---
id: book-1-chapter-06
title: "OF THE COMPONENT PART OF THE PRICE OF COMMODITIES."
book: "1"
chapter: 6
artifact_type: content
---

CHAPTER VI.
OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.



      In that early and rude state of society which precedes both the
      accumulation of stock and the appropriation of land, the proportion
      between the quantities of labour necessary for acquiring different
      objects, seems to be the only circumstance which can afford any rule for
      exchanging them for one another. If among a nation of hunters, for
      example, it usually costs twice the labour to kill a beaver which it does
      to kill a deer, one beaver should naturally exchange for or be worth two
      deer. It is natural that what is usually the produce of two days or two
      hours labour, should be worth double of what is usually the produce of one
      day’s or one hour’s labour.

      If the one species of labour should be more severe than the other, some
      allowance will naturally be made for this superior hardship; and the
      produce of one hour’s labour in the one way may frequently exchange for
      that of two hour’s labour in the other.

      Or if the one species of labour requires an uncommon degree of dexterity
      and ingenuity, the esteem which men have for such talents, will naturally
      give a value to their produce, superior to what would be due to the time
      employed about it. Such talents can seldom be acquired but in consequence
      of long application, and the superior value of their produce may
      frequently be no more than a reasonable compensation for the time and
      labour which must be spent in acquiring them. In the advanced state of
      society, allowances of this kind, for superior hardship and superior
      skill, are commonly made in the wages of labour; and something of the same
      kind must probably have taken place in its earliest and rudest period.

      In this state of things, the whole produce of labour belongs to the
      labourer; and the quantity of labour commonly employed in acquiring or
      producing any commodity, is the only circumstance which can regulate the
      quantity of labour which it ought commonly to purchase, command, or
      exchange for.

      As soon as stock has accumulated in the hands of particular persons, some
      of them will naturally employ it in setting to work industrious people,
      whom they will supply with materials and subsistence, in order to make a
      profit by the sale of their work, or by what their labour adds to the
      value of the materials. In exchanging the complete manufacture either for
      money, for labour, or for other goods, over and above what may be
      sufficient to pay the price of the materials, and the wages of the
      workmen, something must be given for the profits of the undertaker of the
      work, who hazards his stock in this adventure. The value which the workmen
      add to the materials, therefore, resolves itself in this case into two
      parts, of which the one pays their wages, the other the profits of their
      employer upon the whole stock of materials and wages which he advanced. He
      could have no interest to employ them, unless he expected from the sale of
      their work something more than what was sufficient to replace his stock to
      him; and he could have no interest to employ a great stock rather than a
      small one, unless his profits were to bear some proportion to the extent
      of his stock.

      The profits of stock, it may perhaps be thought, are only a different name
      for the wages of a particular sort of labour, the labour of inspection and
      direction. They are, however, altogether different, are regulated by quite
      different principles, and bear no proportion to the quantity, the
      hardship, or the ingenuity of this supposed labour of inspection and
      direction. They are regulated altogether by the value of the stock
      employed, and are greater or smaller in proportion to the extent of this
      stock. Let us suppose, for example, that in some particular place, where
      the common annual profits of manufacturing stock are ten per cent. there
      are two different manufactures, in each of which twenty workmen are
      employed, at the rate of fifteen pounds a year each, or at the expense of
      three hundred a-year in each manufactory. Let us suppose, too, that the
      coarse materials annually wrought up in the one cost only seven hundred
      pounds, while the finer materials in the other cost seven thousand. The
      capital annually employed in the one will, in this case, amount only to
      one thousand pounds; whereas that employed in the other will amount to
      seven thousand three hundred pounds. At the rate of ten per cent.
      therefore, the undertaker of the one will expect a yearly profit of about
      one hundred pounds only; while that of the other will expect about seven
      hundred and thirty pounds. But though their profits are so very different,
      their labour of inspection and direction may be either altogether or very
      nearly the same. In many great works, almost the whole labour of this kind
      is committed to some principal clerk. His wages properly express the value
      of this labour of inspection and direction. Though in settling them some
      regard is had commonly, not only to his labour and skill, but to the trust
      which is reposed in him, yet they never bear any regular proportion to the
      capital of which he oversees the management; and the owner of this
      capital, though he is thus discharged of almost all labour, still expects
      that his profit should bear a regular proportion to his capital. In the
      price of commodities, therefore, the profits of stock constitute a
      component part altogether different from the wages of labour, and
      regulated by quite different principles.

      In this state of things, the whole produce of labour does not always
      belong to the labourer. He must in most cases share it with the owner of
      the stock which employs him. Neither is the quantity of labour commonly
      employed in acquiring or producing any commodity, the only circumstance
      which can regulate the quantity which it ought commonly to purchase,
      command or exchange for. An additional quantity, it is evident, must be
      due for the profits of the stock which advanced the wages and furnished
      the materials of that labour.

      As soon as the land of any country has all become private property, the
      landlords, like all other men, love to reap where they never sowed, and
      demand a rent even for its natural produce. The wood of the forest, the
      grass of the field, and all the natural fruits of the earth, which, when
      land was in common, cost the labourer only the trouble of gathering them,
      come, even to him, to have an additional price fixed upon them. He must
      then pay for the licence to gather them, and must give up to the landlord
      a portion of what his labour either collects or produces. This portion,
      or, what comes to the same thing, the price of this portion, constitutes
      the rent of land, and in the price of the greater part of commodities,
      makes a third component part.

      The real value of all the different component parts of price, it must be
      observed, is measured by the quantity of labour which they can, each of
      them, purchase or command. Labour measures the value, not only of that
      part of price which resolves itself into labour, but of that which
      resolves itself into rent, and of that which resolves itself into profit.

      In every society, the price of every commodity finally resolves itself
      into some one or other, or all of those three parts; and in every improved
      society, all the three enter, more or less, as component parts, into the
      price of the far greater part of commodities.

      In the price of corn, for example, one part pays the rent of the landlord,
      another pays the wages or maintenance of the labourers and labouring
      cattle employed in producing it, and the third pays the profit of the
      farmer. These three parts seem either immediately or ultimately to make up
      the whole price of corn. A fourth part, it may perhaps be thought is
      necessary for replacing the stock of the farmer, or for compensating the
      wear and tear of his labouring cattle, and other instruments of husbandry.
      But it must be considered, that the price of any instrument of husbandry,
      such as a labouring horse, is itself made up of the same time parts; the
      rent of the land upon which he is reared, the labour of tending and
      rearing him, and the profits of the farmer, who advances both the rent of
      this land, and the wages of this labour. Though the price of the corn,
      therefore, may pay the price as well as the maintenance of the horse, the
      whole price still resolves itself, either immediately or ultimately, into
      the same three parts of rent, labour, and profit.

      In the price of flour or meal, we must add to the price of the corn, the
      profits of the miller, and the wages of his servants; in the price of
      bread, the profits of the baker, and the wages of his servants; and in the
      price of both, the labour of transporting the corn from the house of the
      farmer to that of the miller, and from that of the miller to that of the
      baker, together with the profits of those who advance the wages of that
      labour.

      The price of flax resolves itself into the same three parts as that of
      corn. In the price of linen we must add to this price the wages of the
      flax-dresser, of the spinner, of the weaver, of the bleacher, etc.
      together with the profits of their respective employers.

      As any particular commodity comes to be more manufactured, that part of
      the price which resolves itself into wages and profit, comes to be greater
      in proportion to that which resolves itself into rent. In the progress of
      the manufacture, not only the number of profits increase, but every
      subsequent profit is greater than the foregoing; because the capital from
      which it is derived must always be greater. The capital which employs the
      weavers, for example, must be greater than that which employs the
      spinners; because it not only replaces that capital with its profits, but
      pays, besides, the wages of the weavers: and the profits must always bear
      some proportion to the capital.

      In the most improved societies, however, there are always a few
      commodities of which the price resolves itself into two parts only: the
      wages of labour, and the profits of stock; and a still smaller number, in
      which it consists altogether in the wages of labour. In the price of
      sea-fish, for example, one part pays the labour of the fisherman, and the
      other the profits of the capital employed in the fishery. Rent very seldom
      makes any part of it, though it does sometimes, as I shall shew hereafter.
      It is otherwise, at least through the greater part of Europe, in river
      fisheries. A salmon fishery pays a rent; and rent, though it cannot well
      be called the rent of land, makes a part of the price of a salmon, as well
      as wares and profit. In some parts of Scotland, a few poor people make a
      trade of gathering, along the sea-shore, those little variegated stones
      commonly known by the name of Scotch pebbles. The price which is paid to
      them by the stone-cutter, is altogether the wages of their labour; neither
      rent nor profit makes any part of it.

      But the whole price of any commodity must still finally resolve itself
      into some one or other or all of those three parts; as whatever part of it
      remains after paying the rent of the land, and the price of the whole
      labour employed in raising, manufacturing, and bringing it to market, must
      necessarily be profit to somebody.

      As the price or exchangeable value of every particular commodity, taken
      separately, resolves itself into some one or other, or all of those three
      parts; so that of all the commodities which compose the whole annual
      produce of the labour of every country, taken complexly, must resolve
      itself into the same three parts, and be parcelled out among different
      inhabitants of the country, either as the wages of their labour, the
      profits of their stock, or the rent of their land. The whole of what is
      annually either collected or produced by the labour of every society, or,
      what comes to the same thing, the whole price of it, is in this manner
      originally distributed among some of its different members. Wages, profit,
      and rent, are the three original sources of all revenue, as well as of all
      exchangeable value. All other revenue is ultimately derived from some one
      or other of these.

      Whoever derives his revenue from a fund which is his own, must draw it
      either from his labour, from his stock, or from his land. The revenue
      derived from labour is called wages; that 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. It is the compensation which the
      borrower pays to the lender, for the profit which he has an opportunity of
      making by the use of the money. Part of that profit naturally belongs to
      the borrower, who runs the risk and takes the trouble of employing it, and
      part to the lender, who affords him the opportunity of making this profit.
      The interest of money is always a derivative revenue, which, if it is not
      paid from the profit which is made by the use of the money, must be paid
      from some other source of revenue, unless perhaps the borrower is a
      spendthrift, who contracts a second debt in order to pay the interest of
      the first. The revenue which proceeds altogether from land, is called
      rent, and belongs to the landlord. The revenue of the farmer is derived
      partly from his labour, and partly from his stock. To him, land is only
      the instrument which enables him to earn the wages of this labour, and to
      make the profits of this stock. All taxes, and all the revenue which is
      founded upon them, all salaries, pensions, and annuities of every kind,
      are ultimately derived from some one or other of those three original
      sources of revenue, and are paid either immediately or mediately from the
      wages of labour, the profits of stock, or the rent of land.

      When those three different sorts of revenue belong to different persons,
      they are readily distinguished; but when they belong to the same, they are
      sometimes confounded with one another, at least in common language.

      A gentleman who farms a part of his own estate, after paying the expense
      of cultivation, should gain both the rent of the landlord and the profit
      of the farmer. He is apt to denominate, however, his whole gain, profit,
      and thus confounds rent with profit, at least in common language. The
      greater part of our North American and West Indian planters are in this
      situation. They farm, the greater part of them, their own estates: and
      accordingly we seldom hear of the rent of a plantation, but frequently of
      its profit.

      Common farmers seldom employ any overseer to direct the general operations
      of the farm. They generally, too, work a good deal with their own hands,
      as ploughmen, harrowers, etc. What remains of the crop, after paying the
      rent, therefore, should not only replace to them their stock employed in
      cultivation, together with its ordinary profits, but pay them the wages
      which are due to them, both as labourers and overseers. Whatever remains,
      however, after paying the rent and keeping up the stock, is called profit.
      But wages evidently make a part of it. The farmer, by saving these wages,
      must necessarily gain them. Wages, therefore, are in this case confounded
      with profit.

      An independent manufacturer, who has stock enough both to purchase
      materials, and to maintain himself till he can carry his work to market,
      should gain both the wages of a journeyman who works under a master, and
      the profit which that master makes by the sale of that journeyman’s work.
      His whole gains, however, are commonly called profit, and wages are, in
      this case, too, confounded with profit.

      A gardener who cultivates his own garden with his own hands, unites in his
      own person the three different characters, of landlord, farmer, and
      labourer. His produce, therefore, should pay him the rent of the first,
      the profit of the second, and the wages of the third. The whole, however,
      is commonly considered as the earnings of his labour. Both rent and profit
      are, in this case, confounded with wages.

      As in a civilized country there are but few commodities of which the
      exchangeable value arises from labour only, rent and profit contributing
      largely to that of the far greater part of them, so the annual produce of
      its labour will always be sufficient to purchase or command a much greater
      quantity of labour than what was employed in raising, preparing, and
      bringing that produce to market. If the society were annually to employ
      all the labour which it can annually purchase, as the quantity of labour
      would increase greatly every year, so the produce of every succeeding year
      would be of vastly greater value than that of the foregoing. But there is
      no country in which the whole annual produce is employed in maintaining
      the industrious. The idle everywhere consume a great part of it; and,
      according to the different proportions in which it is annually divided
      between those two different orders of people, its ordinary or average
      value must either annually increase or diminish, or continue the same from
      one year to another.
