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effect in a way less direct and less manifest, but equally prejudicial to the states that have adopted it.”*

According to this view of the subject, the doctrine of the freedom of trade appears to me to divide itself naturally into two articles. The one relates to those restraints which check the free circulation of labour and stock among the members of the same community, the other, to the restraints on the commercial intercourse of different nations. I shall consider these two articles separately, beginning with the restraints on domestic commerce. What I have to offer on this subject, I must again remind you, will be little more than an abridgment of Mr. Smith's argument, which, indeed, it is absolutely necessary to introduce in order to prepare the way for the discussions which still remain.

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[SUBSECT. I.Of Restraints on Domestic Commerce and

Industry.] I had occasion before to mention Mr. Smith's analysis of the component parts of the price of commodities.† The same author observes, that “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. ....

“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, shonld gain both the rent of the landlord and the profit of the farmer. He is apt to deno

* [Sect. iv., infra, Vol. X. pp. 60, 61.]
+ [See above, Political Economy, Vol. I. (Works, Vol. VIII.) p. 391.)

minate, however, his whole gain profit, and thus confounds rent with profit, at least in common language."*

In some of Mr. Smith's illustrations of this subject, there are principles involved which have a connexion with those definitions of national wealth and of productive labour, on which I formerly hazarded some criticisms. But to these it is not necessary for me to attend at present. Nor, perhaps, will it be possible for me to avoid some other peculiarities of expression connected with his system, which I should not voluntarily have adopted if I had followed the train of my own thoughts in stating the doctrines now to be explained. I cannot help adding, that the result of Mr. Smith's speculations respecting the component parts of price, although sufficiently accurate for our present purpose, is by no means unexceptionable in point of distinctness.

It appears from a manuscript of Mr. Smith's, now in my possession, that the foregoing analysis or division was suggested to bim by Mr. Oswald of Dunnikier. It is somewhat remarkable, that the very same division is hinted at by Sir William Petty, who states it as an impediment to national prosperity, that taxes should be levied on lands alone, and not on land, stock, and labour.

In the very slight view of the subject to which I am obliged to confine my attention, I shall have little or no occasion to touch on the rent of land, the political regulations I have in view tending chiefly to affect wages and profit in the different employments of labour and stock. In order to convey a distinct idea of the manner in which these regulations operate, it is necessary for me to premise a few other general considerations, in addition to those which have been already suggested. It is necessary, in particular, for me to give a short recapitulation of Mr. Smith's doctrines concerning the natural price of commodities, as distinguished from that which they actually bear in the market. Some of these principles I have had occasion to state already ; but they are so intimately connected with the subject now in view, that I shall again recall them to your attention.

* [Wealth of Nations, Book I. chap. ri.; Vol. I. p. 78, seq., tenth edition.]

“ When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price."* This is frequently different from the market price, which depends upon the proportion which is actually brought to market, and the extent of the demand. With respect to the market price of commodities, it is very justly observed by Mr. Thornton, that "it is formed by means of a certain struggle which takes place between the buyers and the sellers. It is commonly said, that the price of a thing is regulated by the proportion between the supply and the demand. This is, undoubtedly, true; and for the following reason :—If the supply of an article, or the demand for it, is great, it is also known to be great ; and if small, it is understood to be small. When, therefore, the supply, for example, is known to be less than the demand, the sellers judge that the buyers are in some degree in their mercy, and they insist on as favourable a price as their power over the buyers is likely to enable them to obtain. The price paid is not at all governed by the equity of the case, but entirely by the degree of command which the one party has over the other. When the demand is less than the supply, the buyers, in their turn, in some degree, command the market, giving not that sum which is calculated to indemnify the seller against loss, but so much only as they think that the seller will accept rather than not sell his article. The question of price is, therefore, in all cases, a question of power, and of power only. It is obvious, that a rise in the price of a scarce commodity, will be more or less considerable in proportion as the article is felt to be one of more or less strict necessity.”+

Of this remark of Mr. Thornton's, a very striking illustration is afforded by our immense importations from the north of Europe ; importations occasioned chiefly by the great difference in the value of money in this country, and in these nations; in consequence of which, they have it always in their power so to suit their prices to our market, as to keep them below that at which we can produce the same articles ourselves. It frequently happens, that avarice counteracts this state of things, in some instances to a great degree, and to a certain degree in all. Thus, for example, we can supply ourselves with iron at as cheap a rate as the Swedes and Russians now are disposed to do it, but not at so low a price as they might sell it. Had they been disposed to extend the iron trade, instead of demanding the highest prices which they could get, we should never have made the progress we have made in this very important article of manufacture. The price, in fact, of every article which we purchase from the north, is regulated by the price which the same article could be raised at in England, and not according to what Mr. Smith calls the natural price. Thus, we are assured by the best authorities, that the tallow and hides which come into the English market, are sold for above three times the natural proportion which they should bear to the price of that part of the beast which is consumed in Russia. According to the principles which have been seen to regulate the natural price of commodities, the pound of tallow should not be sold at a higher price than the pound of meat ; whereas, in Russia, it is sold at more than ten, and even fifteen times that price. This, however, it is added, was not the case till the exportation of tallow to England became general.

* [Wealth of Nations, Book I. chap. vii.; Vol. I. p. 82, tenth edition.]

+ [Inquiry into the Nature and Effect of the Paper Credit of Great Britain, Chap. viii. p. 193, seq.)

My reason for entering here into this detail, was the illustration it affords of the difference between the principles which regulate the natural and the market prices of commodities. Among the articles imported from Russia, there are very few which we cannot produce ourselves; but the fact is, that the value of money is so different in the two countries, that whatever is brought to this market becomes too dear for their own consumption. A Russian peasant, accordingly, although supplied with abundance of animal food, is not able to afford to burn a candle ; while we find that the English peasants burn candles made of Russian tallow, while they cannot afford to live upon butchers’ meat. “ It is the great price which England can afford to give, and actually gives, that,” as remarked by a late intelligent writer, “ raises all over Europe the price of every sort of article which comes to her market. The dearth of corn in England has enriched Poland, and many other countries, in a few years, and its wealth is gradually diffusing its influence over other parts of the world.” It is painful to observe, after this very judicious preamble, the same author relapse soon afterwards into the exploded errors of the mercantile system.

These facts, which turn almost entirely on the different values of money in different countries, are evidently by no means inconsistent with Mr. Smith's general principle, that in the same society or neighbourhood, the market price of commodities has always a tendency to adjust itself to the natural price. “ The quantity of every commodity brought to market,” says Mr. Smith, naturally suits itself to the effectual demand. It is the interest of all those who employ their land, labour, or stock, in bringing any commodity to market, that the quantity never should exceed the effectual demand ; and it is the interest of all other people that it never should fall short of that demand."* Notwithstanding, however, this natural tendency in the supply to adjust itself to the demand, a variety of circumstances may prevent it from actually taking place even in the same society or neighbourhood. “But, in some employments, the same quantity of industry will, in different years, produce very different quantities of commodities, while in others it will produce always the same, or very nearly the same. The same number of labourers in husbandry will, in different years, produce very different quantities of corn, wine, oil, hops, &c. But the same number of spinners and weavers will every year produce the same, or very nearly the same, quantity of linen and woollen cloth. It is only the average produce of the one species of industry which can be suited in any respect to the effectual demand ; and as its actual produce is frequently much greater, and frequently much less than its average produce, the quantity

* [Wealth of Nations, Book I. chap. vii.; Vol. I. p. 86, tenth edition.]

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