, all the industry necessary to raise cloth and corn to purchase the wine. They may say here, Ay, we should allow you to send corn or cloth for claret, but it is gold which ye send. But there is no difference whether it be gold or whether it be corn. The one is nowise preferable to the other. This money if kept at home is very prejudicial to industry, and might be sent abroad directly to France for wine,v or may be sent first to Brazil for gold, or which is the same thing to Portugall where it has been already brought and afterwards sent for claret to France. For it is all one whether the goods be sent or the money receiv’d for them. So that if you stop the importation of claret, you stop the manufactures which would be sent to Spain no less effectually than by a direct prohibition. These prohibitions hurt ourselves more than they do the French. All these national jealousy<s> which prompt them to spite and ill–will each other, and refuse to be supplied by them in any | convenience of life, must lessen the exchange of commodities, hurt the division of labour, and diminish the opulence of both. All commerce with France is now in a manner prohibited; thew nations are deprived of the benefit of the mutuall exchanges which would be made betwixt them. Both are by this means impoverished, but Britain being the richer country of the two is most impoverished. For in all traffick which is fairly carried on both parties must improve their fortunes, but if the one be rich and the other poor the rich for many reasons will mend his fortune more than the other.—On the other hand the trade to Portugal is greatly encouraged, as the ballance being much in our favours money must be got by it. But to what purpose does the money serve, if it be more than the exchange demands. If it be kept at home it is hurtfull, and must therefore be sent abroad or some other way turnd out of the channell of circulation.—The exchange with Portugall is also much inferior and consequently less profitable byx a free trade than a free trade to Portugall70 | would be. Portugall contains about 2 mills of men; France on the other hand contains about 20 mills. The exchanges which would be made to France would probably be 100 times those made to Portugall, and a free trade to it would therefore excite much greater industry than one to Portugall. For 20 millions in a society, in the same manner as a company of manufacturers, will produce 100 times more goods to be exchanged than a poorer and less numerous one of 2 mill. France indeed is poorer than England or even the low parts <of> Scotland, but compared with Spain or Portugall is immensely rich, and all manufactures are found in it in much greater abundance. For one exchange that is made to Portugall 100 would be made to France, and the industry which would be excited by a free trade to both would be in the same proportion. By our prohibiting French wines we are supplied intirely by the Portugese at a higher price and in inferior quality than we would be from France. I mentioned this instance as it is one of the least importance iny appearance. | But it will be said that wine is merely a superfluity; but it isz not more so than pepper, sugar, tea, coffee, tobacco, dying stuffs, drugs, etc., and there is nothing more absurd in desiring to have good wine for our money than any other commodity.

No nation can be ruined by the ballance of trade being against them. If we look into Gees book71 we find that trade to all the nations of Europe had a ballance against us excepting Spain, Portugall, and Ireland, besides the American plantations, for the West Indian islands had a vast ballance against us. This he represents as threatening us with immediate ruin; and as Swift72 imagined that in six or seven years there would not be a shill. or a guinea left in Ireland, notwithstanding of which Ireland is improving very fast, so he seems to have imagined that England would be utterly ruined in a short time if some stop was not put to this destructive and ruinous forreign trade. This indeed has been the cry, that the forreign trade would be the ruin | of England, ever since the time of Ch. 2d, and notwithstanding of this the nation has continually improved in riches, in strength, and opulence; and money when wanted is raised in greater abundance and with greater facility now than ever. The greatest summ that was raised by Queen Annes ministers, who were very clever ones, did not exceed 6 millions. Mr. Pelham raised in one year 10 mills. and Mr. Pit 23,73 and with greater ease than it had ever been done before. We complaind that navigation was ruind, but we find the number of ships and our strength in every shap<e>a is increasing. The case is the same in other countries: France, Holland, Italy have all complaind that the ballance of trade would ruin them, and yet they are continually improving. No nation can ever be ruind by this. The same thing ruins nations as individualls, viz their consumption being greater than their produce. If the nation produce to the value of 90 millions and consume an hundred, such a nation can not long subsist.

| 3d, another bad effect of this system, not indeed so prejudiciall as the former as it has affected the theory more than the practise, is the notions with regard to forreign and home expence. It was a rule that necessarily followed from this, that nothing spent at home could diminish public or nationall opulence. From hence {Sir John Mandeville, author of the Fable of the Bees.74 —} formed his theory that private vices were publick benefits. It was thought that no luxury nor folly whatever, not the greatest extravagance imaginable, if laid out on comodities of home production could in the leastb be prejudiciall: many were even beneficiall; that if we kept out all other goods, let one spend as much as he pleased, the nation was as rich as before; the money is not sent abroad to France or Holland but is still at home. It is the same as the right hand paying the left, in which case the man cant grow poorer; so here the money being still amongst the subjects the nation can not. But we will find that every one who spends his stock in this manner must diminish opulence by the same quantity. For tho the money is in the kin<g>dom, the stock is diminished just so much. If I am worth £1000 and spend it all on follies and extravagances, there is still a thousand pound in | the kin<g>dom, but there is 1000 £s worth of less stock. The whole is destroyed and nothing is producd in return. But if I send it out to a merchant who employs it in trade, a farmer or land holder who employs by this means a greater number of hands and cultivates the ground to better purpose, these will by this means make of it £75 profit per annum, of which they give me £50 and have still 25 to themselves. The money is in this manner of service in industry and opulence. I, whoc now live on £50, as I am idle man can do <?little> good, but then I do no harm. My stock is employed, and more industry and wea<l>th is produced. If I was also industrious and produced goods also, no doubt I would be of an advantage. But if I consume the £1000 without any thing being produced by <?> the country is poorer to the value of £1000. To make this the more evident, let us suppose that my father leaves me goods, cattle at pasture, beer in his cellars, cloth, linnen, etc., etc. in his ware room, and all the things I can want, so that I can live within myself to the value of £1000; and that I with some others as idle as myself eat and drink, tear and wear, the cattled and [and] beer, cloth and linnen, etc. so as to destroy | it all by the years end, there is plainly here a diminution of £1000 for which nothing is produced

End of Volume Six of MS.

LECTURES ON JURISPRUDENCE

REPORT DATED 1766

lf0141-06_figure_001

Juris Prudence or Notes from the Lectures on Justice, Police, Revenue, and Arms delivered in the University of Glasgow

by Adam Smith Professor of Moral Philosophy.

mdcclxvi

| Juris Prudence

[n]Reading of last two words doubtful

[o]Reading doubtful

[p]Reading doubtful

[68 ]Sic. No doubt ‘goods’ was intended.

[69 ]Cf. Hume, ‘Of the Jealousy of Trade’, Essays, I.345 ff.

[q]Reading doubtful

[r]Reading of last two words doubtful

[s]Illegible word

[t]Illegible word deleted

[u]Illegible word deleted

[v]Replaces ‘gold an’

[w]Reading doubtful

[x]Reading doubtful

[70 ]Sic. Probably ‘France’ was intended.

[y]Reading doubtful

[z]‘no more’ deleted

[71 ]Joshua Gee, The Trade and Navigation of Great–Britain Considered (1729).

[72 ]Jonathan Swift, A Short View of the State of Ireland (1727–8: Prose Works, ed. H. Davis, vol. XII, 1955, 9–10). Cf. Hume, Essays, I. 332.

[73 ]Henry Pelham was First Lord of the Treasury between 1743 and 1754, during which period the most money was voted in 1748 (including £3,640,350 for the Navy and £4,261,575 for the Army). William Pitt, later first Earl of Chatham, was in effective power as Secretary of State between 1756 and 1761, during which period the highest sum voted was £19,616,119 for war charges in 1760 (J. Sinclair, History of the Public Revenue of the British Empire, 2nd edn., 1790, III.58–69).

[a]Reading doubtful

[74 ]The Fable of the Bees; or, Private Vices Public Benefits (1714) was written by Bernard Mandeville, who was quite unconnected with Sir John Mandeville, author of a fourteenth–century book of travels.

[b]Reading doubtful

[c]Reading of last two words doubtful

[d]Reading doubtful