Book V.) the Language Is Identical With That of the Physiocrats. but

there is this great difference. Rousseau thought that the state of nature had been denaturalised by social and especially by political institutions, including, of course, private property; and his chief desire was to give back to the people the equivalent of what they had lost. The “social contract” is just an attempt to secure this. The Physiocrats, on the other hand, regarded the institution of private property as the perfect bloom of the “natural order.” Its beauty has perhaps suffered at the hands of turbulent Governments, but let Governments be removed and the “natural order” will at once resume its usual course.

There is also this other prime difference. The Physiocrats regarded interest and duty as one and the same thing, for by following his own interest the individual is also furthering the good of everybody else. To Rousseau they seemed antagonistic: the former must be overcome by the latter. “Personal interest is always in inverse ratio to duty, and becomes greater the narrower the association, and the less sacred.” (Contrat Social, ii, chap. 3.) In other words, family ties and co-operative associations are stronger than patriotism.

“There is a natural society whose existence is prior to every other human association.… These self-evident principles, which might form the foundation of a perfect constitution, are also self-revealing. They are evident not only to the well-informed student, but also to the simple savage as he issues from the lap of nature.” (Dupont, vol. i, p. 341.) Some Physiocrats even seem inclined to the belief that this “natural order” has actually existed in the past and that men lost it through their own remissness. Dupont de Nemours mournfully asks: “How have the people fallen from that state of felicity in which they lived in those far-off, happy days? How is it that they failed to appreciate the natural order?” But even when interpreted in this fashion it had no resemblance to a savage state. It must rather be identified with the Golden Age of the ancients or the Eden of Holy Scripture. It is a lost Paradise which we must seek to regain.

The view is not peculiar to the Physiocrats, but it is interesting to note how unfamiliar they were with the modern idea of evolutionary progress.

Mercier de la Rivière, vol. ii, p. 615. “Natural right is indeterminate in a state of nature [note the paradox]. The right only appears when justice and labour have been established.” (Quesnay, p. 43.)

“By entering society and making conventions for their mutual advantage men increase the scope of natural right without incurring any restriction of their liberties, for this is just the state of things that enlightened reason would have chosen.” (Quesnay, pp. 43, 44.)

Pursuing this same idea, Dupont writes as follows: “It is thirteen years since a man of exceptional genius, well versed in profound disquisition, and already known for his success in an art where complete mastery only comes with careful observation and complete submission to the laws of nature, predicted that natural laws extended far beyond the bounds hitherto assigned to them. If nature gives to the bee, the ant, or the beaver the power of submitting by common consent and for their own interest to a good, stable, and equable form of government, it can hardly refuse man the power of raising himself to the enjoyment of the same advantages. Convinced of the importance of this view, and of the important consequences that might follow from it, he applied his whole intellectual strength to an investigation of the physical laws which govern society.” Elsewhere he adds: “The natural order is merely the physical constitution which God Himself has given the universe.” (Introduction to Quesnay’s works, p. 21.)

Hector Denis in his Histoire des Doctrines expresses the belief that the most characteristic feature of the Physiocratic system is the emphasis laid upon a naturalistic conception of society. He illustrates this by means of diagrams showing the identity of the circulation of wealth and the circulation of the blood.

“Its laws are irrevocable, pertaining as they do to the essence of matter and the soul of humanity. They are just the expression of the will of God.… All our interests, all our wishes, are focused at one point, making for harmony and universal happiness. We must regard this as the work of a kind Providence, which desires that the earth should be peopled by happy human beings.” (Mercier de la Rivière, vol. i, p. 390; vol. ii, p. 638.)

“There is a natural judge of all ordinances, even of the sovereign’s. This judge, which recognises no exceptions, is just the evidence of their conformity with or opposition to natural laws.” (Dupont, vol. i, p. 746.)

Dupont, introduction to Quesnay’s works, vol. i, pp. 19 and 26.

Baudeau, vol. i, p. 820.

Letter to Mdlle. Lespinasse (1770).

See some remarks on the Tableau économique on p. 18.

Baudeau, Éphémérides du Citoyen.

“The laws of the natural order do not in any way restrain the liberty of mankind, for the great advantage which they possess is that they make for greater liberty.” (Quesnay, Droit Naturel, p. 55.) And Mercier de la Rivière says (vol. ii, p. 617): “The institution of private property and of liberty would secure perfect order without the help of any other law.”

Dialogues sur les Artisans.

Mercier de la Rivière, vol. ii, p. 617.

The origin of the famous formula is uncertain. Several of the Physiocrats, especially Mirabeau and Mercier de la Rivière, assign it to Vincent de Gournay, but Turgot, the friend and biographer of Vincent de Gournay, attributes it, under a slightly different form, laissez-nous faire, to Le Gendre, a merchant who was a contemporary of Colbert. Oncken thinks that the credit must go to the Marquis d’Argenson, who employed the term in his Mémoires as early as the year 1736. The formula itself is quite commonplace. It only became important when it was adopted as the motto of a famous school of thinkers, so that this kind of research has no great interest. For a discussion of this trivial question, see the work of M. Schelle, Vincent de Gournay (1897), and especially Oncken’s Die Maxime Laissez-faire et Laissez-passer (Berne, 1886).

“The prosperity of mankind is bound up with a maximum net product.” (Dupont de Nemours, Origine d’une Science nouvelle, p. 346.)

“Labour applied anywhere except to land is absolutely sterile, for man is not a creator.” (Le Trosne, p. 942.)

“This physical truth that the earth is the source of all commodities is so very evident that none of us can doubt it.” (Le Trosne, Intérêt social.)

“The produce of the soil may be divided into two parts … what remains over is free and disposable, a pure gift given to the cultivator in addition to the return for his outlay and the wages of his labour.” (Turgot, Réflexions.)

“Raw material is transformed into beautiful and useful objects through the diligence of the artisan, but before his task begins it is necessary that others should supply the raw material and provide the necessary sustenance. When their part is completed others should recompense them and pay them for their trouble. The cultivators, on the other hand, produce their own raw material, whether for use or for consumption, as well as everything that is consumed by others. This is just where the difference between a productive and a sterile class comes in.” (Baudeau, Correspondance avec M. Graslin.)

“A weaver buys food and clothing, giving 150 francs for them, together with a quantity of flax, for which he gives 50 francs. The cloth will be sold for 200 francs, a sum that will cover all expenditure.” (Mercier de la Rivière, vol. ii, p. 598.) “Industry merely superimposes value, but does not create any which did not previously exist.” (Ibid.)

Baudeau, Éphém. ix (1770). One feels that the Physiocrats go too far when they say that “the merchant who sells goods may occasionally prove as useful as the philanthropist who gives them, because want puts a price upon the service of the one just as it does upon the charity of the other.” (Du Marchand de Grains, in the Journal de l’Agriculture, du Commerce, et des Finances, December 1773, quoted in a thesis on the corn trade by M. Curmond, 1900.) We must insist upon the fact that “unproductive” or “sterile” did not by any means signify “useless.” They saw clearly enough that the labour of the weaver who makes linen out of flax or cloth out of wool is at any rate as useful as that of the cultivator who produced the wool and the flax, or rather that the latter’s toil would be perfectly useless without the industry of the former. They also realised that although we may say that agricultural labour is more useful than that of the weaver or the mason, especially when the land is used for raising corn, one cannot say as much when that same land is employed in producing roses, or mulberry trees for rearing silkworms.

Le Trosne, p. 945.

“It seems necessary as well as simple and natural to distinguish the men who pay others and draw their wealth directly from nature, from the paid men, who can only obtain it as a reward for useful and agreeable services which they have rendered to the former class.” (Dupont, vol. i, p. 142.)

It is rather strange that Turgot should have added this qualification, because he was more favourable to industry and less devoted to agriculture than the rest of the Physiocrats.

“I must have a man to make my clothes, just as I must have a doctor whose advice I may ask concerning my health, or a lawyer concerning my affairs, or a servant to work instead of me.” (Le Trosne, p. 949.)

On this point see M. Pervinquière, Contribution à l’Étude de la Productivité dans la Physiocratie. The indifference of the Physiocrats to mines shows a want of scientific spirit, for even from their own point of view the question was one of prime importance. No commodity could be produced without raw material, and wealth is simply a collection of commodities. Raw material is furnished by the mine as well as by the soil. In the history of mankind iron has played as important a part as corn. Agriculture itself is an extractive industry, where the miner—the agriculturist—uses plants instead of drills, and in both cases the product is exhaustible.

Le Trosne, p. 942.

“Land owes its fertility to the might of the Creator, and out of His blessing flow its inexhaustible riches. This power is already there, and man simply makes use of it.” (Le Trosne, Intérêt social, chap. 1, § 2.)

Quesnay, p. 325.

Geschichte der National Oekonomie, Part I, Die Zeit vor Adam Smith.

M. Méline’s book, Le Retour à la Terre, though Protectionist in tone, is wholly imbued with the Physiocratic spirit.

Essai physique sur l’Économie animale (1747).

“There have been since the world began three great inventions which have principally given stability to political societies, independent of many other inventions which have enriched and advanced them. The first is the invention of writing, which alone gives human nature the power of transmitting without alteration its laws, its contracts, its annals, and its discoveries. The second is the invention of money, which binds together all the relations between civilised societies. The third is the Economical Table, the result of the other two, which completes them both by perfecting their object; the great discovery of our age, but of which our posterity will reap the benefit.” (Mirabeau, quoted in Wealth of Nations, Book IV, chap. 9.) Baudeau is no less enthusiastic. “These figures,” he writes, “are borrowed with the consent and upon the advice of the great master whose genius first begat the sublime idea of this Tableau. The Tableau gives us such a clear idea of the premier position of the science that all Europe is bound to accept its teaching, to the eternal glory of the invention and the everlasting happiness of mankind.” (P. 867.)

The first edition of the Tableau, of which only a few copies were printed, is missing altogether, but a proof of that edition, corrected by Quesnay himself, was recently discovered in the Bibliothèque Nationale in Paris by Professor Stephen Bauer, of the University of Bâle. A facsimile was published by the British Economic Association in 1894.

“The discovery of the circulation of wealth in economic societies occupies in the history of the science the same position as is occupied by the discovery of the circulation of the blood in the history of biology.”

Quesnay’s table consists of a number of columns placed in juxtaposition with a number of zigzag lines which cross from one column to another. If he had been living now he would almost certainly have used the graphic method, which would have simplified matters very considerably, and it is somewhat strange that no one has attempted this with his Tableau. Hector Denis has compared his tables with those of the anatomist and traced a parallel between the links of the economical world and the plexus of veins and arteries in the human body.

His explanation of the Tableau by means of mathematical tables gives him a claim to be considered a pioneer of the Mathematical school. Full justice has been done to him in this respect. An article by Bauer in the Quarterly Journal of Economics, 1890, recognises his claim, and there is another by Oncken in the Economic Journal for June 1896, entitled The Physiocrats as Founders of the Mathematical School. His contemporary Le Trosne is even more emphatic on the point: “Economic science, being a study of measurable objects, is an exact science, and its conclusions may be mathematically tested. What the science lacked was a convenient formula which might be applied to test its general conclusions. Such a formula we now have in the Tableau économique.” (De l’Ordre social, viii, p. 218.)

Turgot, although he is not speaking of the Tableau itself in this case, sums it up admirably in the following: “What the labourers get from the land in addition to what is sufficient to supply their own needs constitutes the only wages fund [note the phrase], which all the other members of society can draw upon in return for their labour. The other members of society, when they buy the commodities which the labourer has produced, simply give him the bare equivalent of what it has cost the labourer to produce them.” (Turgot, vol. i, p. 10.) For a more detailed account see Baudeau, Explication du Tableau économique.

“This movement of commerce from one class to another, and the conditions which give rise to it, are not mere hypotheses. A little reflection will show that they are faithfully copied from nature.” (Quesnay, p. 60.)

They imagined that it was actually so. “On the one hand, we see the productive class living on a series of payments, which are given in return for its labour, and always bearing a close relation to the outlay upon its upkeep. On the other, there is nothing but consumption and annihilation of goods, but no production.” (Quesnay, p. 60.)

“It is impossible not to recognise the right of property as a divine institution, for it has been ordained that this should be the indirect means of perpetuating the work of creation.” (La Rivière, p. 618.) “The order of society presupposes the existence of a third class in society, namely, the proprietors who make preparation for the work of cultivation and who dispense the net product.” (Quesnay, p. 181.)

“Immediately below the landed proprietors come the productive classes, whose labour is the only source of their income, but who cannot exercise that labour unless the landlord has already incurred some outlay in the way of ground expenses.” (Baudeau, p. 691.)

The Physiocrats never mention the agricultural workers, and one might almost think that there were none. Their solicitude for the agriculturists does not extend beyond the farmers and métayers. M. Weulersse has referred to their system, not without some justification, as an essentially capitalistic one.

“We may call them the nobility, as well as the propertied class. Nobility in this sense, far from being illusory, is a very useful institution in the history of civilised nations.” (Baudeau, p. 670.)

“In the third line—they generally occupy the first rank—we have the landed proprietors who prepare the soil, build houses, make plantations and enclosures at their own expense or who pay for those outlays by buying property already developed. This revenue, they might argue, belongs to us because of the wisdom and forethought we have exercised in preparing the land, in undertaking to keep it in repair, and to improve it still further.” (Baudeau, Philosophie économique, p. 757.) “The foremost and most essential agent of production must be that man who makes it possible. But who is this agent but the landed proprietor, whose claims to his prerogatives are based upon the need for his productive services?” (Mercier de la Rivière, pp. 466-467.)

“It is this expenditure that makes the claim of proprietors real and their existence just and necessary. Until such expenditure is incurred the right of property is merely an exclusive right to make the soil capable of bearing fruit.” (Baudeau, p. 851.) In other words, so long as the proprietor has not incurred some expenditure the right of property is simply reduced to occupation.

The Physiocrats distinguished three kinds of avances:

1. The annual expenditure (avances annuelles) incurred in connection with the actual work of cultivation, which recurs every year, such as the cost of seed and manure, cost of maintaining labourers, etc. The annual harvest ought to repay all this, which to-day would be called circulating capital.

2. The “original” outlay (avances primitives) involved in buying cattle and implements which render service for a number of years, and for which the proprietor does not expect to be recompensed in a single year. The return is spread out over a number of years. Here we have the distinction between fixed and circulating capital, and the idea of the gradual redemption of the former as against the total repayment of the latter at one single use. It did not escape the Physiocrats’ notice that an intelligent increase of the fixed might gradually reduce the annual expenditure. Such ideas were quite novel. But they immediately took their place as definite contributions to the science. They are no longer confined to agriculture, however, but apply equally to all branches of production.

3. The avances foncières are the expenses which are undertaken with a view to preparing the land for cultivation. (The adjective “primitive” would have been better applied here.)

The first two kinds of expenditure are incumbent upon the agriculturist and entitle him to a remuneration sufficient to cover his expenses.

The third is incumbent upon the proprietor and constitutes his claim to a share of the funds. “Before you can set up a farm where agriculture may be steadily practised year in and year out what must be done? A block of buildings and a farmhouse must be built, roads made and plantations set, the soil must be prepared, the stones cleared, trees cut down and roots removed; drains must also be cut and shelters prepared. These are the avances foncières, the work that is incumbent upon proprietors, and the true basis of their claim to the privileges of proprietorship.” (Baudeau, Éphémérides, May 1776. A reply to Condillac.)

“Without that sense of security which property gives, the land would still be uncultivated.” (Quesnay, Maximes, iv.) “Everything would be lost if this fount of wealth were not as well assured as the person of the individual.” (Dupont, vol. i. p. 26.)

Mercier de la Rivière, vol. i, p. 242.

Maximes, iv.

Pp. 615, 617.

It is necessary to make a note here of one of the many differences between Turgot and the Physiocrats. Turgot seems much less firmly convinced of the social utility of landed property and of the legitimacy of the right of property. He thinks that its origin is simply due to occupation. This weakens the Physiocratic case very considerably. “The earth is peopled and cultivation extends. The best lands will in time all be occupied. For the last comers there will only be the unfertile lands rejected by the first. In the end every piece of land will have its owner, and those who possess none will have no other resource than to exchange the labour of their arm for the superfluous corn of the proprietor.” (Vol. i, p. 12.) We are here not very far from the Ricardian theory.

Baudeau, p. 378.

“A proprietor who keeps up the avances foncières without fail is performing the noblest service that anyone can perform on this earth.” (Baudeau.)

“The rich have the control of the fund from which the workers are paid, but they are doing a great injustice if they appropriate it.” (Quesnay, vol. i, p. 193.)

Pp. 835, 839. And Mercier de la Rivière writes in terms not less severe; “He is responsible under pain of annihilation for the products of society, and no part of the produce which goes to support the cultivator should wittingly be employed otherwise.” The history of Ireland is an interesting commentary on these words.

But let us always remember that when the Physiocrats speak of the rights of the cultivator they think only of the farmer and métayer and never of the paid agriculturist. They are content to demand merely a decent existence for the latter. Were they put too much at ease they would perhaps leave off working. See Weulersse, vol. ii, p. 729. He seems a little unjust, and quotes some words of Quesnay, who protests against the belief that “the poor must be kept poor if they are not to become indolent.”

One is perhaps surprised to find that freedom of work—in other words, the abolition of corporations—is not included in their list, especially since the credit for the downfall of those institutions is usually given to the Physiocrats. Their writings contain only very occasional reference to this topic, because industrial labour is regarded as sterile, and reform touching its organisation concerned them but little. They did, however, protest against the rule that confined the right to engage in a trade to those who had received an express privilege from the Crown. They considered that “to an honest soul this was the most odious maxim which the spirit of domination and rapacity ever invented.” (Baudeau, in Éphémérides, 1768, vol. iv.) Turgot’s famous Edict of January 1776, abolishing the rights of corporations and establishing liberty for all, is, with good reason, attributed to Physiocratic influence.

“Exchange is a contract of equality, equal value being given in exchange for equal value. Consequently it is not a means of increasing wealth, for one gives as much as the other receives, but it is a means of satisfying wants and of varying enjoyment.” (Le Trosne, pp. 903, 904.) But what does this satisfying of wants and variation of enjoyment signify if it does not mean increased wealth?

Mercier de la Rivière, p. 545.

P. 548.

“The settlement of international indebtedness by payment of money is a mere pis aller of foreign trade, adopted by those nations which are unable to give commodities in return for commodities according to custom. And foreign trade itself is a mere pis aller adopted by those nations whose home trade is insufficient to enable them to make the best use of their own productions. It is very strange that anyone should have laid such stress upon a mere pis aller of commerce.” (Quesnay’s Dialogues, p. 175.)

“After all merchants are only traffickers, and the trafficker is just a person who employs his ability in appropriating a part of other people’s wealth.” (Mercier de la Rivière, p. 551.) “Merchants’ gains are not a species of profit.” (Quesnay, p. 151.)

Ordre Naturel, p. 538.

Enforcing sales in open market and in limited quantities only, keeping corn beyond two years, etc. Corn was to be supplied to consumers in the first place, then to bakers, and finally to merchants, etc.

“Let entire freedom of commerce be maintained, for the surest, the exactest, the most profitable regulator both of home and of foreign trade for the nation as well as for the State is perfect freedom of competition.” (Quesnay’s Maximes, xxv.) “We must tell them that free trade is in accordance with the order and with the demands of justice, and everything that conforms to the order bears its own reward.” (Le Trosne, p. 586.)

Dialogues, p. 153. The dearth of plenty, as they paradoxically put it, stimulates production, and Boisguillebert, in an equal paradox, remarks that “Low price gives rise to want.” In the Maximes, p. 98, Quesnay contents himself by saying that free trade in corn makes the price more equal. “It is clear,” he adds, “that, leaving aside the question of foreign debt, equal prices will increase the revenue yielded by the land, which will again result in extended cultivation, which will provide a guarantee against those dearths that decimate population.”

Mercier de la Rivière writes in a similar vein. “A good constant average price ensures abundance, but without freedom we have neither a good price nor plenty.” (P. 570.)

Turgot in his Lettres sur le Commerce des Grains develops the argument at great length and tries to give a mathematical demonstration of it. There was no need for this. It is a commonplace of psychology that a steady price of 20 is preferable to alternative prices of 35 and 5 francs respectively, although the average in both cases is the same.

It is worth noting that the nature of American competition was clearly foreseen by Quesnay—one of the most remarkable instances of scientific prevision on record. In his article on corn in the Encyclopédie he says that he views the fertility of the American colonies with apprehension and dreads the growth of agriculture in the New World, but the fear is provisionally dismissed because the corn is inferior in quality to that of France and is damaged in transit. (See our remarks concerning the Physiocratic connection with modern Protectionist theories.)

It must not be forgotten that the Protectionist system aided the development of industry and retarded that of agriculture by its policy of encouraging the exportation of manufactured products and its restrictions on the exportation of agricultural products and raw materials with a view to securing cheap labour and a plentiful supply of raw materials for the manufacturing industries. The Protectionists were not concerned to prevent the exportation of corn. Both Colbertism and Mercantilism sacrificed the cultivator by preventing the exportation of corn and by allowing of its importation, while doing the exact opposite for manufactured products.

“Upon final analysis do you find that you have gained anything by your policy of always selling to foreigners without ever buying from them? Have you gained any money by the process? But you cannot retain it. It has passed through your hands without being of the least use. The more it increases the more does its value diminish, while the value of other things increases proportionally.” (Mercier de la Rivière, pp. 580-583.)

Turgot, Œuvres, vol. i, p. 181. “If you succeed in keeping back foreign merchants by means of your protective tariffs they will not bring you those goods which you need, thus causing those impositions which were designed for others to retaliate upon your own head.” (Quesnay, Dialogues.)

Dialogues, pp. 254, 274.

Ibid., p. 237.

Ibid., p. 22. He proposed a highly complicated system imposing moderate duties both upon the importation and exportation of corn—a 5 per cent. ad valorem duty in the one case and a 10 per cent. in the other.

Turgot was the author of a work on this subject, entitled Mémoire sur les Prêts d’Argent (1769).

Réflexions sur la Formation des Richesses, §§ lix, lxi, lxxiv.

“Remove all useless, unjust, contradictory, and absurd laws, and there will not be much legislative machinery left after that.” (Baudeau, p. 817.) “It is not a question of procuring immense riches, but simply a question of letting people alone, a problem that hardly requires a moment’s thought.” So wrote Boisguillebert sixty years before.

Quesnay, Maximes, vol. i, p. 390. Mercier de la Rivière writes in much the same style; “The positive laws that are already in existence are merely expressions of such natural rights.” (Vol. ii, p. 61.) It sounds like a preamble to the Declaration of the Rights of Man.

“The Physiocrats had the most absolute contempt for political liberty.” (Esmein, La Science politique des Physiocrates, address at the opening session of the Congress of Learned Societies, Paris, 1906.)

“The Greek republics never became acquainted with the laws of the order. Those restless, usurping, tyrannical tribes never ceased to drench the plains with human blood, to cover with ruins and to reduce to waste the most fertile and the best situated soil in the then known world.” (Baudeau, p. 800.)

“It is evident that a democratic sovereign—i.e. the whole people—cannot itself exercise its authority, and must be content to name representatives. These representatives are merely agents, whose functions are naturally transitory, and such temporary agents cannot always be in complete harmony with every interest within the nation. This is not the kind of administration contemplated by the Physiocrats. The sovereignty of the natural order is neither elective nor aristocratic. Only in the case of hereditary monarchy can all interests, both personal and individual, present and future, be clearly linked with those of the nation, by their co-partnership in all the net products of the territory submitted to their care.” (Dupont, vol. i, pp. 359-360.)

This sounds very much like a eulogy of the House of Hohenzollern, delivered by William II.

Very curious also are Dupont’s criticisms of the parliamentary régime. In his letter to J. B. Say (p. 414) he notes “its tendency to corruption and canker,” which had not then manifested itself in the United States of America. These letters, though very interesting, hardly belong to a history of economic doctrines.

“It is only when the people are ingenuous that we find real despots, because then the sovereign can do whatever he wills.” (Dupont, p. 364.)

Quesnay, Maximes, i. The Physiocrats were in favour of a national assembly, but would give it no legislative power. It was to be just a council of State concerned chiefly with public works and with the apportionment of the burden of taxation. See M. Esmein’s mémoire on the proposed National Assembly of the Physiocrats (Comptes rendus de l’Académie des Sciences Morales et Politiques, 1904).

“The personal despotism will only be the legal despotism of an obvious and essential order. In legal despotism the obviousness of a law demands obedience before the monarch enjoins it. Euclid is a veritable despot, and the geometrical truths that he enunciates are really despotic laws. The legal and personal despotism of the legislator are one and the same. Together they are irresistible.” (Mercier de la Rivière, pp. 460-471.) This despotism is really not unlike that of Comte, who remarks that there is no question of liberty of conscience in geometry.

“On the contrary,” says Quesnay in a letter to Mirabeau, “this despotism is a sufficient guarantee against the abuse of power.”

“That is an abominable absurdity,” says Baudeau, “for on this reckoning a mere majority vote would be sufficient to justify parricide.”

Is it necessary to point out that this is exactly the reverse of the view held by interventionists and socialists of these later times, who think that the mission of the State is to redress the grievances caused by natural laws?

“This single supreme will which exercises supreme power is not, strictly speaking, a human will at all. It is just the voice of nature—the will of God. The Chinese are the only people whose philosophy seems to have got hold of this supreme truth, and they regard their emperor as the eldest son of God.” (Baudeau, p. 798.)

Some writers—for example, Pantaleoni in his introduction to Arthur Labriola’s book, Le Dottrine economiche di Quesnay—seem to think that the Physiocratic criticism proved fatal to feudal society, just as the socialistic criticism of the present time is undermining the bourgeois society. Politically this is true enough, for the Physiocrats advocated the establishment of a single supreme monarch with undivided authority. Economically it is incorrect, for their conception even of sovereignty and taxation is impregnated with feudal ideas.

Dupont, Discours en tête des Œuvres de Quesnay, vol. i, p. 35.

Ibid. p. 22.

Turgot, who is less inclined to favour agriculture, thinks that certain royal privileges must be granted before manufacturers can compete with agriculture (Œuvres, vol. i, p. 360).

“One has come to regard the various nations as drawn up against one another in a perpetual state of war. This unfortunate prejudice is almost sacred, and is regarded as a patriotic virtue.” (Baudeau, p. 808.)

The three errors usually committed by States, and the three that led to the downfall of Greece, Baudeau thought, were arbitrary use of legislative authority, oppressive taxation, and aggressive patriotism (p. 801).

“Before a harvest can be reaped not only must the cultivators incur the usual outlay upon stock, etc., and the proprietors upon clearing the land, but the public authority must also incur some expense, which might be designated avances souveraines.” (Baudeau, p. 758.)

“The Government ought to be less concerned with the task of saving than with the duty of spending upon those operations that are necessary for the prosperity of the realm. This heavy expenditure will cease when the country has become wealthy.” (Quesnay, Maximes, xxvi.)

“It is a narrow and churlish English idea which decrees that an annual sum should be annually voted to the Government, and that Parliament should reserve to itself the right of refusing this tax. Such a procedure is a travesty of democracy.” (Dupont, in a letter to J. B. Say.)

“The amount of the tax as compared with the amount of the net product should be such that the position of the landed proprietor shall be the best possible and the state of being a landowner preferable to any other state in society.” (Dupont, p. 356.)

If we compare this figure with the total gross revenue of France, valued then at 5 milliard francs, it would represent a tax of 12 per cent., which is rather heavy for a State that was supposed to be governed by the laws of the “natural order.” The proportion which the present French Budget bears to the total revenue of the country is 16 per cent.

The French Budget of 1781, introduced by Necker, corresponded almost exactly with the figure given by the Physiocrats, namely, 610 millions. Of course, we ought to add to this the ecclesiastical dues, the seigniorial rights, and the compulsory labour of every kind, which were to disappear under the Physiocratic régime.

“The tax is a kind of inalienable common property. When proprietors buy or sell land they do not buy and sell the tax. They can only dispose of that portion of the land which really belongs to them, after deducting the amount of the tax. This tax is no more a charge upon property than is the right of fellow proprietors a burden upon one’s property. And so the public revenue is not burdensome to anyone, costs nothing, and is paid by no one. Hence, it in no way curtails the amount of property which a person has.” (Dupont, vol. i, pp. 357, 358.)

In order to give every security to proprietors the Physiocrats were anxious that the value of the property, when once it was fixed, should vary as little as possible. Baudeau, however, recognised the advisability of periodical revaluations “in order that the sovereign power should always share in both the profits and the losses of the producer.” And he addresses this important caution to the proprietors: “Take no credit to yourselves for the increase in the revenue of land. The thanks are really due to the growing efficiency of the sovereign authority.” (P. 708.)

“Let us observe, in passing, that the terms ‘taxation’ and ‘public revenue’ have unfortunately become synonymous in the public mind. The term ‘taxation’ is always unpopular. It implies a charge that is hard to bear, and which everybody is anxious to shirk. The public revenue is the product of the sovereign’s landed property, which is distinct from his subjects’ property.” (Mercier de la Rivière, p. 451.)

“The sovereign takes a fixed amount of the net product for his annual income. This amount of necessity grows with every increase of the net product and diminishes with every shrinking of the product. The people’s interests and the sovereign’s are, consequently, necessarily one.” (Baudeau, p. 769.)

This was the basis of Voltaire’s lively satire, L’Homme avec Quarante Écus. It treats of a wealthy financier who escapes taxation, and who makes sport of the poor agriculturist who pays taxes for both, although his income is only forty écus.

“Such a reduction of the necessary expenditure must result in diminished production, because there can be no harvest without some amount of preliminary expense. You may check your expenditure, but it will mean diminishing your harvest—a decrease in the one means an equal decrease of the other. Such a fatal blow to the growth of population would, in the long run, injure the landed proprietor and the sovereign.” (Dupont de Nemours, p. 353.)

“A fall in the expenditure means a smaller harvest, which means that less will be expended upon making preparation for the next harvest. This cyclical movement seems a terrible thing to those who have given it some thought.” (Mercier de la Rivière, p. 499.)

“There would be something to say for this if the rich repaid them by increased wages or additional almsgiving. But the poor give to the rich, and so add to their misery, already sufficiently great. The State demands from those who have nothing to give, and directs all its penalties and exercises all its severity upon the poor.” (Turgot, Œuvres, vol. i, p. 413).

“It would be better for the landed proprietors to pay it direct to the Treasury, and thus save the cost of collection.” (Dupont de Nemours, p. 352.)

“It might happen—and, indeed, it often does happen—that the worker’s wage is only equal to what is necessary for his subsistence.” (Réflexions, vi.)

It is also possible that Jesus was not formulating a general law when He said that we have the poor always with us. Turgot likewise wished to state the simple fact, and not to draw a general conclusion.

Quesnay, Second Problème économique, p. 134. The argument which follows is rather curious. He does not seem to think that a fall in wages even below the minimum would result in the death of many people, but simply that it would result in emigration to other countries, and that as a consequence of such emigration the diminished supply at home would soon lead to higher wages being paid—a fairly optimistic conclusion for the period.

Baudeau (p. 770) points out the error of confusing the gross revenue with the net revenue. Allowance should be made for the cost of collecting the revenue, etc.

“If unfortunately it be true that three-tenths of the annual product is not sufficient to cover the ordinary expenditure, there is only one natural and reasonable conclusion to be drawn from this, namely, curtail the expenditure.” (Dupont de Nemours, p. 775.)

“The tax must never be assessed in accordance with individual caprice. The amount is determined by the natural order.” (Dupont, Sur l’Origin d’un Science nouvelle.) Neither should the State, in their opinion, exceed the limit, because it would mean having recourse to borrowing, which would simply mean increased deferred taxation.

See M. Garçon’s instructive brochure, Un Prince allemand physiocrate, for a résumé of the Margrave’s correspondence.

We find the word in one of Dupont’s letters to Say, but that is much later.

Henry George dedicated his volume entitled Protection or Free Trade to them because he considered that they were his masters. But his tribute loses its point somewhat when we remember that he admits that he had never read them.

Listen to Mercier de la Rivière: “We must admire the way in which one man becomes an instrument for the happiness of others, and the manner in which this happiness seems to communicate itself to the whole. Speaking literally, of course I do not know whether there will not be a few unhappy people even in this State, but their numbers will be so few and the happy ones will be so numerous that we need not be much concerned about helping them. All our interests and wills will be linked to the interest and will of the sovereign, forming for our common good a harmony which can only be regarded as the work of a kind Providence that wills that the land shall be full of happy men.” This enchanting picture only applies to future society, when the “natural order” will be established. The optimism of the Physiocrats is very much like the anarchists’.

Very little seems to have been known about Cantillon for more than a century after his death. But, like all the rediscovered founders of the science, he has received considerable attention for some years past. His influence upon the Physiocrats has perhaps been exaggerated. Mirabeau’s earliest book, L’Ami des Hommes, which appeared just twelve months after Cantillon’s work, is undoubtedly inspired by Cantillon. No discussion of his work is included in the text because it was felt that it might interfere with the plan of the work as already mapped out. There are several articles in various reviews which deal with Cantillon’s work, the earliest being that contributed by Stanley Jevons to the Contemporary Review in 1881.

Valeurs et Monnaies, which dates from 1769, and again in his Réflexions. Quesnay’s conception of value may be gleaned from his article entitled Hommes, which remained unpublished for a long time, and has only recently appeared in the Revue d’Histoire des Doctrines économiques et sociales, vol. i, No. 1.

He dilates at considerable length on the distinction between estimative value (what would now be called subjective value) and appreciative (or social) value. The first depends upon the amount of time and trouble we are willing to sacrifice in order to acquire it. In this connection the notion of labour-value appears. As to appreciative value, it differs from the preceding only in being an “average estimative value.”

Turgot, though a disciple of Quesnay, remained outside the Physiocratic school. He always referred to them contemptuously as “the sect.”

“I am so struck with this notion that I think it must serve as the basis of this whole treatise.” (Chap. 1.)

Le Commerce et le Gouvernement, p. 15.

Ibid., Part I, chap. 1.

“It is not correct to say that the exchanged values are equal; on the contrary, each party seeks to give a smaller value in exchange for a larger one. The process proves advantageous to both; hence, doubtless, the origin of the idea that the values must be equal. But one ought to have come to the conclusion that if each gains both must have given less and obtained more.” (Op. cit., pp. 55, 86.) Compare this with the quotation from de Trosne, p. 27, and note its psychological superiority.

Op. cit., Part I, chap. 9.

“Even where the land is covered with products there is no additional material beyond what there was formerly. They have just been given a new form, and wealth consists merely of such transformations.”

Op. cit., Part I, chap. 29.

In a recent study of the wage bargain we find M. Chatelain giving expression to similar ideas, though apparently knowing nothing of Condillac’s work.

Op. cit., chap. xv, par. 8.

See Turgot, Mémoire sur les Prêts d’Argent, p. 122: “In every bargain involving the taking of interest a certain sum of money is given now in exchange for a somewhat larger sum to be paid at some future date; difference of time as well as of place makes a real difference to the value of money.” Further on he adds (p. 127): “The difference is familiar to everyone, and the well-known proverb ‘A bird in the hand is worth two in the bush’ is simply a popular way of expressing it.”

The life of Adam Smith presents nothing remarkable. It is easily summed up in the story of his travels, his professional activities, and the records of his friendships, and among these his intimacy with Hume the philosopher has become classical. He was born at Kirkcaldy, in Scotland, on June 5, 1723. From 1737 to 1740 he studied at the University of Glasgow under Francis Hutcheson, the philosopher, to whom he became much attached. From 1740 to 1746 he continued his studies at Oxford, where he seems to have worked steadily, chiefly by himself. The intellectual state of the university was at that time extremely low, and a number of the professors never delivered any lectures at all. Returning to Scotland, he gave two free courses of lectures at Edinburgh, one on English literature and the other on political economy, in the course of which he defended the principles of commercial liberty. In 1751 he became Professor of Logic at Glasgow, at that time one of the best universities in Europe. Towards the end of the year he was appointed to the chair of Moral Philosophy, which included the four divisions of Natural Theology, Ethics, Jurisprudence, and Politics within its curriculum. In 1759 he published his Theory of Moral Sentiments, which speedily brought him a great reputation. In 1764, when forty years of age, he quitted the professorial chair at Glasgow University and accompanied the young Duke of Buccleuch, son-in-law of Charles Townshend, the celebrated statesman, on his travels abroad. With the young nobility of this period foreign travel frequently took the place of a university training, on account of the disrepute into which the latter had fallen. Smith was given a pension of £300 a year for the rest of his life, so that the mere material advantage was considerably in excess of his earnings as a professor. The years 1764-66 were spent in this way. A year and a half was passed at Toulouse, two months at Geneva, where he met Voltaire, and another ten months at Paris. While in Paris he became acquainted with the Physiocrats, particularly with Turgot and the Encyclopædists. It was at Toulouse that he began his Wealth of Nations. Returning to Scotland in 1767, he went to live with his mother, with the sole object of devoting himself to this work. By 1773 the book was nearly complete. But Smith moved to London, and the work did not appear till 1776. By this achievement Smith crowned the great celebrity which he already enjoyed. In January 1778 Smith was appointed Commissioner of Customs at Edinburgh, a distinguished position which he held until his death in 1790.

All that we know of Smith’s character shows him to have been a man of tender feelings and of great refinement of character. His absent-mindedness has become proverbial. In politics his sympathies were with the Whigs. In religion he associated himself with the deists, a school that was greatly in vogue towards the end of the eighteenth century, and of which Voltaire, who was much admired by Smith, was the most celebrated representative.

For a long time the only life of Smith which we possessed was the memoir written by Dugald Stewart, Account of the Life and Writings of Adam Smith, and read by him in 1793 before the Royal Society of Edinburgh. It appeared in the Transactions of the society for 1794, and was published in volume form in 1811 along with other biographies, under the title of Biographical Memoirs of Adam Smith, Robertson, etc., by Dugald Stewart. To-day we are more fortunate. John Rae in his charming Life of Adam Smith (London, 1895) has succeeded in bringing to light all that we can know of Smith and his circle. To him we are indebted for most of the details we have given. In 1894 James Bonar published a catalogue of Smith’s library, containing about 2300 volumes, and comprising about two-thirds of his whole library. A still more important contribution to the study of Smith’s ideas has been made by Dr. Edwin Cannan, who in 1896 published Lectures on Justice, Police, Revenue, and Arms, delivered in Glasgow by Adam Smith, from Notes taken by a Student in 1763 (Oxford). This represents the course of lectures on political economy delivered by Smith while professor at Glasgow. A manuscript copy of the notes taken in this course by a student, probably in 1763, was accidentally discovered by a London solicitor in 1876. These notes were in 1895 forwarded to Dr. Cannan for publication. They are especially precious in helping us to understand Smith’s ideas before his stay in France and his meeting with the Physiocrats. Of the numerous editions of the Wealth of Nations which have hitherto been published, the more important are those of Buchanan, McCulloch, Thorold Rogers, and Nicholson. The latest critical edition is that of Dr. Cannan, published in 1904 by Methuen, containing very valuable notes. This is the edition we have used.

Wealth of Nations, vol. ii, p. 275.

On this point see Schatz’s Individualisme économique et social (Paris, 1908).

Chap. iv of sec. ii of the 7th part of the Theory of Moral Sentiments is entitled Of Systems of License.

Oncken’s edition, p. 331.

The theory that there are three factors of production, which has since become a commonplace of economics, is not to be found in Smith. Indirectly, however, it was he who originated the idea by distinguishing in his treatment of distribution between the various sources of revenue. The distinction once made, it was quite natural to consider each source as a factor of production; and this is just what J. B. Say did in his Treatise (2nd ed., chaps. iv and v). Cf. Cannan’s History of the Theories of Production and Distribution, p. 40 (1894).

Wealth of Nations, Book I, chap. 1; Cannan, vol. i, pp. 13-14.

“In almost every other race of animals each individual, when it is grown up to maturity, is entirely independent, and in its natural state has occasion for the assistance of no other living creature.” (Wealth of Nations, Book I, chap. 2; Cannan, vol. i, p. 16.)

Wealth of Nations, Book I, chap. 1; Cannan, vol. i, p. 6.

Ibid., Book V, chap, 1, par. iii, art. 2; vol. ii, p. 267.

“For a very small expence the public can facilitate, can encourage, and can even impose upon almost the whole body of the people, the necessity of acquiring those most essential parts of education.” (Wealth of Nations, Book V, chap. 1, part iii, art. 2; Cannan, vol. ii, p. 270.)

Ibid., Book I, chap. 3; vol. i, p. 19.

“As the accumulation of stock must, in the nature of things, be previous to the division of labour, so labour can be more and more subdivided in proportion only as stock is previously more and more accumulated.” (Ibid., Book II, Introd.; vol. i, p. 259.) It is true that in another passage he speaks of the quantity of stock which can be employed in any branch of business depending very much upon that of the labour which can be employed in it (Book I, chap. 10, part ii; vol. i, p. 137). But this observation remains isolated, while the former represents his true teaching.

Cf. Cannan’s penetrating criticism of this idea of Smith’s in Theories of Production and Distribution, pp. 80-83.

This is the first of the four celebrated maxims enunciated by Smith in his theory of taxation. Here are the other three: “(ii) The tax which each individual is bound to pay ought to be certain and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. (iii) Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it. (iv) Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible, over and above what it brings into the public treasury of the State.” (Wealth of Nations, Book V, chap. 2, part ii; Cannan, vol. ii, pp. 310-311.)

This rule of payment according to ability did not prevent his pronouncing in another paragraph in favour of progressive taxation. This is an instance of a want of logic frequently evidenced in his writings. Speaking of taxes upon rent, he remarks that they weigh more heavily upon rich than upon poor, because the former in proportion to their income spend more upon house rent than the latter. But “it is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.” (Ibid., Book V, chap. 2, part ii, art. 1; vol. ii, p. 327.)

Ibid., Book II, chap. 3; vol. i, p. 314.

“Farmers and country labourers, indeed, over and above the stock which maintains and employs them, reproduce annually a neat produce, a free rent to the landlord. As a marriage which affords three children is certainly more productive than one which affords only two; so the labour of farmers and country labourers is certainly more productive than that of merchants, artificers, and manufacturers. The superior produce of the one class, however, does not render the other barren or unproductive.” (Wealth of Nations, Book IV, chap. 9; Cannan, vol. ii, p. 173.)

Ibid., Book IV, chap. 9; vol. ii, p. 176.

Ibid., Book II, chap. 5; vol. i, p. 344.

Wealth of Nations, Book II, chap. 5; Cannan, vol. i, p. 344. Note that here as elsewhere Smith entertains more than one opinion. In other passages in the book he regards rent as a monopoly price “that enters into the composition of the price of commodities in a different way from wages and profit. High or low wages and profit, are the causes of high or low price; high or low rent is the effect of it. It is because high or low wages and profit must be paid, in order to bring a particular commodity to market, that its price is high or low. But it is because its price is high or low; a great deal more, or very little more, or no more, than what is sufficient to pay those wages and profit, that it affords a high rent, or a low rent, or no rent at all.” (Ibid., Book I, chap. 11; vol. i, p. 147.)

It is impossible to reconcile these statements. In the one case rent is regarded as a constituent element of price, in the other it is the effect of price.

In the first edition this contradiction was still more evident. In that edition rent, along with profit and wages, was treated as a third determinant of value. (See Cannan’s edition, vol. i, p. 51, note 7.) The paragraph was deleted from the second edition, and rent was treated merely as a component part of the price. This modification was perhaps the outcome of a letter written by Hume to Smith on April 1, 1776, after he had read the Wealth of Nations for the first time. “I cannot think,” says Hume, “that the rent of farms makes any part of the price of the produce, but that the price is determined altogether by the quantity and the demand.” (Quoted by Rae in his Life of Adam Smith, p. 286.) The celebrated controversy as to whether rent enters into prices is not a thing of yesterday. Its origin dates from the birth of political economy itself, and it will probably only die with it.

His error is partly due to the fact that he failed to distinguish between the profits of the entrepreneur and the interest of the capitalist. Both with Smith and with his successors the word “profit” signified a twofold revenue, and this was perfectly correct so long as the entrepreneur was also a capitalist. The word “interest” was reserved for the income of that person who lent capital but who did not himself produce anything. The revenue “derived from stock, by the person who manages or employs it, is called profit. That derived from it by the person who does not employ it himself, but lends it to another, is called the interest or the use of money.” (Ibid., Book I, chap. 6; vol. i, p. 54.) J. B. Say was the first to give us a definite idea of the entrepreneur. Had Smith realised more clearly the functions of the entrepreneur he would probably have perceived: (1) That the entrepreneur, in addition to paying interest on his capital, frequently has to pay rent for the use of the soil; (2) that profit strictly so called includes an element analogous to rent. According to Smith, profit was simply payment for risks undergone or for work undertaken.

James Watt in 1756 had set up his workshop within the precincts of the University of Glasgow, for which he manufactured mathematical instruments. The corporation had refused him permission to set it up in the town—a striking illustration of the narrowness and inflexibility of “the corporative régime.”

A combination of Hargreave’s spinning jenny and Arkwright’s water frame.

Marx speaks of Smith as the economist who is the very epitome of the manufacturing period. (Das Kapital, vol. i, p. 313, note.)

See Mantoux’ work, La Révolution industrielle au XVIIIe Siècle, p. 75 (Paris, 1905). “We are mistaken,” says he, “if we think that manufacture was the dominant feature of the period preceding the factory system. Logically it may be the necessary antecedent, but historically its claim to priority is weak, although it left its indelible marks upon industry. The appearance of industry at the time of the Renaissance is an event of the greatest importance and significance, but it only played a part of secondary importance for a century or two.”

Rae’s Life of Adam Smith, p. 89.

Wealth of Nations, Book I, chap. 11; Cannan, vol. i. p. 250.

Wealth of Nations, Book I, chap. 8; Cannan, vol. i, p. 80.

Ibid., Book I, chap. 9, in fine; vol. i, p. 100.

Ibid., Book I, chap. 10, part ii; vol. i, p. 143.

Ibid., Book I, chap. 10, part ii; vol. i, p. 128. The whole passage contains a curious eulogy of proprietors and farmers.

Wealth of Nations, Book IV, chap. 2; Cannan, vol. i, p. 427.

For the connection between Smith’s system and the philosophy of his time see W. Hasbach, Die allgemeinen philosophischen Grundlagen der von F. Quesnai und A. Smith begründeten politischen Oekonomie (Leipzig, 1890).

Wealth of Nations, Book I, chap. 2; Cannan, vol. i, p. 15.

The whole passage, almost word for word, may be found in Smith’s course of lectures at Glasgow, and the whole is taken from Mandeville’s Fable des Abeilles.

Wealth of Nations, Book I, chap. 4; Cannan, vol. i, p. 24.

For a long time economists were quite content with Smith’s theory of capital. Like other portions of his work, it readily became classic, and subsequent writers simply repeated it. To-day, however, this success hardly seems to have been warranted. “It can scarcely be denied,” writes Cannan, “that Smith left the whole subject of capital in the most unsatisfactory state.” (Theories of Production and Distribution, p. 89.) If this remark needs any justification we have it in the many discussions which have taken place on this subject during the last fifty years, and which are not yet at an end. Some of the most original works of recent years, Böhm-Bawerk’s Positive Theory of Capital, for example, are entirely taken up with this topic. In England, America, and Italy the best-known economists, Cannan, Fisher, and Pareto, have recently revived the ancient notions, and the discussions which have followed are sufficient evidence that Smith had by no means exhausted the subject. If we carefully read Book II of the Wealth of Nations, which is entirely devoted to this topic, what do we find? We have a distinction drawn between fixed and circulating capital borrowed from practical affairs, but possessing no great scientific value; the very doubtful identification of national capital with the sum of private capitals; a very unsatisfactory attempt at differentiating between the notions of capital and revenue; the affirmation that saving involves consumption, a paradox repeated ad nauseam down to the days of Mill; the commonplace statement that capital increases as saving grows; and, finally, the proposition that “capital limits industry.”

Wealth of Nations, Book II, chap. 3; Cannan, vol. i, p. 325. “The annual produce of the land and labour of any nation can be increased in its value by no other means, but by increasing either the number of its productive labourers, or the productive powers of those labourers who had before been employed. The number of its productive labourers, it is evident, can never be much increased, but in consequence of an increase of capital, or of the funds destined for maintaining them. The productive powers of the same number of labourers cannot be increased, but in consequence either of some addition and improvement to those machines and instruments which facilitate and abridge labour; or of a more proper division and distribution of employment. In either case an additional capital is almost always required.”

Ibid., Book IV, chap. 2; vol. i, p. 423.

“The general industry of the society never can exceed what the capital of the society can employ.” (Ibid., Book IV, chap. 2; vol. i, p. 419.) John Stuart Mill was the first to employ the formula in its condensed form, “Industry is limited by capital.”

We have spoken of the controversies as threadbare, for every economist is by this time persuaded that, assuming the necessity for the co-operation of capital, land, and labour in production, it is quite clear that the amount of produce raised must depend upon the amount of each of these factors employed, and not upon the amount of any one of them.

Smith had anticipated the arguments advanced by such socialists as Rodbertus and Lassalle, who regard saving rather than labour as the source of capital. “Parsimony, and not industry, is the immediate cause of the increase of capital. Industry, indeed, provides the subject which parsimony accumulates. But whatever industry might acquire, if parsimony did not save and store up, the capital would never be the greater.” (Wealth of Nations, Book II, chap. 3; Cannan, vol. i, p. 320.)

Ibid., Book II, chap. 3; vol. i, pp. 323, 324, 325.

Wealth of Nations, Book I, chap. 7; Cannan, vol. i, p. 58. “The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity, or the whole value of the rent, labour, and profit, which must be paid in order to bring it thither. Such people may be called the effectual demanders, and their demand the effectual demand; since it may be sufficient to effectuate the bringing of the commodity to market. It is different from the absolute demand. A very poor man may be said in some sense to have a demand for a coach and six; he might like to have it; but his demand is not an effectual demand, as the commodity can never be brought to market in order to satisfy it.”

For Smith oppression meant the tyranny either of producers or consumers. When profits are above the normal rate “it is a proof that something is either bought cheaper or sold dearer than it ought to be, and that some particular class of citizens is more or less oppressed either by paying more or by getting less than what is suitable to that equality which ought to take place, and which naturally does take place among all the different classes of them.” (Ibid., Book IV, chap. 7,