formity of market to natural prices, and it contradicts the idea that labor is an invariable standard of value, to which he returns in his digression on the variations in the value of silver.

Dr. Smith was seduced into this error by a double confusion. He seems to have imagined that as the natural price of a commodity, A, is regulated by the cost of production, it is the same with the cost of production. But the natural price, is in truth, not the cost of production, but that quantity of other commodities, which can be produced at the same cost. Dr. Smith was still further mistaken, when he supposed that the cost of production, in this sense, of any given quantity of labor is its intrinsic value to the laborer, or the ease, liberty, and happiness, sacrificed in its performance. The cost of production of the present supply of labor, as we have before shown, is represented by the capital expended on the former labor, which produced it. And as this capital was also the cost of the production of the capital in existence, the natural price of the present supply of labor is the present supply of capital, which was purchased by that same past labor, by which it was itself produced.

This series of mistakes, occasioned partly by those ambiguities of language, which the founder of a science finds it peculiarly difficult to escape, led Dr. Smith to regard profits and rents as deductions from the natural wages of labor, and made it necessary to suppose that wages were regulated in civilized societies, where capital is accumulated, by some new standard. Nothing suggested itself for this purpose so readily as that amount of food, clothing and other necessaries, which is required for the support of the laborer and the perpetuation of his class. According to the doctrine before established, the market wages or price of labor must gravitate towards this natural standard; but to prove this, it must be supposed that the amount of this "necessary maintenance" varies with the habits of the laborer, and it is finally added, that these habits themselves vary with the rate of wages. This is reasoning completely in a circle; we shall examine the theory more at large, when we review Mr. McCulloch's writings.. He has pushed it much farther than Dr. Smith, who had a secret consciousness of its fallacy, and has made but little use of it.

It is worthy of notice that most writers mean the commonest species of manual labor only, when they speak of

the wages of labor. It is perhaps useful to regard this kind of industry, as a sort of normal labor, or standard with which to compare other labor; but it may cause us to mistake the theory of labor, if we do not keep all its species in sight.

In pursuing his idea that profits are a deduction from wages, Dr. Smith says that as the price of every commodity depends on wages and profits, so it is distributed between the laborer and the capitalist, and hence the smaller the share of the one, the larger will be that of the other. Therefore wages will rise, as profits fall. But this is a mere plausibility. We have shown that price does not depend on wages and profits, and it is not true that commodities, or their price, are so distributed. The capitalist receives the whole, not merely a part, of the productions of the labor he employs, and in order to use them, and to enjoy their intrinsic value in the satisfaction of his desires, he must employ labor with them. The part, which constitutes profits, are destined to this purpose, as well as that which replaces his capital. That, which is profits at one moment, appears in the form of wages at the next. The laborer receives what has been produced, not what is about to be produced. Individual capitals may, as we have remarked more than once, receive profits above the average, when the supply of labor in some particular employment, or district, happens to be so unusually large, that wages are reduced, and the capitals in question command niore labor than other equal capitals. But the competition of other capitals will soon reduce these profits, and elevate these wages, to the general level, which depends on the general surplus of the whole production of society, beyond the whole capital expended. If labor becomes generally more productive, this surplus will be larger and profits must rise, and since capital increases proportionally faster, wages will also rise. At the same time, the commodities, which it requires less labor to produce, will be cheaper than they formerly were, though their value as to each other will be the same, if the saving of labor extends equally to the production of all. So true is it that natural profits and wages rise, as natural prices fall.

A high rate of interest is not always a proof of a high natural rate of profits. It may arise from the insecurity of loans; or particular individuals, to whom loans secure a large market rate of profits at the expense of the community,

may afford to give a high rate of interest. Men, to whom Queen Elizabeth granted lucrative monopolies, might pay large interest for the use of capital, while the usual rate of profits was low. The pro-consuls and publicans, who plundered provinces and kingdoms in the days of Cæsar and Brutus, to which Smith refers, were naturally willing to borrow at exorbitant usury the money, with which they bought votes, offices, and the farming of the public revenues. The very privileges which enabled them to pay such interest, reduced wages, and the profits of the fair trader, and impoverished society at large.

When Dr. Smith comes to the subject of rent, he shows that part of what is commonly so called is only the profits of the capital expended in improvement, but that rent, in the technical sense, is a monopoly price, paid for the use of natural agents, and that high or low rent is the effect, not the cause of high or low price. He then draws a distinction between such portions of the produce of land as sell for more than enough to repay profits and wages, and such as sell for barely enough. The former pay rent, the latter do not. But the important inquiry is why do some portions of produce sell for more than enough to repay profits and wages, or to speak more correctly, for more than the natural price, while others do not? It is not merely, as Dr. Smith seems to suppose, because the demand for them is greater, but because it is greater than the limited powers of the natural agents in use will yield, with the present expenditure of labor. The price of such portions of produce accordingly becomes a monopoly price, limited only by the cost of production on the less productive natural agents. It is nothing in the nature of a commodity, in its value in use, which makes it bear a monopoly price, and yield rent, but it is the limited supply, which the powers of the natural agents employed can produce. It is however the value in use, which raises the demand for particular species of produce up to, and beyond this limited supply, and in this sense, Dr. Smith may be right in his theory, though it must be confessed that his views of the subject were very indistinct, which arises from his original error in supposing that the labor of production regulated natural relative value only in the early stages of society. Hence he says that "high or low wages and profit are the causes of high or low price." (p. 67.) This, as we have shown, is true only of market

prices, and even then, high or low wages and profits are the effects, not the causes, of high or low price. According to Dr. Smith, since high wages and profit accompany high price, and as high or low rent is the effect of high price, (see same page and sentence,) high wages, profits, and rents inust go together; yet he usually represents rent, as a deduction from profits and wages!

These erroneous views have induced Dr. Smith to represent, that while the interest of those who live by rent or by wages is the same, and "is strictly and inseparably connected with the general interest of the society," (p. 115,) the interest of those who live by profits, that is, of capitalists, is different, and "has not the same connexion with the general interest of society, as that of the other two," (p. 116.) He adds, that "the rate of profit does not, like rent and wages, rise with the prosperity, and fall with the declension of the society. On the contrary, it is naturally low in rich, and high in poor countries, and it is always highest in the countries which are going fastest to ruin." What is this but to say, that individuals prosper most, when the society, which is composed of them, prospers least? That the general stock grows slowest, when the separate capitals, which make it up, grow fastest? Can any thing be falser? That profits were low in England and Holland, (the cases cited by Dr. Smith,) was due to the restrictive systems of policy adopted by those countries, and the heavy taxation. The rate of profit refers not to the amount of riches, but their increase; it was low in Holland, not because it was a rich country, but because its riches increased slowly. In the beneficent order of Providence, the interests of all the natural classes of society are harmonious. None can permanently thrive or suffer, without a corresponding weight or injury to the others. Rent itself, is but the necessary means of equalising profits, and is as much expended for the general advantage, as any other portion of wealth. It arises from the limits, which nature has placed on the number and capabilities of her productive powers, limits, which form a necessary stimulus to man's genius. When forced to occupy inferior soils, he must be contented with a lower condition of life, or he must and will invent the means of increasing the powers of production, which will at once raise wages, profits and

rents.

We shall now proceed to consider MR. MCCULLOCH'S

mode of treating these questions, which may be found either in his Principles of Political Economy, or in his extensive notes and additions to the Wealth of Nations. Our references will be to the latter source.

His Notes on Labour and Value, are generally correct and forcible, though, like Dr. Smith, he does not always distinguish between natural price, and the cost of production, and seems to imagine that because the former is regulated by the latter, they are the same. This error is clearly seen in his summary of the results of his own statements and reasonings, which is contained in these four propositions:

"1st. That the utility of certain articles or products, or their capacity to minister to our wants and desires, renders them objects of demand; and, is consequently, the cause of labor being expended on their acquisition, or, in other words, of their value.

"2d. That the value or power of one commodity to exchange for another, is measured by the quantity of any other commodity, or of labor, for which it will exchange; and that this quantity depends upon, and is regulated partly by, the quantities of labor required for the production of the commodities compared together, and partly by the state of their supply, as compared with the demand.

"3d. That the cost of a commodity is measured by, and is wholly dependent on, the quantity of labor required for its production.

"4th. That to whatever extent, fluctuations in the demand and sup ply of freely produced commodities, whose quantity may be indefinitely increased, may sometimes raise their value above, they must at other times equally sink it below their cost; so that on an average, their value and cost are identical, and depend upon, and are measured by, the quantities of labor required for their production." p.

443.

To the first of these propositions there can be no objection. The second is what we have attempted to prove to be true; but it is the form, in which it is here stated, that has given birth to most of the objections it has encountered. The quantity of any other commodity, that a given commodity will exchange for, (both being freely produced,) depends wholly, not partly, on the state of the supply and demand, and this last depends wholly, not partly, on the comparative quantities of labor required for their produc

tion.

We may suppose from the emphasis laid on the word cost. in the 3d proposition, that he uses it in the sense, which he has previously given it by a careful definitiou. But, in this signification, we have a barren truism, for his definition of cost, is "the quantity of labor required for the production or