Adam Smith · Public domain edition · 441 cards · 122 chapters
Adam Smith argues that national wealth arises from the division of labour, driven by human propensity to trade, and that markets and self-interest coordinate production more effectively than regulation. This deck covers his accounts of labour specialization, the pin factory, the limits imposed by market extent, and the policies he criticizes.
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Chapter 1 · Question
According to Smith, what two circumstances regulate a nation's supply relative to its consumers?
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Chapter 1 · Answer
Smith says the proportion of annual produce to consumers is regulated by two circumstances: first, the skill, dexterity, and judgment with which labour is generally applied; and second, the proportion between the number employed in useful labour and those not so employed. He argues the supply depends more on the first circumstance than the second.
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CHAPTER III. OF PUBLIC DEBTS.4 cards
According to Smith, what two circumstances regulate a nation's supply relative to its consumers?
Smith says the proportion of annual produce to consumers is regulated by two circumstances: first, the skill, dexterity, and judgment with which labour is generally applied; and second, the proportion between the number employed in useful labour and those not so employed. He argues the supply depends more on the first circumstance than the second.
Chapter 1
Why does Smith claim even the poorest workman in a civilized nation may be better supplied than any savage?
Smith argues that among savage hunters and fishers everyone able to work is employed, yet such nations are miserably poor, sometimes driven by want to abandon or destroy infants, the old, and the sick. In civilized thriving nations many do not labour and consume far more than workers, yet the whole society's produce is so great that all are often abundantly supplied.
Chapter 1
Which industries has European policy favoured since the fall of the Roman empire, according to Smith?
Smith states that scarce any nation has dealt equally and impartially with every sort of industry. Since the downfall of the Roman empire, the policy of Europe has been more favourable to arts, manufactures, and commerce—the industry of towns—than to agriculture, the industry of the country. He says the circumstances introducing this policy are explained in the third book.
Chapter 1
What does Smith say the fifth book of the Inquiry treats, and what three things does it examine?
The fifth and last book treats the revenue of the sovereign, or commonwealth. Smith says he examines: first, the necessary expenses of the sovereign and which should be defrayed by the whole society versus particular parts or members; second, the methods by which society may contribute and their advantages and inconveniencies; and third, the reasons governments mortgage revenue or contract debts, and the effects of those debts.
Chapter 1
CHAPTER I.4 cards
According to Smith, what three circumstances cause the division of labour to increase the quantity of work?
Smith attributes the great increase in work done by the same number of people to three circumstances: first, the increase of dexterity in every particular workman; second, the saving of time commonly lost in passing from one species of work to another; and third, the invention of many machines that facilitate and abridge labour, enabling one man to do the work of many.
Chapter 2
Why does Smith use the pin-maker as his example of the division of labour?
Smith chooses a trifling manufacture because in small trades supplying few wants, all workmen can be gathered into one workhouse and observed at once. In great manufactures serving the whole people, workers are too numerous to collect, so the division, though greater, is less obvious. The pin trade is divided into about eighteen distinct operations.
Chapter 2
How many pins could ten men make daily in Smith's pin factory, and how does that compare to working alone?
Smith reports a small manufactory of ten men, poorly accommodated with machinery, could make about twelve pounds of pins a day—upwards of forty-eight thousand pins, since a pound holds over four thousand of middling size. That is about four thousand eight hundred per person. Working separately and uneducated to the trade, each could scarce make twenty, perhaps not one pin a day.
Chapter 2
Why does Smith say agriculture admits of less division of labour than manufactures?
Smith argues agriculture cannot be so completely subdivided: the grazier's business cannot be separated from the corn-farmer's as carpentry is from smithing. The ploughman, harrower, sower, and reaper are often the same man, because the occasions for these labours return with the seasons, making constant employment in any one impossible. This may explain why agriculture's productivity lags manufactures.
Chapter 2
CHAPTER II.3 cards
According to Smith, what human propensity gives occasion to the division of labour?
The author argues the division of labour is not the product of human wisdom foreseeing general opulence, but the slow, gradual consequence of a propensity in human nature to truck, barter, and exchange one thing for another. He says whether this propensity is an original principle or a consequence of reason and speech is not his present subject to inquire.
Chapter 3
How does Smith say we obtain the cooperation of others in civilized society?
Smith argues we should not rely on others' benevolence, since life is too short to gain the friendship of the many we depend on. Instead we interest their self-love, showing it is to their advantage to do what we require. Hence the famous butcher, brewer, and baker passage: we address their self-interest, not their humanity. Even a beggar, he notes, depends on charity only for his fund, not for how he obtains goods.
Chapter 3
What does Smith claim about natural differences in talents between professions?
The author argues natural talent differences among men are much less than we think, and the apparent difference between professions is often the effect rather than the cause of the division of labour. A philosopher and a street porter are much alike in early years; habit, custom, and education widen the gap. He adds that by nature a philosopher differs less from a porter than a mastiff from a greyhound, yet animals cannot pool their talents for want of exchange.
Chapter 3
CHAPTER III.4 cards
According to Smith, what limits the division of labour?
The division of labour is limited by the extent of the market. Because the power of exchanging gives occasion to the division of labour, no one can devote himself entirely to one employment when the market is too small to absorb the surplus produce of his labour in exchange for goods he needs.
Chapter 4
Why does Smith say water-carriage promotes specialization more than land-carriage?
Water-carriage opens a more extensive market at far lower cost. Smith compares fifty broad-wheeled waggons, a hundred men and four hundred horses carrying four tons between London and Edinburgh in six weeks with a ship of six or eight men carrying two hundred tons in the same time. Cheap transport widens the market and encourages industry to subdivide.
Chapter 4
Why did early civilization and improvement appear around the Mediterranean?
Smith argues the Mediterranean was extremely favourable to infant navigation: it has no tides and few waves beyond wind, many islands, and close neighbouring shores. Since men feared losing sight of the coast before the compass and distrusted ocean waves, this sea suited early navigation. Egypt improved early partly because the Nile's canals gave easy inland navigation.
Chapter 4
Why does Smith say inland Africa and Tartary remained uncivilized?
Smith argues these regions lacked conditions for extensive markets: Tartary's sea is frozen and its great rivers too distant from one another; Africa has no large inlets like the Baltic or Mediterranean to carry maritime commerce inland, and its rivers are too far apart for considerable inland navigation. Rivers passing through another territory can also be obstructed.
Chapter 4
CHAPTER IV.4 cards
Why did people adopt metals over other commodities as the instrument of commerce?
The author argues metals were preferred because they can be kept with little loss, being scarcely perishable, and can be divided into any number of parts without loss, then reunited by fusion. This divisibility lets a buyer proportion the metal to the precise quantity of goods he needs, unlike cattle, which forced purchases in whole ox or sheep units.
Chapter 5
What two inconveniences attended the use of unstamped metal bars as money?
The trouble of weighing and the trouble of assaying. Exact weighing of precious metals required very accurate scales, and assaying was more difficult and tedious still, needing a portion melted in a crucible with dissolvents. Without these operations, people were liable to gross frauds, receiving adulterated compositions resembling silver or copper instead of pure metal.
Chapter 5
What did the first public stamps on metals certify, and how did later coins differ?
Early stamps, like the sterling mark on silver plate or the Spanish mark on gold ingots, were struck on one side only and certified the fineness, not the weight; Abraham's shekels were received by weight, not tale. Later coins had stamps covering both sides and sometimes the edges, certifying both fineness and weight, so they were received by tale without weighing.
Chapter 5
What does the author argue princes did to coins, and with what effect?
The author argues that the avarice and injustice of princes and sovereign states, abusing their subjects' confidence, gradually diminished the real metal in coins. The Roman as fell to a twenty-fourth of its value; the English pound to about a third. This let them appear to pay debts with less silver, but creditors were really defrauded, making such operations favourable to debtors and ruinous to creditors.
Chapter 5
CHAPTER V. (part 1)4 cards
According to Smith, what is the real measure of the exchangeable value of all commodities?
Smith states that labour is the real measure of the exchangeable value of all commodities. The value of a commodity to its possessor who means to exchange it equals the quantity of labour it enables him to purchase or command. Labour was the original purchase money paid for all things; wealth is valued by the command over others' labour it conveys.
Chapter 6
Why is labour not the measure by which commodity value is commonly estimated?
Smith notes it is often difficult to ascertain the proportion between two quantities of labour, since time alone does not determine it; differing hardship and ingenuity must be counted. No accurate measure of these exists, so exchange is adjusted by the higgling and bargaining of the market, by a rough equality sufficient for common life. People also better understand a quantity of a commodity than an abstract quantity of labour.
Chapter 6
Why does Smith say gold and silver cannot be an accurate measure of value?
Gold and silver vary in their own value, being sometimes cheaper and sometimes dearer depending on the fertility or barrenness of known mines. The discovery of the abundant mines of America reduced the value of gold and silver in Europe to about a third of what it had been before. A commodity continually varying in its own value can never accurately measure the value of other commodities.
Chapter 6
What distinction does Smith draw between real and nominal price, and what practical use does it have?
The real price of labour consists in the quantity of necessaries and conveniencies given for it; the nominal price, in the quantity of money. The labourer is rich or poor in proportion to the real, not nominal, price. Smith argues this distinction has practical use: a perpetual money rent loses value through coin debasement and falling silver prices, whereas rents reserved in corn preserved their value much better.
Chapter 6
CHAPTER V. (part 2)4 cards
Why does Smith use corn rather than silver to compare values across distant times?
Smith argues that the current prices of labour at distant times and places can scarce ever be known exactly, so we must rely on corn prices as the nearest approximation to the proportion. Corn prices, though rarely recorded regularly, are generally better known and more often noted by historians and writers than labour prices.
Chapter 7
Which metal did Smith say served as the measure of value in Rome and why?
Smith reports that the Romans had nothing but copper money until five years before the first Punic war, when they began coining silver. Copper therefore remained the measure of value: accounts were kept in asses and sestertii, and the sestertius, though originally silver, was valued in copper.
Chapter 7
When does the distinction between standard and non-standard metal become more than nominal?
Smith argues the distinction is more than nominal only when the regulated proportion between metals changes. If a guinea were reduced to twenty or raised to twenty-two shillings, silver payments would stay the same while gold payments changed, making silver appear more invariable. During any one regulated proportion, the distinction is little more than nominal.
Chapter 7
What did Smith conclude about Locke's explanation for high silver bullion prices?
Locke attributed the high price of silver bullion after the recoinage under William III to permission to export bullion and prohibition on exporting coin. Smith argues this is unlikely, since far more people want silver coin for domestic buying and selling than want bullion for export, and gold bullion now faces the same rules yet trades below mint price.
Chapter 7
CHAPTER V. (part 3)2 cards
How does Smith define the money price of goods?
Smith states that by the money price of goods he means always the quantity of pure gold or silver for which they are sold, without regard to the denomination of the coin. He illustrates this by treating six shillings and eight pence in the time of Edward I as the same money price as a pound sterling in his own time, since both contained nearly the same quantity of pure silver.
Chapter 8
How do people adjust prices when coinage is disordered?
Smith explains that when there is disorder in the coin, the price of goods comes to be adjusted not to the quantity of pure gold or silver the coin ought to contain, but to what, upon average experience, it is actually found to contain. Merchants likewise adjust to actual weights and measures as they find them by experience, not to what those ought to be.
Chapter 8
CHAPTER VI.3 cards
In the early rude state before stock and land appropriation, what rule governs exchange?
The author argues that in that early and rude state preceding both the accumulation of stock and the appropriation of land, the proportion between the quantities of labour necessary for acquiring different objects is the only circumstance that can afford a rule for exchanging them. His example: if it costs twice the labour to kill a beaver as a deer, one beaver naturally exchanges for two deer.
Chapter 9
Once stock accumulates, into what does the value added by workmen resolve?
The author argues that once stock accumulates in particular hands, the value workmen add to materials resolves into two parts: one pays their wages, the other pays the profits of the employer upon the whole stock of materials and wages he advanced. The employer would have no interest in employing them unless he expected from the sale of their work something more than sufficient to replace his stock.
Chapter 9
What are the three original sources of revenue and exchangeable value?
The author argues wages, profit, and rent are the three original sources of all revenue as well as of all exchangeable value, and all other revenue is ultimately derived from one or other of them. Interest is a derivative revenue paid from profit; taxes, salaries, pensions, and annuities are ultimately paid from wages, profits, or rent. In improved societies all three enter, more or less, into the price of the far greater part of commodities.
Chapter 9
CHAPTER VII.4 cards
What three components make up a commodity's natural price?
The natural price is 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 the commodity to market, according to their natural rates. At this price the commodity is sold for what it is really worth, or what it really costs the person who brings it to market.
Chapter 10
What is effectual demand, and how does it differ from absolute demand?
Effectual demand is the demand of those willing to pay the natural price, meaning the whole value of rent, labour, and profit needed to bring the commodity to market. It differs from absolute demand: a very poor man may desire a coach and six, but since the commodity can never be brought to market to satisfy him, his demand is not effectual.
Chapter 10
How does market price behave when quantity falls short of or exceeds effectual demand?
When quantity falls short, competition among buyers pushes market price above natural price, as with exorbitant prices during a blockade or famine. When quantity exceeds demand, sellers must accept less, pushing price below natural price, more so for perishable goods like oranges than durable ones like old iron. When quantity just matches demand, market price equals natural price.
Chapter 10
Why do corn prices fluctuate more than cloth prices?
In husbandry, the same number of labourers produces very different quantities of corn, wine, oil, or hops in different years, while the same spinners or weavers produce nearly the same quantity of linen and woollen cloth yearly. Only average produce can suit effectual demand, so corn's market price swings widely above and below natural price, while cloth prices vary mainly with demand.
Chapter 10
CHAPTER VIII. (part 1)2 cards
In the original state before land appropriation, who owned the whole produce of labour?
The author states that in the original state of things, before the appropriation of land and the accumulation of stock, the whole produce of labour belongs to the labourer, who has neither landlord nor master to share with him. This state ended with private property, when rent became the first deduction and profit the second deduction from the labourer's produce.
Chapter 11
Why do masters generally win wage disputes against workmen, according to Smith?
The author argues masters have the advantage because they are fewer and can combine more easily, the law permits their combinations while prohibiting workmen's, and they can subsist a year or two on existing stock while many workmen could not subsist a week without employment. Workmen's combinations usually end in punishment or ruin of the ringleaders.
Chapter 11
CHAPTER VIII. (part 2)4 cards
What does Smith say a starving condition of the labouring poor signals about a country?
Smith states that scanty maintenance of the labouring poor is the natural symptom that things are at a stand, and their starving condition that they are going fast backwards. Conversely, the liberal reward of labour is both the necessary effect and the natural symptom of increasing national wealth. He cites Bengal, where hundreds of thousands die of hunger in a year, as evidence that funds for maintaining the poor are fast decaying.
Chapter 12
What four plain symptoms show British wages exceed bare subsistence?
First, summer wages exceed winter wages even though winter upkeep costs more. Second, wages stay fixed for decades while provision prices fluctuate yearly. Third, wages vary more by place than food prices do. Fourth, wage and grain-price movements are often opposite: grain is dearer in Scotland but wages dearer in England. Smith argues these show wages are set by the quantity and value of work, not bare necessity.
Chapter 12
How does Smith explain the difference between English and Scottish workers' food?
Smith argues the inferior oatmeal diet of common Scots is not the cause but the effect of lower Scottish wages, calling the reverse a strange misapprehension. His analogy: one man keeps a coach because he is rich, not the reverse. He also notes grain was dearer in both kingdoms last century than now, while labour was much cheaper then, so the poor must be better off now.
Chapter 12
What is Smith's verdict on whether improving the lot of the lower ranks harms society?
The author argues it plainly is an advantage. Servants, labourers, and workmen make up the far greater part of every great political society, and what improves the circumstances of the greater part can never be an inconveniency to the whole. He adds that complaints about luxury reaching the lowest ranks actually suggest the real recompence of labour, not just its money price, has increased.
Chapter 12
CHAPTER VIII. (part 3)4 cards
According to Smith, what happens to workmen who are liberally paid by the piece?
Smith observes that workmen liberally paid by the piece are very apt to overwork themselves and ruin their health and constitution in a few years. He notes a London carpenter is not supposed to last in his utmost vigour above eight years, and that soldiers paid by the piece had to be capped by stipulation to prevent excessive labour.
Chapter 13
What two circumstances does Smith say necessarily regulate the money price of labour?
Smith states the money price of labour is necessarily regulated by two circumstances: the demand for labour, and the price of the necessaries and conveniencies of life. The demand, whether increasing, stationary, or declining, determines the quantity of necessaries given to the labourer; the money price is determined by what is requisite for purchasing that quantity.
Chapter 13
Why does Smith reject the claim that men work better when ill fed than well fed?
Smith argues it seems not very probable that men in general work better when ill fed, disheartened, and frequently sick than when well fed and in good spirits. He notes years of dearth are generally years of sickness and mortality among the common people, which cannot fail to diminish the produce of their industry.
Chapter 13
Why does Smith say the wages of labour are more steady than the price of provisions?
Smith explains that in a dear year, scarcity lowers the demand for labour and thus tends to lower wages, while the high price of provisions tends to raise them. In a cheap year the opposite causes work in reverse. In ordinary variations, these two opposite causes seem to counterbalance one another, which is probably part of the reason wages are everywhere so much more steady than provisions.
Chapter 13
CHAPTER IX.4 cards
According to Smith, what effect does an increase of stock have on profit?
The increase of stock, which raises wages, tends to lower profit. When the stocks of many rich merchants enter the same trade, their mutual competition naturally lowers its profit, and the same effect follows when stock increases across all trades in a society.
Chapter 14
Why does Smith say average profit is so hard to determine?
Profit is very fluctuating: the trader cannot always state his own annual average. It is affected by price variations in his commodities, by the good or bad fortune of rivals and customers, and by accidents to goods carried by sea or land or stored in warehouses. It varies from year to year, day to day, almost hour to hour.
Chapter 14
What maxim does Smith use to link interest and profit?
Wherever a great deal can be made by the use of money, a great deal will commonly be given for it; wherever little can be made, less will be given. So as the usual market rate of interest varies, ordinary profits of stock must vary with it, sinking as it sinks and rising as it rises.
Chapter 14
Why do high wages and high profits coexist in new colonies?
A new colony is understocked relative to its territory and underpeopled relative to its stock. Settlers cultivate only the most fertile land near the sea and navigable rivers, often bought below the value of its natural produce, so stock yields large profit and can pay large interest. As fertile land is occupied, profits and interest gradually fall.
Chapter 14
CHAPTER X.1 cards
What two causes does Smith give for differences in pecuniary wages and profit across Europe?
Smith states that pecuniary wages and profit are everywhere in Europe extremely different according to employment. This difference arises partly from circumstances in the employments themselves, which really or in men's imagination make up for a small pecuniary gain in some and counterbalance a great one in others, and partly from the policy of Europe, which nowhere leaves things at perfect liberty.
Chapter 15
PART I. (part 1)3 cards
What five circumstances compensate for unequal wages across employments?
The agreeableness or disagreeableness of the work, the ease or difficulty of learning it, the constancy or inconstancy of employment, the trust reposed in workers, and the probability or improbability of success. These five circumstances, Smith observes, make up for small pecuniary gain in some employments and counterbalance a great one in others.
Chapter 16
Why do masons and bricklayers earn more than house-carpenters?
Their employment is inconstant: they cannot work in hard frost or foul weather, and depend on customers' occasional calls. Their wages, from half again to double common labour, compensate for idleness and anxiety rather than skill. Smith notes no skilled labour seems easier to learn, since London chairmen sometimes work as bricklayers in summer.
Chapter 16
Why are wages of goldsmiths, physicians, and lawyers high?
Because great trust is reposed in them: goldsmiths handle precious materials, while we trust physicians with our health and lawyers with our fortune, life, and reputation. Such confidence cannot safely rest in people of mean condition, so their reward must give them suitable rank. Their long, expensive education further raises the price of their labour.
Chapter 16
PART I. (part 2)4 cards
Why does Smith say sailors' wages stay near common labourers' despite their skill and hardship?
Smith argues sailors' skill and dexterity exceed almost any artificers', and their life is one of hardship and danger, yet common sailors earn little more than common labourers at the regulating port. Their recompence is largely the pleasure of exercising skill and surmounting danger. Because they move port to port, their monthly pay is more level across Britain than other workmen's, regulated by London.
Chapter 17
Why does Smith say the risk premium in hazardous trades fails to compensate risk fully?
Smith argues profit rises with risk but not in proportion to it. The presumptuous hope of success entices too many adventurers into hazardous trades, and their competition reduces profit below what would compensate the risk. Bankruptcies are most frequent in the most hazardous trades; smuggling, the most hazardous, is the infallible road to bankruptcy even when most profitable.
Chapter 17
Why is the apothecary's seemingly extravagant profit really wages?
Smith argues the apothecary's great apparent profit is frequently no more than reasonable wages of labour. His skill is more delicate than an artificer's and the trust reposed in him greater; he is physician to the poor in all cases. His reward comes from the price of his drugs, so a thousand per cent profit on drugs costing thirty or forty pounds may be real wages disguised as profit.
Chapter 17
Why are apparent retail profits lower in the capital than in small towns?
Smith argues that in small towns the narrow market limits how far trade can extend, so the grocer's wages must be added to a small stock, inflating apparent profit. In the capital, ten thousand pounds can be employed, making the grocer's labour a trifling addition to real profits. Hence retail goods are generally as cheap or cheaper in the capital, though bread and meat differ less because prime cost rises with distance.
Chapter 17
PART I. (part 3)4 cards
Why can the equality of advantages across employments only hold for principal employments?
Smith argues equality can take place only where an employment is the sole or principal occupation of those in it. Someone drawing subsistence mainly from one job may work at another for less in spare time, so the second trade's wages fall below what its nature would otherwise require.
Chapter 18
How does Smith explain why Scottish stockings knit cheaper than loom-woven ones?
They are made by servants and labourers who get most of their subsistence from another employment, so their knitting recompence is not the whole price of their labour. Smith notes over a thousand pairs of Shetland stockings imported annually to Leith at fivepence to sevenpence a pair.
Chapter 18
How did earlier writers misread the wages of cottars and similar labourers?
Smith argues many writers who collected ancient prices of labour and provisions treated the daily or weekly recompence as the whole price of labour, and took pleasure in representing both as wonderfully low. In fact the small tenement made a considerable part of the payment.
Chapter 18
Why is a furnished London apartment so cheap despite dear house-rent?
Smith argues dear house-rent in London partly causes cheap lodging. English custom obliges every master of a family to hire a whole house, so a tradesman lets the two middle storeys to lodgers to help pay rent, expecting to live by his trade, not his lodgers. In Paris and Edinburgh, by contrast, lodging-house keepers have no other subsistence.
Chapter 18
PART II.—Inequalities occasioned by the Policy of Europe. (part 1)3 cards
What three ways does Smith say Europe's policy creates inequalities in employments?
The author argues European policy creates greater inequalities chiefly by: first, restraining competition in some employments to fewer people than would otherwise enter; second, increasing competition in others beyond its natural level; and third, obstructing the free circulation of labour and stock between employments and between places. These are distinct from the inequalities that arise even under perfect liberty from defects in the three requisites.
Chapter 19
How did corporation rules and apprenticeship terms restrain competition in trades?
Exclusive privileges of corporations confined competition to those free of the trade, usually requiring apprenticeship under a qualified master. Bye-laws limited the number of apprentices a master could keep and set long service terms. Limiting apprentice numbers restrained competition directly; long apprenticeships did so indirectly by raising the cost of education. Smith cites Sheffield cutlers (one apprentice) and English hatters (two apprentices).
Chapter 19
What did the Statute of Apprenticeship (5th of Elizabeth) enact, and how was it limited?
It enacted that no person should exercise any trade, craft, or mystery then exercised in England without first serving at least seven years' apprenticeship, making many corporations' bye-laws the general public law of trades in market towns. By interpretation its operation was limited to market towns, not country villages, and to trades established in England before the 5th of Elizabeth, never extended to later trades.
Chapter 19
PART II.—Inequalities occasioned by the Policy of Europe. (part 2)4 cards
Why does Smith say country labourers' understanding is superior to town mechanics'?
The author argues the ploughman's work involves variable instruments, materials, and judgment, accustoming his mind to consider a greater variety of objects. The town mechanic's attention is occupied all day in one or two very simple operations. Smith notes country people are less used to social intercourse and speak more uncouthly, yet their understanding is generally much superior.
Chapter 20
How do corporation laws and trade regulations raise town prices at the country's expense?
Corporation laws let town inhabitants raise prices without fear of being undersold by their own countrymen; high duties on foreign manufactures and on goods imported by alien merchants protect them equally from foreigners. The author argues the resulting price enhancement is finally paid by landlords, farmers, and labourers of the country, who seldom oppose such monopolies, being persuaded by merchants' clamour that a subordinate part's private interest is the general interest.
Chapter 20
According to Smith, what real discipline restrains a workman's fraud and negligence?
The author argues it is not the corporation but the customers: fear of losing their employment restrains frauds and corrects negligence. An exclusive corporation weakens this discipline, since a particular set of workmen must be employed whether they behave well or ill. Hence in many large incorporated towns no tolerable workmen are found in some necessary trades; work is better done in the suburbs and smuggled in.
Chapter 20
Why does public funding of education lower the rewards of churchmen and men of letters?
Smith argues that pensions, scholarships, and bursaries draw more people into professions than could otherwise follow them, so the church is crowded with candidates willing to accept smaller recompence; the competition of the poor takes away the reward of the rich. Similarly, men of letters, mostly educated at public expense and numerous, have the price of their labour reduced to a paltry recompence.
Chapter 20
PART II.—Inequalities occasioned by the Policy of Europe. (part 3)4 cards
Under the 13th and 14th of Charles II, what gained a person a settlement in a parish?
Forty days of undisturbed residence gained a settlement, but within that time two justices of the peace could, on complaint of church-wardens or overseers, remove a new inhabitant to the parish where he was last legally settled—unless he rented a tenement of ten pounds a year or gave sufficient security.
Chapter 21
What four alternative ways did the 3rd of William III allow for gaining a settlement without notice?
The statute appointed four ways: being taxed to parish rates and paying them; being elected to an annual parish office and serving a year; serving an apprenticeship in the parish; or being hired into service there for a year and continuing the whole term. Smith notes no married man could well gain settlement by the last two.
Chapter 21
What did the certificate system of 8th and 9th of William III enact?
A person bringing a certificate from his last legal parish, signed by church-wardens and overseers and allowed by two justices, had to be received by any other parish. He could not be removed merely for being likely to become chargeable, only when actually chargeable; then the certifying parish paid maintenance and removal. He gained no settlement there except by renting a ten-pound tenement or serving a year in parish office.
Chapter 21
What does Smith argue about removing a man from the parish where he chooses to reside?
Smith argues that removing a man who has committed no misdemeanour from the parish where he chooses to reside is an evident violation of natural liberty and justice. He contends the common people of England, jealous of liberty but not understanding wherein it consists, suffered this oppression for over a century without remedy, and that scarce a poor man of forty has not felt cruelly oppressed by the law of settlements.
Chapter 21
CHAPTER XI.4 cards
How does Smith define the natural rent of land?
Smith defines rent as the highest price the tenant can afford in the actual circumstances of the land. The landlord tries to leave the tenant only enough to replace his stock and earn ordinary farming profits. Any surplus above that share the landlord reserves as rent. Smith notes liberality or ignorance of landlords, and rarely tenants, may shift this, but this portion is still the natural rent.
Chapter 22
Does rent enter commodity prices the same way as wages and profit?
No. Smith argues high or low wages and profit are causes of high or low price, since they must be paid to bring a commodity to market. High or low rent is the effect of price: when price exceeds what covers wages and profit, the surplus goes to rent. So rent enters the composition of price differently from wages and profit.
Chapter 22
Why does Smith call land rent a monopoly price?
Smith argues rent is naturally a monopoly price because it is not proportioned to what the landlord laid out on improvements, nor to what he can afford to accept, but to what the farmer can afford to give. He notes landlords demand rent even for unimproved land, and sometimes for things incapable of improvement, like kelp shores, or for fishing grounds near Shetland.
Chapter 22
Which produce always affords rent, and which only sometimes?
Smith says some parts of land's produce always face demand sufficient to yield a price above what is needed to bring them to market, so they must always afford rent. Other parts may or may not fetch that greater price depending on circumstances, so they sometimes afford rent and sometimes none. Whether price exceeds costs depends on demand.
Chapter 22
PART I.—Of the Produce of Land which always affords Rent.4 cards
According to Smith, why does land almost always yield some rent to the landlord?
Smith argues that land in almost any situation produces more food than is needed to maintain the labour required to bring it to market in the most liberal way, and the surplus also exceeds what is needed to replace the stock and its profits. Something therefore always remains for rent. Even the most desert moors of Norway and Scotland afford some small rent.
Chapter 23
How do fertility and situation each affect the rent of land?
Rent varies with fertility, whatever the produce, and also with situation, whatever the fertility. Land near a town yields greater rent than equally fertile distant land, since more labour is needed to bring distant produce to market, shrinking the surplus. But in remote parts the rate of profit is generally higher, so a smaller proportion of that diminished surplus goes to the landlord.
Chapter 23
How do good roads, canals, and navigable rivers affect remote land and towns?
Smith argues they lower carriage costs, putting remote parts nearly on a level with land near towns, and calls them the greatest of all improvements. They encourage cultivation of the remote, most extensive circle of the country, and benefit the town by breaking the monopoly of nearby country. Though they bring rivals into old markets, they open new ones.
Chapter 23
How does the relative price of bread and butcher's meat change with the progress of cultivation?
In rude beginnings, unimproved wilds are abandoned to cattle, so meat is plentiful and bread dearest; Smith cites Ulloa's Buenos Ayres ox at four reals. As cultivation extends, bread becomes more plentiful than meat, competition shifts, and butcher's meat grows dearer than bread. In Britain a pound of best meat is generally worth more than two pounds of best white bread.
Chapter 23
PART II.—Of the Produce of Land, which sometimes does, and…4 cards
According to Smith, which produce of land always necessarily affords rent?
Human food is the only produce of land that always and necessarily affords some rent to the landlord. Other produce, such as materials for clothing and lodging, may or may not afford rent depending on circumstances. Smith argues food is the original source of rent, and other produce derives its rent-affording value from the improvement of labour in producing food through cultivation.
Chapter 24
When do materials of clothing fail to afford rent to the landlord?
In countries not better cultivated than England once was, or the Highlands of Scotland now, and which had no foreign commerce, clothing materials would be so superabundant that much would be thrown away as useless, and none could afford rent. Foreign commerce, however, creates demand among wealthier neighbours, raising prices above transport costs and enabling some rent.
Chapter 24
What two factors determine whether a coal mine can afford rent?
Whether a coal mine can afford rent depends partly on its fertility and partly on its situation. A mine is fertile or barren according as a given quantity of labour yields more or less mineral than other mines of the same kind. Some mines are too barren to pay expenses; others yield profit but no rent; still others are fertile but too remote, lacking roads or water-carriage, to sell their coal.
Chapter 24
Why does Smith say populousness depends on food rather than clothing and lodging?
Smith argues countries are populous in proportion to the number of people their produce can feed, not clothe and lodge. Once food is provided, clothing and lodging are easy to find; but even with these at hand, food may be difficult to obtain. Among savage nations, about a hundredth part of the year's labour suffices for clothing and lodging, while the other ninety-nine parts are often barely enough for food.
Chapter 24
PART III.—Of the variations in the Proportion between the… (part 1)3 cards
According to Smith, what happens to the relative value of non-food land produce as improvement advances?
The author argues that as art and industry advance, the demand for non-food produce—materials of clothing and lodging, useful fossils, precious metals and stones—should rise, so these should exchange for ever greater quantities of food, becoming dearer. This holds unless particular accidents increase their supply in still greater proportion than demand.
Chapter 25
Why does a silver mine's value not necessarily rise with local improvement, unlike a free-stone quarry?
A free-stone quarry's market extends only a few miles, so demand grows with the improvement and population of that small district. A silver mine's market may extend over the whole known world, so unless the world in general advances, local improvement alone need not raise demand for its produce.
Chapter 25
What evidence does Smith use to argue wheat's ordinary price around 1350 was about four ounces of silver?
He cites the Statute of Labourers (25th of Edward III), which set livery-wheat at tenpence a bushel, roughly half an ounce of silver—so four ounces per quarter of eight bushels was moderate. He adds Ralph de Born's 1309 installation feast accounts and the assize of bread and ale, revived in 1262, as corroboration.
Chapter 25
PART III.—Of the variations in the Proportion between the… (part 2)4 cards
Why does Smith prefer corn over other commodities as a measure of value?
The author argues corn is a more accurate measure of value than any other commodity because raising equal quantities of corn in the same soil and climate requires nearly equal quantities of labour in every stage of improvement. Corn is also the principal subsistence of the labourer, so the money price of labour depends more on corn's price than on butcher's meat or other rude produce.
Chapter 26
What two causes can increase a country's quantity of precious metals, and what differs between them?
Smith says the quantity of precious metals may increase either from more abundant mines or from increased national wealth. Abundant mines necessarily lower the metals' value, since more metal is exchanged for the same quantity of commodities. Increased wealth does not lower their value: more coin is needed to circulate more goods, and gold and silver are not likely to be worse paid for.
Chapter 26
How did disorder under the Plantagenets affect the variation of corn prices?
Smith argues corn prices vary most in turbulent, disorderly societies where interrupted commerce and communication prevent plenty in one district from relieving scarcity in another. Under the Plantagenets, one district might enjoy plenty while another nearby suffered famine, and a hostile lord's lands between them could block all assistance. Under the Tudors, no baron was powerful enough to disturb public security.
Chapter 26
What did Fleetwood and Dupré de St Maur agree on despite differing opinions?
Smith notes that Bishop Fleetwood and Mr Dupré de St Maur were the two authors who collected ancient prices with the greatest diligence and fidelity. Their opinions differed greatly, yet their facts, so far as they relate to the price of corn, coincided exactly. Fleetwood believed silver's value continually diminished, but his own collected corn prices do not agree with that opinion.
Chapter 26
PART III.—Of the variations in the Proportion between the… (part 3)3 cards
What three events does Smith cite to explain higher corn prices from 1637 to 1700?
Smith names the civil war, which discouraged tillage and interrupted commerce; the bounty on corn exportation granted in 1688, which by encouraging export hindered one year's abundance from compensating another's scarcity; and the great debasement of silver coin by clipping and wearing, which raised nominal prices. He notes the bounty had no time before 1700 to produce its supposed abundance effect.
Chapter 27
By how much was English silver coin below standard value in 1695, and what was the effect?
According to Mr Lowndes, the current silver coin in 1695 was on average near twenty-five per cent below its standard value. Because market prices are regulated by the silver actually contained in coin rather than the standard amount, this debasement raised nominal prices. Smith notes silver bullion then sold at six shillings and fivepence an ounce, fifteen pence above the mint price.
Chapter 27
What was the avowed purpose of the 1688 corn bounty, and who benefited?
Smith argues the bounty was an expedient by country gentlemen, who composed a large share of the legislature, to raise the money price of corn artificially to the high levels of Charles I and II's times, since they felt corn prices falling. It was to operate until wheat reached forty-eight shillings a quarter, twenty shillings above Gregory King's 1688 estimate of the grower's price in moderate plenty.
Chapter 27
PART III.—Of the variations in the Proportion between the… (part 4)4 cards
Why did silver's European price fall after the discovery of America?
The author argues that after America's discovery, silver initially sold near its former price, making mining profits very high. But importers soon found the whole annual importation could not be sold at that high price, so silver gradually exchanged for smaller quantities of goods until it reached its natural price—just enough to pay, at natural rates, the wages, profits, and rent needed to bring it from mine to market.
Chapter 28
How did the king of Spain's tax on Peruvian silver change over time?
The tax was originally a half of gross produce, then fell to a third, then a fifth, and finally a tenth, at which it still continued. In most Peruvian silver mines this tenth ate up the whole rent of the land. The tax was reduced to a fifth of registered silver in 1504, forty-one years before the 1545 discovery of the Potosi mines.
Chapter 28
What three markets does the author say absorbed America's growing silver output?
First, Europe's market grew more extensive as countries improved in agriculture and manufactures, requiring more silver coin and plate. Second, America itself became a new market for its own silver, its demand rising faster than Europe's. Third, the East Indies was another market continually taking off greater quantities of silver, through both the Acapulco ships and indirect trade via Europe.
Chapter 28
Why does the author say the precious metals were worth more in India than Europe?
In rice countries yielding two or three crops yearly, food is more abundant and populations denser, so the rich have more surplus food to buy labour and rare goods like precious metals. The mines supplying India seemed less abundant than Europe's, so metals exchanged for more food there. The author argues real wages, the food labourers get, were lower in China and Indostan than in most of Europe.
Chapter 28
PART III.—Of the variations in the Proportion between the… (part 5)4 cards
What was the gold-to-silver value ratio in Europe before the discovery of the American mines?
Before the discovery of the mines of America, the value of fine gold to fine silver was regulated in the different mines of Europe between the proportions of one to ten and one to twelve—that is, an ounce of fine gold was supposed to be worth from ten to twelve ounces of fine silver.
Chapter 29
By the mid-eighteenth century, what ratio of gold to silver had come to be regulated in Europe?
About the middle of the last century, it came to be regulated between the proportions of one to fourteen and one to fifteen—an ounce of fine gold was supposed to be worth between fourteen and fifteen ounces of fine silver. Both metals sank in real value, but silver sank more than gold, so gold rose in nominal value.
Chapter 29
Why does Smith reject Meggens' inference that the value ratio must equal the quantity ratio of imported gold and silver?
Smith argues the ordinary proportion between the values of two commodities is not necessarily the same as the proportion between their quantities in the market. He compares an ox at ten guineas to a lamb at 3s. 6d.—about sixty times the price—yet it would be absurd to infer sixty lambs are in the market for every ox. Likewise, silver's market quantity likely exceeds its value ratio to gold.
Chapter 29
What three possible outcomes does Smith say rising silver-mining costs must eventually produce?
Smith says the increased expense of working the deeper Spanish American silver mines must be compensated either first by a proportionate rise in the price of silver, secondly by a proportionate reduction of the tax upon silver, or thirdly partly by one and partly by the other. He calls the third event very possible, and notes such tax reductions may retard but not prevent silver's rise in value.
Chapter 29
PART III.—Of the variations in the Proportion between the… (part 6)3 cards
Why did rare birds and fishes command such high prices in ancient Rome?
The author argues their high prices reflected the high value of rarities that human industry could not multiply, not the low value of silver. Demand rose with wealth while supply stayed fixed, so prices had no certain boundary. He notes Roman silver was actually worth more than in contemporary Europe, so real prices were about a third higher than nominal figures suggest.
Chapter 30
What determines the upper limit of the price of cattle as improvement progresses?
The price rises until it becomes as profitable to cultivate land to raise food for cattle as to raise food for man; beyond that, more corn land would turn to pasture. Tillage reduces wild pasture and increases demand, so cattle prices climb. The author notes Scotland's cattle price had not reached this height before the Union.
Chapter 30
What does the author call Scotland's greatest commercial advantage from the Union with England?
He argues it is the rise in the price of cattle, which raised the value of highland estates and was perhaps the principal cause of low-country improvement. He notes this rise was gradual, hindered by tenants' poverty and slow land improvement, and that stock increase and land improvement must advance together over perhaps half a century or more.
Chapter 30
PART III.—Of the variations in the Proportion between the… (part 7)2 cards
Why did Smith say pork and poultry prices rose in Great Britain?
Smith says the great rise in the price of hogs and poultry in Great Britain was frequently imputed to the diminution of cottagers and other small occupiers of land. He notes this event was everywhere in Europe the forerunner of improvement and better cultivation, but may have raised prices of these provisions sooner and faster by reducing the quantity produced at little or no expense.
Chapter 31
What does Smith say about English wool prices since Edward III?
Smith states that in England, despite the flourishing woollen manufacture, the price of English wool has fallen very considerably since the time of Edward III. Authentic records show that around 1339 the moderate and reasonable price of the tod, or twenty-eight pounds of English wool, was not less than ten shillings of the money of those times.
Chapter 31
PART III.—Of the variations in the Proportion between the… (part 8)4 cards
What effect does Smith say regulations lowering wool or hide prices have in an improved country?
Smith argues that in an improved and cultivated country, regulations that sink the price of wool or raw hides below its natural level tend to raise the price of butcher's meat. Landlords and farmers receive the same total price, divided differently between hide and carcase, so their interest as producers is little affected, though as consumers they may suffer from dearer provisions.
Chapter 32
How does Smith say such regulations affect an unimproved, cattle-rearing country?
In an unimproved country where most land can only feed cattle and wool and hide form the chief value, Smith argues the interest of landlords and farmers would be deeply affected. A fall in wool and hide prices would not raise carcase prices, since the same cattle are still fed; instead the whole price of cattle, rent, and profit would fall.
Chapter 32
Why does Smith say the real price of fish naturally rises with improvement?
Smith argues that as population and produce grow, more buyers with more goods demand fish, but supplying an extended market requires disproportionately more labour: fish sought farther off, larger vessels, and more expensive machinery. The real price of fish therefore naturally rises in the progress of improvement, as he believes it has more or less in every country.
Chapter 32
What two circumstances does Smith say determine the quantity of precious metals in a country?
Smith says the quantity of gold and silver in any country depends first on its power of purchasing, meaning the state of its industry and annual produce, and second on the fertility or barrenness of the mines then supplying the commercial world. The second circumstance, he notes, may have no connection with that country's industry.
Chapter 32
PART III.—Of the variations in the Proportion between the… (part 9)2 cards
How does improvement affect animal versus vegetable food prices?
Smith argues that extending improvement and cultivation raises the price of animal food, since much land producing it must yield corn-land rent and profit, while it lowers vegetable food prices by increasing fertility and abundance. Potatoes and maize, plus turnips, carrots and cabbages brought from garden to field, are cited as cheapening vegetable food.
Chapter 33
What is the natural effect of improvement on manufactures' real price?
Smith argues improvement naturally diminishes the real price of almost all manufactures, since better machinery, greater dexterity and finer division of work reduce the labour needed per piece, generally more than compensating any rise in labour's price. Exceptions include carpenters' and joiners' work, where rising timber prices outweigh such advantages.
Chapter 33
PART III.—Of the variations in the Proportion between the… (part 10)4 cards
What three orders make up every civilized society, according to Smith?
Smith divides the revenue of society into three parts—rent of land, wages of labour, and profits of stock—which support three orders: those who live by rent, those who live by wages, and those who live by profit. These are the three great, original, and constituent orders of every civilized society, from whose revenue that of every other order is ultimately derived.
Chapter 34
Why does Smith say landowners often fail to grasp their own interest?
Their revenue costs them neither labour nor care but comes of its own accord, independent of any plan of their own. The indolence natural to the ease and security of their situation renders them too often not only ignorant but incapable of the application of mind needed to foresee and understand the consequences of public regulation.
Chapter 34
How does the rate of profit behave as a society grows rich or poor?
Unlike rent and wages, the rate of profit does not rise with prosperity and fall with decline. It is naturally low in rich countries and high in poor countries, and always highest in countries going fastest to ruin. Therefore the interest of those who live by profit has not the same connexion with the general interest as that of the other two orders.
Chapter 34
What does Smith advise about laws proposed by merchants and manufacturers?
The interest of dealers in any branch is always in some respects different from, and even opposite to, the public interest: they want to widen the market and narrow competition. Smith argues any new law or regulation of commerce from this order should be listened to with great precaution and never adopted until long and carefully examined with the most scrupulous and suspicious attention, since such men have often deceived and oppressed the public.
Chapter 34
BOOK II.3 cards
Why must a weaver have stock stored up before specializing?
A weaver cannot devote himself entirely to weaving unless a stock sufficient to maintain him and supply materials and tools is stored somewhere, in his own or another's possession, until he has both completed and sold his web. Since purchase of others' produce requires his own produce to be finished and sold, accumulation must precede specialized industry.
Chapter 35
How does stock accumulation relate to the division of labour?
The author argues accumulation of stock must in the nature of things precede the division of labour, and labour can be subdivided further only as stock is previously more accumulated. More materials, provisions, and tools are needed beforehand as operations simplify and machines are invented; accumulation also naturally leads to improvement, since employers of stock seek to maximize work produced.
Chapter 35
What does the introduction say Book II's five chapters cover?
The book explains the nature of stock, its accumulation into capitals of different kinds, and the effects of different employments of capital. Chapter one covers how stock divides into parts; chapter two treats money as a branch of society's stock; chapters three and four examine capital employed by its owner or lent to another; chapter five treats effects of different capital employments on national industry and annual produce.
Chapter 35
CHAPTER I.4 cards
How does Smith divide a person's whole stock?
Smith divides a person's whole stock into two parts: the part expected to afford revenue, called capital, and the part supplying immediate consumption. The latter consists of stock originally reserved for consumption, revenue as it gradually comes in, and goods bought with either that remain unconsumed, such as clothes and household furniture.
Chapter 36
What distinguishes circulating from fixed capital?
Circulating capital yields profit only by circulating or changing masters, as when a merchant buys goods and sells them again. Fixed capital yields revenue without changing masters, as with land improvement, machines, and instruments of trade. Smith notes different occupations require very different proportions of each.
Chapter 36
What four articles make up a society's fixed capital?
Smith lists: useful machines and instruments of trade; profitable buildings like shops, warehouses, and farm-houses; land improvements such as clearing, draining, and manuring; and the acquired and useful abilities of inhabitants, whose education costs a real expense fixed in the person.
Chapter 36
Why does a dwelling-house not serve as public capital?
Smith argues a dwelling-house occupied by its owner affords no revenue and is stock reserved for immediate consumption. If let to a tenant it yields rent to the proprietor, but the tenant pays from other revenue, so it cannot increase the revenue of the whole people. The author argues houses are the slowest-consumed part of consumption stock.
Chapter 36
CHAPTER II. (part 1)3 cards
How does Smith distinguish gross from neat revenue in a society?
Smith compares a nation to a private estate: gross rent is all the farmer pays, neat rent is what remains to the landlord after management, repairs, and necessary charges. Likewise, a society's gross revenue is the whole annual produce of land and labour; its neat revenue is what remains after deducting the expense of maintaining fixed and circulating capital. Real wealth is proportional to neat, not gross, revenue.
Chapter 37
Why is the expense of maintaining fixed capital excluded from neat revenue?
Smith argues the expense of maintaining fixed capital is always excluded from a society's neat revenue. Though fixed capital (machines, buildings, improvements) increases the productive powers of labour and is repaid with great profit, supporting it still consumes materials and labour that could otherwise go to subsistence and conveniencies. Cheaper, simpler machinery is therefore advantageous, since it frees resources for more productive work.
Chapter 37
Why does Smith say money is the only circulating capital that reduces neat revenue?
Of the four parts of circulating capital — money, provisions, materials, and finished work — Smith says the last three are regularly withdrawn and placed in fixed capital or consumable stock, so maintaining them does not reduce neat revenue. Money alone requires expense to collect and support, and it makes no part of gross or neat revenue. It is the great wheel of circulation, distinct from the goods circulated.
Chapter 37
CHAPTER II. (part 2)4 cards
According to Smith, what happens to gold and silver displaced by paper money?
Smith argues the channel of circulation stays the same, so paper beyond what it can hold overflows abroad. The displaced gold and silver is not given away but exchanged for foreign goods, either for the carrying trade or for home consumption. He says most will purchase materials, tools, and provisions to employ industry rather than maintain idle people.
Chapter 38
Why does Smith say money is not part of the capital that employs industry?
Smith argues three things are needed to set industry in motion: materials, tools, and wages. Money is neither material nor tool; wages are paid in money but real revenue is the money's worth. So the industry a capital can employ equals the workmen it supplies with materials, tools, and maintenance, not the money that buys them.
Chapter 38
What does Smith claim paper substitution did for Scotland's wealth?
Smith argues replacing gold and silver with paper adds the value of that coin to the funds maintaining industry, as if an undertaker scrapped old machinery and added the difference to circulating capital. He cites Scotland's new banks, notes that silver and gold rarely appear, and says trade and industry increased considerably, though he doubts the banks alone explain the reported doubling of Glasgow's trade.
Chapter 38
How did Scottish banks issue notes through cash accounts?
Smith explains banks mainly issue notes by discounting bills of exchange, deducting legal interest until due. Scottish companies also granted cash accounts: credit up to a set sum to anyone with two sureties of undoubted credit and landed estate, repayable on demand with legal interest. Repayment could be made piecemeal, with interest discounted proportionably from each payment date, terms Smith calls peculiar to Scotland.
Chapter 38
CHAPTER II. (part 3)4 cards
What happens when a bank issues paper money beyond what circulation can absorb?
The excess paper returns to the bank almost as fast as it is issued, forcing the bank to hold more gold and silver in its coffers to meet demands. Smith's example: a bank circulating 44,000 pounds instead of 40,000 must keep 14,000 rather than 11,000 in reserve, gaining nothing on the excess while bearing the full cost of continually collecting coin.
Chapter 39
What did the Bank of England's over-issuance of paper force it to do annually?
By issuing too much paper whose excess continually returned for exchange, the Bank of England was obliged for years to coin gold amounting to between 800,000 and a million pounds a year, averaging about 850,000. Because the worn gold coin had degraded, the bank often bought bullion at four pounds an ounce and issued it at about £3:17:10½, losing two and a half to three per cent.
Chapter 39
What ruinous resource did distressed Scotch banks use to satisfy London drafts?
When agents could not replenish their coffers fast enough, Scotch banks drew bills of exchange on London correspondents. When those correspondents drew back for payment with interest and commission, some banks, unable to pay, drew a second set of bills on the same or other correspondents. The same sum could make two or three journeys, with the debtor bank paying interest and commission on the whole accumulated sum.
Chapter 39
What rule does Smith give for how much a bank may properly advance a merchant?
The bank should advance not the merchant's whole capital, or even a considerable part, but only the portion he would otherwise keep unemployed in ready money for occasional demands. If advances never exceed this, they cannot exceed the coin that would circulate without paper money. Smith compares such coffers to a pond with equal streams running in and out, needing little expense to stay full.
Chapter 39
CHAPTER II. (part 4)3 cards
What did the repeated redrawing practice cost the borrower per year, and why?
Interest was five per cent per year and commission never less than half a per cent on each draught. Since commission repeated more than six times a year, money raised this way cost somewhat more than eight per cent annually, and sometimes far more when commission rose or compound interest was paid on former interest and commission.
Chapter 40
Why did the paper issued on circulating bills never truly return to the banks?
Before each bill fell due, another bill for a somewhat greater amount was drawn and discounted, and that discount was necessary to pay the first. So repayment was fictitious: the stream that ran out of the banks' coffers was never replaced by one running in. The paper often exceeded what circulation could absorb, returning for gold and silver.
Chapter 40
How did the new Scottish bank established to relieve the 'distress of the country' conduct itself?
It was more liberal than any other in granting cash-accounts and discounting bills, making scarce any distinction between real and circulating bills. Its avowed principle was to advance the whole capital for slow-returning improvements such as land. Its notes, exceeding what circulation could absorb, returned for gold and silver as fast as issued; its coffers were never well filled.
Chapter 40
CHAPTER II. (part 5)4 cards
Why does Smith say a lending bank chooses debtors worse than a private lender?
The author argues a bank lending to perhaps five hundred people its directors barely know is less judicious than a private person lending to a few known, sober, frugal borrowers. Such a bank's debtors would mostly be chimerical projectors and drawers of circulating bills, while private lenders' borrowers would fund sober, proportionate, profitable undertakings.
Chapter 41
What was the Bank of England's original 1694 advance to government and its terms?
Incorporated by charter dated 27 July 1694, the Bank advanced £1,200,000 to government for an annuity of £100,000: £96,000 a-year interest at eight per cent, plus £4,000 a-year for management expenses. Smith says this high interest shows how low government credit was after the Revolution.
Chapter 41
How does Smith say judicious banking increases a country's industry?
Not by augmenting capital but by rendering more of it active and productive. A dealer's ready money is dead stock; banking converts it into materials, tools, and subsistence. Likewise, substituting paper for gold and silver converts the country's dead stock into productive stock, like turning highways into pastures and corn fields.
Chapter 41
What risk does Smith say paper money adds compared to gold and silver?
Commerce suspended on the 'Daedalian wings of paper money' is less secure than on the solid ground of gold and silver. Beyond unskilful conductors, an unsuccessful war in which an enemy seized the capital and its treasure would cause far greater confusion where circulation is all paper, leaving no means to pay troops or magazines.
Chapter 41
CHAPTER II. (part 6)4 cards
According to Smith, what makes paper money equal in value to gold and silver?
Smith argues that bank notes issued by people of undoubted credit, payable on demand without condition, and in fact always readily paid when presented, are in every respect equal in value to gold and silver money, since gold and silver can at any time be had for them. Whatever is bought or sold for such paper must be bought or sold as cheap as it could have been for coin.
Chapter 42
How did Scotland's optional clause degrade bank notes below coin value?
Scottish banks inserted an optional clause promising payment either on presentation or, at the directors' option, six months later with legal interest. Directors sometimes used or threatened it to pressure those demanding coin. This uncertainty of payment degraded notes below gold and silver value; during the abuse (chiefly 1762–1764), exchange between London and Dumfries was sometimes four per cent against Dumfries, though only thirty miles from Carlisle.
Chapter 42
Why does Smith call colonial paper money a scheme of fraudulent debtors?
Colonial paper was government paper not payable until years after issue, bearing no interest, yet declared a legal tender for full value. Smith argues £100 payable fifteen years hence at six per cent is worth little more than £40 ready money, so forcing a creditor to accept it for a £100 cash debt was violent injustice, bearing the marks of a scheme of fraudulent debtors to cheat creditors.
Chapter 42
What does Smith say about the effect of free competition among banks?
Smith argues the multiplication of banking companies increases public security: it obliges banks to be more circumspect, not extending currency beyond due proportion to cash, guarding against malicious runs from rivals. It narrows each company's circulation and divides the whole into more parts, so any one failure matters less. Free competition also makes bankers more liberal to customers, lest rivals carry them away.
Chapter 42
CHAPTER III. (part 1)4 cards
For Smith, what distinguishes productive from unproductive labour?
Productive labour adds to the value of the subject it is bestowed upon and fixes itself in a vendible commodity that lasts after the labour is past. Unproductive labour adds to the value of nothing and perishes in the instant of performance, leaving no trace of value for which equal service could later be procured. Smith notes unproductive labour still has value and deserves its reward.
Chapter 43
Which respectable professions does Smith rank as unproductive, and why?
Smith ranks the sovereign with officers of justice and war, the whole army and navy, plus churchmen, lawyers, physicians, men of letters, players, buffoons, musicians, and opera-singers as unproductive. Their labour fixes itself in no permanent vendible commodity; like an actor's declamation, the work perishes in the instant of production. Their service, however honourable or necessary, produces nothing that can later purchase equal service.
Chapter 43
How does the annual produce divide, and which part maintains unproductive hands?
The annual produce first divides into one part replacing a capital and another constituting revenue as profit or rent. The capital-replacing part maintains only productive hands. The revenue part may maintain either productive or unproductive hands. Unproductive labourers are maintained by revenue, and the rent of land and profits of stock are the principal sources of their subsistence.
Chapter 43
What does Smith argue determines a country's industry versus idleness?
The author argues the proportion between funds destined for maintaining productive labour and those likely to maintain idleness determines the general character of inhabitants as to industry or idleness. In mercantile towns maintained by capital, people are industrious and thriving; in court towns maintained by revenue spending, they are idle and poor. He says our ancestors were idle for want of encouragement to industry.
Chapter 43
CHAPTER III. (part 2)4 cards
According to Smith, what happens when a prodigal spends within the country rather than on imports?
The author argues the effect on productive funds is the same: food and clothing that should have maintained productive hands instead maintain unproductive ones, reducing the value of annual produce. The money stays in the country, but no reproduction of consumable goods occurs—there would have been two values instead of one.
Chapter 44
What does Smith say determines the quantity of money circulating in a country?
The author argues money's sole use is circulating consumable goods, so its quantity is determined by the value of goods annually circulated. Money increases as produce increases and diminishes as produce diminishes; gold and silver exports are the effect, not the cause, of national decline.
Chapter 44
Why does Smith believe frugality generally outweighs prodigality in most people?
The author argues the passion for present enjoyment is momentary and occasional, while the desire to better our condition comes from the womb and never leaves until the grave. Since augmenting fortune is best achieved by saving, frugality predominates greatly in most men over a lifetime.
Chapter 44
What does Smith say about private versus public prodigality's effect on national wealth?
The author argues great nations are never impoverished by private prodigality, since individual frugality and good conduct usually compensate it, but they sometimes are impoverished by public prodigality and misconduct. Public revenue maintains unproductive hands like courts, clergy, fleets, and armies, which can consume so much produce that productive laborers cannot reproduce it.
Chapter 44
CHAPTER III. (part 3)4 cards
Why does Smith say spending on durable goods is more favourable to national opulence?
The author argues durable-goods spending leaves accumulated valuable commodities, promotes private frugality, and maintains productive rather than unproductive hands. By contrast, hospitality spending is largely consumed and wasted, and maintains unproductive hands, so it does not increase the exchangeable value of the annual produce.
Chapter 45
How does durable-goods spending make frugality easier for a person who overspent?
The author argues that cutting back on servants, table, or equipage is visible and implies acknowledgment of bad conduct, so few reform until ruin forces them. But reducing expense on building, furniture, books, or pictures raises no such inference; one appears to stop because fancy is satisfied, not because fortune was exceeded.
Chapter 45
What examples show durable goods passing to inferior ranks in rich countries?
Smith notes that in long-rich countries, inferior ranks often possess good houses and furniture not made for them. A former Seymour family seat became an inn on the Bath road, and James I's marriage-bed, brought from Denmark by his queen, later ornamented an alehouse at Dunfermline. Ancient cities may scarce have a house built for its present inhabitants.
Chapter 45
Does Smith claim durable-goods spending always shows a generous spirit?
No. The author explicitly says he does not mean one species of expense always betokens a more liberal spirit. Hospitality shares revenue with friends and companions, while durable commodities are often spent on oneself without equivalent given. Spending on frivolous objects like jewels and trinkets may indicate a trifling, base, and selfish disposition.
Chapter 45
CHAPTER IV.4 cards
According to Smith, what does the borrower really receive in a loan at interest?
Smith argues the borrower does not really want money but "the money's worth," the goods it can purchase. Money, whether paper or coin, is merely the deed of assignment conveying a share of the annual produce of land and labour. The lender assigns the borrower the right to a portion of that produce, to be used as the borrower pleases.
Chapter 46
How does Smith illustrate that the same money can support many loans?
Smith gives an example: A lends W £1000, who buys goods from B; B lends the identical pieces to X, who buys from C; C lends them to Y, who buys from D. The same coin or paper may thus serve three loans and three purchases, each equal in value to the whole amount, and the stock lent is three times the money.
Chapter 46
Why does Smith say the rate of interest falls as stock increases?
Smith argues that as capitals grow, profitable employment becomes harder to find, so owners compete for it by selling cheaper and buying dearer. This competition raises wages and sinks profits. Since interest is paid out of profit, the rate of interest necessarily falls along with profits as stock increases.
Chapter 46
How does Smith refute the claim that silver's fall in value caused lower interest rates?
Smith cites Locke, Law, and Montesquieu as holding that the post-West Indies silver influx lowered interest by cheapening money. He replies that if £100 now equals £50 then, £10 now equals £5 then, so the capital-interest proportion is unchanged. Only altering the rate itself changes that proportion, so silver's value cannot lower interest.
Chapter 46
CHAPTER V.4 cards
What four ways can a capital be employed, according to Smith?
Smith classifies capital employment into four ways: procuring rude produce (farmers, miners, fishers), manufacturing it for use (master manufacturers), transporting it from where it abounds to where it is wanted (wholesale merchants), and dividing it into small parcels suiting occasional demands (retailers). He says it is difficult to conceive of a capital employed in any way not classed under one of these four.
Chapter 47
Why does Smith rank agricultural capital as most advantageous to society?
The author argues agricultural capital puts more productive labour in motion and adds more value than equal capital elsewhere. Labourers and cattle reproduce not only their own consumption plus the farmer's profit, but also the landlord's rent, which Smith calls the work of Nature. He says this rent is seldom less than a fourth and often more than a third of the whole produce, whereas in manufactures Nature does nothing and man does all.
Chapter 47
Why does Smith defend shopkeepers against restriction and taxation?
The author argues the prejudices of some political writers against shopkeepers are without foundation. Retailers let people buy subsistence day to day, so a poor workman can keep almost his whole stock as capital rather than tying it up in provisions. Competition among many grocers makes them sell cheaper and reduces the chance of combining to raise prices. Smith says they can never be multiplied so as to hurt the public, though they may hurt one another.
Chapter 47
How does Smith compare the productive labour set in motion by each capital type?
Smith ranks the immediate productive labour each capital employs: the retailer employs only himself; the wholesale merchant employs himself plus sailors and carriers; the master manufacturer distributes much of his capital among workmen, adding value through wages and profits; the farmer employs labouring servants and cattle, with Nature contributing. He concludes equal capitals in these employments put very different quantities of productive labour in motion and add value in different proportions.
Chapter 47
CHAPTER I.4 cards
According to Smith, what is the great commerce of every civilized society?
Smith states that the great commerce of every civilized society is that between town and country: an exchange of rude produce for manufactured produce, either directly or through money or paper. The country supplies subsistence and materials; the town returns manufactured goods. Smith argues both gain mutually, since division of labour benefits all, and denies that the town's gain is the country's loss.
Chapter 48
Why does Smith say agriculture is naturally preferred to manufactures and foreign trade?
Smith argues that, at equal or nearly equal profits, most men prefer employing capital in land because it is more under their view and command and less exposed to accidents than trade, which faces winds, waves, and uncertain human folly. He adds the charms of country life, tranquillity, and independence, and calls cultivating the ground man's original destination.
Chapter 48
What natural order does Smith say capital follows in a growing society?
Smith argues that in every growing society most capital is directed first to agriculture, then to manufactures, and last to foreign commerce. He says this order has been observed to some degree in every society with territory, since land must be cultivated before towns arise and some coarse manufacturing precedes foreign trade.
Chapter 48
How does Smith explain Europe's inverted order of opulence?
Smith argues that although the natural order occurred to some degree everywhere, all modern European states inverted it: foreign commerce in some cities introduced finer manufactures fit for distant sale, and manufactures and foreign commerce together produced the main improvements in agriculture. He attributes this retrograde order to manners and customs introduced by their original governments and surviving later changes.
Chapter 48
CHAPTER II.4 cards
Why did the law of primogeniture arise for landed estates?
The author argues that when land meant power and protection, a great landlord was a petty prince whose security depended on the estate's size; dividing it invited oppression by neighbors. So estates descended undivided to one heir, mirroring monarchies. Among children, the only indisputable differences being sex and age, males were preferred and the elder took precedence, giving rise to primogeniture and lineal succession.
Chapter 49
Why does the chapter call entails absurd in present-day Europe?
Entails preserved a lineal succession, barring any part of an estate from leaving the line by gift or alienation. The author argues they might have been reasonable when great estates were principalities, protecting thousands from one man's caprice. But now that small and great estates alike are secured by law, entails rest on the absurd supposition that the present generation's property should be regulated by the fancy of those dead five hundred years.
Chapter 49
Why does slave labor make cultivation dearer in the end?
The author argues that work done by slaves, though it seems to cost only their maintenance, is ultimately the dearest of all. A person who can acquire no property has no interest but to eat much and labor little; extra work can be extracted only by violence, not self-interest. Hence corn cultivation degenerated under slaves in ancient Italy and Greece, as Pliny, Columella, and Aristotle noted.
Chapter 49
Why does the chapter say great proprietors seldom improve their land?
Great proprietors were first occupied defending or extending their territories, then lacked the inclination and usually the abilities. If expenses matched revenue they had no stock to invest; if frugal, they preferred buying new land to improving old. Profitable improvement requires attention to small savings and gains, which a man born to great fortune seldom manages, so he embellishes a few hundred acres at ten times their worth.
Chapter 49
CHAPTER III.4 cards
What was the original condition of town inhabitants after the fall of the Roman empire?
The author states that towns were chiefly inhabited by tradesmen and mechanics who were of servile, or very nearly servile, condition. Ancient charters granting privileges—such as marrying daughters without the lord's consent, children inheriting goods, and disposing of effects by will—show that before those grants the townspeople were altogether or nearly in the same state of villanage as rural occupiers of land.
Chapter 50
How did burghers come to hold their towns in fee?
The king's revenue from town poll-taxes was commonly let in farm for a term of years, sometimes to the sheriff or others. Burghers frequently got credit to farm their own town's revenues, becoming jointly and severally answerable for the rent. In time the farm was granted to them in fee—for ever—reserving a rent certain never afterwards to be augmented, so their exemptions became perpetual and attached to burghers of the burgh rather than to individuals.
Chapter 50
Why did sovereigns grant towns privileges and self-government?
The author argues that no European sovereign could protect weaker subjects from the great lords. Burghers, unable to defend themselves individually, formed leagues of mutual defence; the lords despised and plundered them, while the king neither hated nor feared them. Mutual interest aligned king and burghers against the barons, so he granted them magistrates, bye-laws, walls, and military discipline, and farmed their town in fee to remove grounds for suspicion.
Chapter 50
How did city representation in general assemblies originate?
In countries like France and England, where the sovereign's authority was low but never destroyed, cities never became fully independent. They grew considerable enough that the sovereign could impose no tax beyond the stated farm-rent without their consent. They were therefore called to send deputies to the general assembly, joining clergy and barons in granting extraordinary aid, and their deputies sometimes served as a counterbalance to the great lords—hence burgh representation in the states-general.
Chapter 50
CHAPTER IV.3 cards
In what three ways does Smith say commercial towns improved their countries?
Smith lists three: first, by providing a ready market for rude produce, encouraging cultivation (benefiting foreign countries too, but the home country most due to lower carriage costs); second, by merchants buying and improving uncultivated land; third, and most important though least observed, by gradually introducing order, good government, liberty, and security of individuals.
Chapter 51
Why does Smith consider merchants better land improvers than country gentlemen?
The author argues merchants are accustomed to employing money in profitable projects, while country gentlemen employ it in expense. Merchants see money return with profit and are bold undertakers; gentlemen are timid, seldom venturing capital, and if they improve at all do so from annual revenue savings. Mercantile habits of order, economy, and attention make merchants fitter to execute improvement projects.
Chapter 51
How did foreign commerce and manufactures undermine the power of the great proprietors?
Smith argues commerce gave proprietors something to exchange their surplus produce for and consume themselves, without sharing with tenants or retainers. For frivolous items like diamond buckles, they traded away the maintenance of a thousand men for a year and the authority it bought. Thus they gradually bartered away their whole power and authority for vanity.
Chapter 51
BOOK IV.3 cards
According to Smith, what two objects does political economy propose?
Smith defines political economy as a branch of the science of a statesman or legislator with two distinct objects: first, to provide a plentiful revenue or subsistence for the people, or more properly to enable them to provide it for themselves; and second, to supply the state with revenue sufficient for public services. It aims to enrich both the people and the sovereign.
Chapter 52
What two systems of political economy does Smith identify for enriching the people?
Smith says the different progress of opulence in different ages and nations gave occasion to two systems of political economy regarding enriching the people: the system of commerce and the system of agriculture. He promises to explain both fully and distinctly, beginning with the system of commerce.
Chapter 52
Which system does Smith treat first, and why?
Smith begins with the system of commerce. He calls it the modern system and says it is best understood in our own country and in our own times. The system of agriculture is the other system he identifies, but he sets it aside for later explanation.
Chapter 52
CHAPTER I. (part 1)4 cards
According to the chapter, what popular notion about wealth does Smith identify?
Smith says the popular notion is that wealth consists in money, or in gold and silver. It arises from money's double function as the instrument of commerce and the measure of value: with money one can readily obtain whatever else one needs, and other commodities are valued by the money they exchange for. In common language, wealth and money are considered synonymous.
Chapter 53
What did the Spaniards and Tartars each inquire about when judging a country worth conquering?
The Spaniards asked whether gold or silver was to be found nearby, judging by that whether a settlement was worthwhile. The Tartars, as Plano Carpino reported, asked whether there was plenty of sheep and oxen in France. Among shepherds ignorant of money, cattle are the instruments of commerce and measure of value, so wealth consisted in cattle. Smith suggests the Tartar notion was perhaps nearer the truth.
Chapter 53
What did merchants argue against prohibitions on exporting gold and silver?
Merchants argued that exporting gold and silver to buy foreign goods need not diminish the metals and might increase them, since goods could be re-exported at profit; Mun compared this to seed-time and harvest. They also argued prohibitions could not stop exportation, given the metals' small bulk, and that only the balance of trade mattered. Smith calls these arguments partly solid, partly sophistical.
Chapter 53
How does Smith criticize the mercantile system's focus on the balance of trade?
Smith says the arguments were sophistical in supposing that preserving or augmenting gold and silver required more government attention than any other useful commodity, which free trade supplies in proper quantity. He also disputes that high exchange necessarily increased the unfavourable balance, arguing it acted as a tax raising foreign goods' prices and diminishing consumption. Government turned from one fruitless care to another equally fruitless.
Chapter 53
CHAPTER I. (part 2)4 cards
According to Smith, what really causes the general complaint of scarcity of money?
Smith argues it is not any scarcity of gold and silver, but the difficulty over-traders find in borrowing, and their creditors in getting payment. When profits exceed ordinary levels, dealers buy unusual quantities of goods on credit, hoping returns arrive before payment is demanded. The demand comes first, leaving them nothing to purchase money or give solid security for borrowing.
Chapter 54
Why does Smith say money necessarily runs after goods, not the reverse?
Smith argues goods can serve many purposes besides purchasing money, but money serves no purpose besides purchasing goods. The buyer often means to use or consume, while the seller always means to buy again. So goods draw money more necessarily in the long run, even if money draws goods more readily at any moment.
Chapter 54
What does Smith compare gold and silver to, and why?
Smith argues gold and silver, whether coin or plate, are utensils as much as kitchen furniture. Their quantity is limited by the use for them: coin by the value of commodities circulated, plate by the number and wealth of families. Trying to increase a country's wealth by hoarding unnecessary gold and silver is as absurd as keeping extra kitchen utensils to improve a family's meals.
Chapter 54
How does Smith say Britain financed the expensive French war without exporting its money?
Smith argues the war was chiefly defrayed by exporting British commodities, not gold and silver. Merchants paying foreign correspondents naturally sent goods rather than coin, since transporting commodities suited to the market yields profit while shipping gold to pay a debt yields none. He notes the circulating money never appeared unusually empty, and complaints of scarcity came from over-trading, not from the war draining coin.
Chapter 54
CHAPTER I. (part 3)3 cards
What two distinct benefits does foreign trade give to all trading countries?
Smith argues foreign trade carries out the surplus produce of land and labour for which there is no home demand, and brings back something else that is demanded. It gives value to superfluities and, by widening the market beyond home consumption, lets the division of labour be carried further and encourages improvement of productive power, increasing the real revenue and wealth of society.
Chapter 55
How did the discovery of America chiefly enrich Europe, per Smith?
Smith argues it was not the import of gold and silver but the opening of a new, inexhaustible market for European commodities, which occasioned new divisions of labour and improvements of art impossible within the narrow circle of ancient commerce. The cheapening of gold and silver was a trifling convenience; the real gain was improved productive powers and increased real revenue. He adds that European injustice made the event ruinous for several of the affected countries.
Chapter 55
What six principal means did the commercial system use to turn the balance of trade?
Smith lists two restraints on importation: duties or prohibitions on foreign goods producible at home, and restraints on goods from countries with a supposedly disadvantageous balance. Four encouragements to exportation follow: drawbacks, bounties, advantageous commercial treaties, and colonies. Together these six aimed to increase a country's gold and silver by turning the balance of trade favourable.
Chapter 55
CHAPTER II. (part 1)4 cards
What effect do import restraints have on a society's total industry, according to Smith?
Smith argues that no regulation of commerce can increase the quantity of industry in a society beyond what its capital can maintain. Such restraints can only divert part of industry into a direction it might not otherwise have taken, and it is not certain that this artificial direction is more advantageous to society than the natural one.
Chapter 56
Why does a merchant prefer home trade over foreign trade at equal profits?
Smith argues that, at equal or nearly equal profits, every wholesale merchant naturally prefers home trade to foreign trade of consumption, and foreign trade to the carrying trade. In home trade his capital is never long out of his sight, he knows better the character of those he trusts, and he knows the laws for seeking redress.
Chapter 56
What does Smith's 'invisible hand' passage say about pursuing self-interest?
Smith argues that an individual intending only his own security and gain is led by an invisible hand to promote an end that was no part of his intention. By pursuing his own interest, he frequently promotes society's interest more effectually than when he really intends to promote it. Smith adds he has never known much good done by those who affected to trade for the public good.
Chapter 56
What does Smith say about a statesman directing private people's capital?
Smith argues that every individual can judge his local situation better than any statesman or lawgiver. A statesman who attempts to direct how private people employ their capitals assumes an authority safely trusted to no single person or council, and nowhere so dangerous as in the hands of one with folly and presumption enough to fancy himself fit to exercise it.
Chapter 56
CHAPTER II. (part 2)4 cards
Why does Smith say farmers need not fear free importation of foreign corn?
Smith argues imported corn is small relative to consumption—about 23,728 quarters yearly, under one five-hundred-and-seventy-first of annual consumption—and bulky, so freest importation would little affect British farmers. He adds the bounty increases exports in plenty years and thus imports in scarcity years, so without it less corn would likely be imported.
Chapter 57
Which two cases does Smith say justify burdening foreign industry?
First, when a particular industry is necessary for national defence—Smith cites the navigation act protecting British sailors and shipping. Second, when a domestic tax is imposed on the produce of domestic industry, an equal tax on like foreign produce is reasonable. Smith calls defence more important than opulence, and the navigation act perhaps the wisest of England's commercial regulations.
Chapter 57
What does Smith observe about who most anxiously supports the corn bounty?
Smith says he observed the greatest anxiety for renewing the bounty in corn-merchants, the fetchers and carriers of corn, rather than in country gentlemen and farmers. He notes farmers and country gentlemen are least subject to the monopoly spirit, being disposed to promote neighbours' cultivation, while merchants in towns possess an exclusive corporation spirit.
Chapter 57
Why does Smith call taxing necessaries to offset other taxes absurd?
Smith says the general price enhancement from taxing necessaries can't be known exactly, so foreign taxes can't be proportioned to it. He compares such taxes to poor soil and bad climate: people should adapt their industry to circumstances rather than be directed. Laying new taxes because people already pay dear for necessaries, he argues, is a most absurd way of making amends.
Chapter 57
CHAPTER II. (part 3)4 cards
Why does Smith think displaced manufacturers can find new work more easily than soldiers?
The author argues manufacturers are accustomed to seeking subsistence from labour, while soldiers expect it from pay, so application and industry are familiar to the former and idleness and dissipation to the latter. He adds that many manufactures have collateral trades of similar nature, and most such workmen are occasionally employed in country labour, making transfer easier.
Chapter 58
What example does Smith use to show mass job loss need not cause ruin?
He cites the reduction of the army and navy at the end of the late war, when more than 100,000 soldiers and seamen were thrown out of employment at once. Though they suffered some inconveniency, they were not deprived of all employment or subsistence; most seamen gradually entered the merchant service, and no great convulsion arose.
Chapter 58
What reforms does Smith propose to restore natural liberty of industry?
He urges breaking down the exclusive privileges of corporations, repealing the statute of apprenticeship, and repealing the law of settlements, so a poor workman thrown out of employment in one trade or place may seek work in another without fear of prosecution or removal. He says this liberty should extend to all subjects as it does to soldiers and seamen.
Chapter 58
How does Smith say free trade changes should be introduced, and why?
The author argues changes should never be introduced suddenly but slowly, gradually, and after a very long warning. The undertaker of a great manufacture would suffer considerably, since capital fixed in workhouses and instruments of trade could scarce be disposed of without loss, though circulating capital might find new employment. He also urges the legislature to avoid establishing or extending new monopolies.
Chapter 58
Part I—Of the Unreasonableness of those Restraints, even…4 cards
What duties did Britain impose on French goods under the commercial system?
Britain imposed a 25% duty on all French goods by the impost of 1692, then a second 25% in 1696, plus 25 pounds per ton on French wine and 15 pounds per ton on French vinegar. Counting five general subsidies, the author states 75% was the lowest duty on most French goods, equivalent to prohibition. The French retaliated similarly, ending almost all fair commerce.
Chapter 59
Why does the author argue a French trade deficit would not harm England?
The author argues that even if the balance favored France, cheaper and better French wines and linens would let Britain buy goods at lower cost, reducing total import value. Also, much of the goods could be re-exported at profit, as Holland did with French goods. So a bilateral deficit need not disadvantage England or worsen its general trade balance.
Chapter 59
Why does the author distrust the course of exchange as a trade balance measure?
The author argues exchange rates are unreliable because debt between two places is influenced by dealings with third countries, as when English merchants pay Hamburg and Riga via Holland. Also, computed exchange differs from real exchange due to worn coin, coinage costs, and bank money versus currency. Custom-house books are equally uncertain, so no certain criterion exists.
Chapter 59
How do coinage costs and bank money distort the computed exchange?
In England coinage is free, but France deducts 8% for coinage, making French money of equal silver weight more valuable. Also, places like Amsterdam pay foreign bills in bank money, worth more than currency by the agio, about 5%. Thus computed exchange may favor one country while the real exchange favors the other.
Chapter 59
PART II.—Of the Unreasonableness of those extraordinary…4 cards
According to Smith, when is trade between two places always advantageous to both?
Smith argues that trade carried on naturally and regularly, without force or constraint, is always advantageous to both places, though not always equally so. By contrast, trade forced through bounties and monopolies may be, and commonly is, disadvantageous to the country in whose favour it is meant to be established.
Chapter 60
How does Smith define 'advantage' or 'gain' in trade?
Smith defines advantage or gain not as an increase in the quantity of gold and silver, but as an increase in the exchangeable value of the annual produce of the land and labour of the country, or the increase of the annual revenue of its inhabitants. This definition underpins his rejection of the balance-of-trade doctrine.
Chapter 60
Why does Smith say a country exporting only native goods gains more than one paying with foreign goods?
Smith argues both countries gain, but unequally. The country exporting native commodities has its whole capital distributed among its own people. The other country, paying with foreign goods like tobacco or East India goods, has much of its capital replacing capitals employed in distant countries such as Virginia, Indostan, and China, so it carries on a round-about trade and derives less revenue.
Chapter 60
What does Smith argue about cheap wine and drunkenness, and the alehouse analogy?
Smith argues the trade with the alehouse is not necessarily losing, being as advantageous in nature as any other though more liable to abuse. He argues cheapness of wine seems a cause of sobriety, not drunkenness, citing wine countries as Europe's soberest, and predicts removing wine duties might cause temporary then permanent sobriety in Britain.
Chapter 60
CHAPTER IV.3 cards
According to Smith, why do drawbacks not increase the quantity of goods exported?
The author argues drawbacks merely return all or part of the excise or inland duty on exportation, so they cannot cause more goods to be exported than would have been without the duty. They do not divert more capital into a particular employment, but only prevent the duty from driving capital away. Thus they preserve rather than overturn the natural division and distribution of labour.
Chapter 61
Why were all duties on tobacco drawn back before the American revolt?
Before the revolt of the North American colonies, Britain had the monopoly of Maryland and Virginia tobacco. About ninety-six thousand hogsheads were imported, while home consumption was not supposed to exceed fourteen thousand. To facilitate the great exportation needed to clear the rest, the whole duties were drawn back, provided exportation took place within three years.
Chapter 61
When does Smith say drawbacks are NOT justified?
The author argues drawbacks are justified only for goods exported to countries altogether foreign and independent, not to those where merchants and manufacturers enjoy a monopoly. A drawback on European goods sent to the American colonies may not increase exportation, since the monopoly could send the same quantity anyway. It may then be pure loss to revenue. Drawbacks also require goods be really exported, not clandestinely re-imported.
Chapter 61
CHAPTER V. (part 1)4 cards
According to Smith, which trades genuinely require export bounties?
Smith argues only trades where the merchant must sell below the price that replaces his capital plus ordinary profit require a bounty. Any trade that recovers capital and ordinary profit is already on a level with other unbountied trades and needs no bounty. A bounty merely makes up a loss and encourages a trade whose every operation consumes part of the capital employed in it.
Chapter 62
What two taxes does Smith say the corn bounty imposes on the people?
Smith says every export bounty imposes two taxes: first, the tax paid to fund the bounty itself; second, the higher price of the commodity in the home market. Since everyone buys corn, this second tax falls on the whole population. Using a bounty of 5s. per quarter and a 4s. price rise, with exports only one-thirty-first of home consumption, he calculates the second tax far outweighs the first.
Chapter 62
Why does Smith reject the claim that the corn bounty lowered corn prices?
Smith argues the fall in average corn prices happened despite the bounty, not because of it. He notes France saw a similar fall without any bounty and with exportation prohibited until 1764, so the cause is likely the gradual rise in the real value of silver across Europe. He adds the bounty raises home prices in years of plenty and blocks plenty from relieving scarcity.
Chapter 62
What is the real effect of the corn bounty on real versus nominal prices?
Smith argues the bounty cannot raise the real price of corn, only the nominal price. It degrades the real value of silver, making money buy less corn and less of other home-made goods. Since the money price of corn regulates wages and other prices, farmers and landlords selling at 4s. instead of 3s.6d. gain little if 4s. buys no more home-made goods than before.
Chapter 62
CHAPTER V. (part 2)4 cards
According to Smith, who alone truly benefits from the corn export bounty?
The author argues that the corn merchants—exporters and importers of corn—are the one set of men essentially served by the bounty. In plentiful years it forced greater exportation; by preventing one year's plenty from relieving another's scarcity, it caused greater importation in scarce years. This expanded the merchant's business in both, letting him sell at a better price and greater profit. Smith observed the greatest zeal for the bounty among these men.
Chapter 63
Why does Smith say a corn bounty cannot raise corn's real value?
The author argues corn has a real value fixed by nature—the quantity of labour it can maintain—which altering its money price cannot change. A bounty raises only the nominal price, the silver corn exchanges for, not the labour it employs. So it does not enrich farmers or gentlemen or encourage corn's growth. By contrast, bounties on woollen or linen raise both nominal and real price, genuinely encouraging those manufactures.
Chapter 63
How does the corn bounty harm British manufactures versus the Dutch?
Smith says the bounty makes corn dearer at home and cheaper abroad, and since corn's money price regulates other commodities, it lowers silver's value at home and raises it slightly abroad. This lets foreigners, especially the Dutch, eat British corn cheaper than Britons sometimes can, and lets them furnish goods for less silver. British manufactures become dearer in every market, giving Dutch industry a double advantage.
Chapter 63
Why does Smith prefer a bounty on production to one on exportation?
The author argues a production bounty would act more directly, impose only one tax (to pay the bounty), and tend to lower the commodity's home price, partly repaying the people. Export bounties, by contrast, force industry into a losing channel and, for corn, cannot promote its production at all. Yet production bounties are rarely granted, because commercial-system prejudices favor exportation as bringing in money, and merchants fear the home market being overstocked.
Chapter 63
CHAPTER V. (part 3)4 cards
What happened to the great company and fishing chambers despite encouragements?
Despite receiving the same annuity and encouragements as the great company, almost all the fishing companies, both great and small, lost either the whole or the greater part of their capitals. Scarce a vestige of any of them remains, and the white-herring fishery is now entirely, or almost entirely, carried on by private adventurers.
Chapter 64
When does Smith say bounties on particular manufactures might be justified?
Smith suggests that if a particular manufacture were necessary for the defence of the society, it might not be prudent to depend on neighbours for supply, and taxing other branches of industry to support it might not be unreasonable. He cites bounties on exported British sail-cloth and gunpowder as perhaps vindicated on this principle.
Chapter 64
How does Smith distinguish a bounty from a drawback?
In the language of the customs, drawbacks are allowances given on goods exported in the same form in which they were imported. When the form has been altered by manufacture so the goods come under a new denomination, the allowances are called bounties. Smith notes what is called a bounty is sometimes really no more than a drawback.
Chapter 64
Why does Smith say premiums are less objectionable than bounties?
Smith argues premiums encourage extraordinary dexterity and ingenuity, keep up emulation among workmen, and are not large enough to divert more capital to an occupation than would go there naturally. Their tendency is not to overturn the natural balance of employments but to make work as perfect as possible, and their expense is trifling compared with bounties.
Chapter 64
I.4 cards
According to Smith, whose interest aligns with the inland corn dealer's in scarcity?
The author argues the inland dealer's interest and that of the great body of the people are exactly the same, even in years of greatest scarcity. It is in his interest to raise corn's price only as high as the season's real scarcity requires, never higher, since overpricing risks unsold, spoiled corn and lower later prices.
Chapter 65
What does Smith say causes famines, as opposed to dearths?
The author argues a dearth never arose from combination among inland corn dealers, but from real scarcity, sometimes from the waste of war, mostly from faulty seasons. A famine, he claims, never arose from any other cause but the violence of government attempting, by improper means, to remedy the inconveniencies of a dearth.
Chapter 65
Why does Smith think corn is hard to monopolize?
Smith argues corn's value far exceeds what a few private capitals can purchase, and its production is scattered among many owners across the country. Inland dealers, including farmers and bakers, are more numerous than dealers in any other commodity, and their dispersed situation makes general combination impossible. Any dealer holding excess corn would lower his price rather than lose sales to rivals.
Chapter 65
What did the statute of Edward VI do to corn engrossers?
By 5th and 6th of Edward VI cap. 14, whoever bought corn or grain with intent to resell it was reputed an unlawful engrosser: two months imprisonment and forfeiture of the corn's value for the first fault; six months and double value for the second; the pillory, imprisonment at the king's pleasure, and forfeiture of all goods for the third.
Chapter 65
II.4 cards
What did Smith claim free corn importation does to corn's real value and home market?
The author argues free importation tends to lower corn's average money price but not its real value, or the labour it can maintain. Farmers would get less money but money of more value, buying more goods and employing more labour, so real wealth stays the same. Lowering corn's money price also lowers other commodities' money prices, giving domestic industry an advantage abroad and enlarging the home market for corn.
Chapter 66
Under 22 Charles II c. 13, what duties did wheat importation face at stated prices?
The statute subjected wheat importation to a duty of 16s. the quarter whenever the home price did not exceed 53s:4d., and to a duty of 8s. whenever it did not exceed £4. Smith notes the first price had for over a century occurred only in great scarcity, and the second, so far as he knew, never occurred at all.
Chapter 66
How were the grain import duties before the 13th of the present king structured?
Duties were set by grain type and by price thresholds, scaled to grain value. For example, wheat paid 21s:9d. to 44s., 17s. to 53s:4d., 8s. to £4, then about 1s:4d.; beans paid 19s:10d. to 28s., 16s:8d. to 40s., then 12d. Malt was prohibited by the annual malt-tax bill. These duties came partly from 22 Charles II in place of the old subsidy, plus the new, one-third, two-thirds, and 1747 subsidies, later increased.
Chapter 66
Why did Smith say temporary statutes suspending corn-import laws in scarcity proved the general law improper?
The distress that strict execution of the import laws might bring in scarcity years would probably have been very great, so execution was generally suspended by temporary statutes permitting limited-time importation of foreign corn. Smith argues the necessity of these temporary statutes sufficiently demonstrates the impropriety of the general one. He also says the restraints, prior to the bounty, were dictated by the same spirit, and became necessary in consequence of that regulation.
Chapter 66
III.4 cards
How does Smith say merchant-export trade indirectly aids the home corn supply?
The author argues that unless surplus corn can ordinarily be exported, growers will not grow more and importers will not import more than bare home consumption requires. The home market will then seldom be overstocked but generally understocked, since suppliers fear goods left on their hands. Prohibiting export limits cultivation to home needs; free export lets it extend for foreign nations.
Chapter 67
What did the statutes of Charles II and William III do regarding corn export?
By 12 Charles II c.4, export was permitted while wheat stayed at or below 40s the quarter, extended to 48s by the 15th and to all higher prices by the 22d, with a small poundage duty. By 1 William and Mary this duty was virtually removed below 48s, and by 11 and 12 William III c.20 expressly removed at all higher prices.
Chapter 67
How did export laws treat engrossing compared with inland sale?
The author notes corn could be engrossed at any price for exportation, but for inland sale only when the price did not exceed 48s the quarter. He argues the inland dealer's interest can never oppose the people's, while the merchant-exporter's may: during a home dearth, he might carry corn to a famine-stricken neighbor, aggravating the dearth.
Chapter 67
What does Smith conclude about free corn export and the laws of religion?
The author argues free export and import among nations would resemble free inland trade among provinces, scarcity in one part relieved by plenty in another. He holds restraint may suit small states like Swiss cantons or Italian states, but scarce ever great countries like France or England, and hindering the farmer from the best market sacrifices ordinary justice to reasons of state. He compares corn laws to religious laws, both rarely reasonable.
Chapter 67
IV.3 cards
How does the merchant-carrier's trade affect the home corn market?
The merchant-carrier who imports foreign corn to export it again contributes to the plentiful supply of the home market, though selling there is not his direct purpose. He will generally be willing to sell at home, even for less than a foreign price, because he saves the expense of loading, unloading, freight, and insurance. The country serving as storehouse for others can seldom be in want itself.
Chapter 68
Why does the author argue the corn bounty laws deserve no praise for Britain's prosperity?
The author argues Britain's improvement may be explained by other causes, especially the security the laws give every man to enjoy the fruits of his own labour, perfected by the Revolution around the time the bounty was established. The natural effort of individuals to better their condition, when free and secure, can carry society to wealth despite absurd regulations. Britain's prosperity came after these laws but was not caused by them.
Chapter 68
What does the same statute do regarding the exportation of corn?
The statute permits, at the lowest prices, duty-free importation of corn for re-export, provided it is lodged in a warehouse under the joint locks of the king and the importer, though this liberty extends to only twenty-five ports. It also lowers the prices at which bounties cease and prohibits exportation at those same prices—a provision the author criticizes as too low and improper.
Chapter 68
CHAPTER VI.4 cards
Under a treaty of commerce, what advantage do merchants of the favoured country gain?
The chapter states that merchants and manufacturers of the favoured country enjoy a sort of monopoly in the indulgent country. Their market becomes more extensive because other nations' goods are excluded or taxed more heavily, and more advantageous because they can often sell at a better price than under free competition of all nations.
Chapter 69
According to Smith, how does a favouring country lose from such a treaty?
Smith argues a monopoly is granted against the favouring country's own merchants, who must often buy foreign goods dearer than under free competition. Its own produce used to purchase those goods consequently sells cheaper, likely diminishing the exchangeable value of its annual produce. This is not positive loss, but a lessening of gain; the trade still replaces capital plus ordinary profit.
Chapter 69
What did the Methuen Treaty of 1703 require of Portugal and Britain?
Portugal bound itself to admit English woollens on the same footing as before their prohibition, not on better terms than other nations. Britain bound itself to admit Portuguese wines paying only two-thirds the duty paid on French wines, the chief competitors. Smith concludes this treaty is evidently advantageous to Portugal and disadvantageous to Great Britain.
Chapter 69
Why does Smith argue the Portugal trade is less valuable than celebrated?
Smith argues that even if all the imported gold were Britain's, the trade is no more advantageous than any other returning equal consumable value. A direct foreign trade of consumption is always more advantageous than a round-about one, requiring smaller capital. Gold's real use is facilitating round-about trade; Britain could obtain needed gold elsewhere, buying at second hand for an insignificant difference.
Chapter 69
PART I. Of the Motives for Establishing New Colonies.4 cards
Why did ancient Greek states send out colonies, according to Smith?
Smith explains that Greek states had very small territories; when population outgrew what the land could maintain, part of the people were sent abroad to find a new home, since warlike neighbours made enlarging territory at home difficult. The mother city treated the colony as an emancipated child—entitled to favour but claiming no direct authority—and the colony governed itself independently.
Chapter 70
What was the purpose of Roman colonies, and how did they differ from Greek ones?
Roman colonies were founded to satisfy landless citizens and to garrison conquered provinces of Italy. They remained subject to the mother city's jurisdiction, at best a corporation with bye-laws, never an independent state. Smith notes the Latin 'colonia' means simply a plantation, while the Greek 'apoixia' means a departure from home—reflecting the different institutions.
Chapter 70
What motivated European voyages of discovery to America and the Indies?
Smith argues the European colonies arose from no necessity, and their utility was not understood at founding nor the motive for it. The Venetians' profitable spice trade tempted the Portuguese, who sought a sea route to India, culminating in Vasco da Gama's 1497 voyage. Columbus, meanwhile, sought a western route to the East Indies, believing the eastward way longer meant the westward was shorter.
Chapter 70
Why did Columbus misname the discovered lands the Indies?
Columbus expected to reach China and Indostan but found wooded, uncultivated islands inhabited by tribes he called naked and miserable savages. Unwilling to abandon his prepossession, he matched slight resemblances—like Cibao mountain to Marco Polo's Cipange—and called the lands the Indies. When their difference became clear, they were renamed the West Indies.
Chapter 70
PART II. Causes of the Prosperity of New Colonies. (part 1)3 cards
Why do colonies of civilized nations advance faster than other human societies?
The author argues colonists bring superior knowledge of agriculture and useful arts, plus habits of subordination, notions of regular government, and a system of laws and justice. They settle waste or thinly inhabited land where natives easily give place. Every colonist gets more land than he can cultivate, pays no rent and scarce any taxes, keeping almost the whole produce.
Chapter 71
Why do liberal wages in new colonies not stop planters from employing labour?
High wages plus cheap, plentiful land soon let labourers leave to become landlords themselves, hiring others who also leave. The proprietor, unable to get labour amid vast land and few people, does not dispute about wages but employs at any price. High wages encourage marriage and population, and cheap land enables proprietors to pay them.
Chapter 71
How did ancient Greek colonies differ from Roman colonies in progress?
Greek colonies settled among savage nations who easily gave place, had plenty of good land, and were altogether independent of the mother city, free to manage their own affairs. Several rivalled or surpassed their mother cities within a century or two. Roman colonies were in fully inhabited conquered provinces, got small land assignments, and were not independent, so their progress was never very rapid.
Chapter 71
PART II. Causes of the Prosperity of New Colonies. (part 2)3 cards
How did England's colonial trade policy differ from Spain's and Portugal's?
England left colonial trade free to all subjects from all mother-country ports, needing only custom-house despatches; the number and dispersal of traders prevented combination and kept profits from being exorbitant. Spain long confined trade to one port with licensed fleets, and Portugal did similarly for most colonies. Smith notes English and French colonial trade profits were somewhat higher than under fully free competition but not exorbitant.
Chapter 72
What were enumerated commodities, and which key products were non-enumerated?
Enumerated commodities, listed in the navigation and later acts, could be exported only to the mother country. Non-enumerated goods could go directly elsewhere in British or plantation ships with British owners and three-fourths British mariners. Non-enumerated included grain, lumber, salt provisions, fish, sugar, and rum. Smith says allowing grain and lumber broad markets encouraged cultivation and clearing, though the 4th of Geo. III. c. 15 put hides and skins among enumerated goods, tending to reduce the value of American cattle.
Chapter 72
How did the modest civil establishments of the English colonies compare with other nations' colonial government?
Smith reports the North American civil establishments, excluding Maryland and North Carolina, cost inhabitants above £64,700 a year before the present disturbances—governed and well governed at small expense for three million people. Massachusetts Bay was about £18,000; Virginia and South Carolina £8,000 each. Defence fell on the mother country. By contrast, Spain, Portugal, and France ran more extensive, expensive governments with costly ceremonials, tithes, and mendicant friars.
Chapter 72
PART II. Causes of the Prosperity of New Colonies. (part 3)4 cards
What did Britain do to colonial sugar refining, and why?
High duties on clayed and refined sugar amounted to a prohibition on refining for foreign markets, and at present for the market taking over nine-tenths of colonial produce. The author notes refining flourished in French sugar colonies but was little cultivated in English ones, except for the colonies' own market; in Grenada, refineries were largely abandoned after it passed to the English.
Chapter 73
What manufactures did Britain prohibit in its American colonies?
Britain prohibited steel furnaces and slit-mills in the plantations, even for their own consumption, while exempting colonial pig and bar iron from duties. It also banned exporting hats, wools, and woollen goods from one province to another by water, or by land on horseback or cart. The author calls such prohibitions a violation of the most sacred rights of mankind.
Chapter 73
Why does the author say the prohibitions had not yet hurt the colonies much?
The author argues that because land was still cheap and labor dear, colonists could import refined manufactures from the mother country cheaper than making them. So self-interest would probably have prevented such manufacturing anyway. The prohibitions were therefore only impertinent badges of slavery, but in a more advanced state they might become really oppressive and insupportable.
Chapter 73
How did English colonial political liberty compare with that of other European colonies?
The author argues English colonists' liberty to manage their own affairs was complete in everything except foreign trade, equal to fellow-citizens at home, secured by assemblies claiming the sole right to impose taxes. There was no hereditary nobility, and in Connecticut and Rhode Island assemblies elected the governor. By contrast, Spain, Portugal, and France imposed absolute government on their colonies, exercised with more than ordinary violence at a distance.
Chapter 73
PART II. Causes of the Prosperity of New Colonies. (part 4)4 cards
According to Smith, what was the sole way Europe's policy aided the American colonies?
The author argues Europe contributed in one way only: it "bred and formed the men" capable of great actions and of founding so great an empire. He claims no other quarter of the world's policy is capable of forming, or has actually formed, such men. The colonies owe to Europe the education and great views of their enterprising founders, and for internal government scarcely anything else.
Chapter 74
What did the mother country's first colonial regulations always aim to secure?
Smith states that the first regulations the mother country made always had in view securing to herself the monopoly of the colonies' commerce—confining their market and enlarging her own at their expense. The effect, he says, was rather to damp and discourage than to quicken and forward colonial prosperity.
Chapter 74
How does Smith rank England's colonial policy against other European nations?
The author argues England's policy is the best of all the European nations, yet is only somewhat less illiberal and oppressive than the rest. The essential differences among European nations' colonial policies consist in the different ways this monopoly was exercised. So even the best case, in Smith's view, remains a monopoly designed to confine colonial markets.
Chapter 74
What does Smith say the colonies owe Europe regarding internal government?
Smith says the colonies owe to Europe's policy the education and great views of their active and enterprising founders. But some of the greatest and most important colonies, so far as their internal government is concerned, owe to it scarcely anything else. So Europe's contribution is largely the formation of founders, not the design of colonial self-government.
Chapter 74
PART III. Of the Advantages which Europe has derived From… (part 1)4 cards
What two general advantages does Europe derive from America's discovery and colonization?
The author says Europe, considered as one great country, gains first an increase of enjoyments from American surplus produce—commodities for convenience, use, pleasure, and ornament—and second an augmentation of industry, as all countries trading directly or indirectly with America gain a more extensive market for their surplus produce.
Chapter 75
How does Smith argue America's trade benefits countries like Hungary and Poland?
Smith argues that even countries which may never have sent goods to America still benefit. American sugar, chocolate, and tobacco are consumed there and must be purchased with Hungarian or Polish produce or with goods bought by it. These new values create a more extensive market, raise the value of surplus produce, and encourage its increase, even if none of it reaches America directly.
Chapter 75
What effect does the exclusive trade of mother countries have, according to Smith?
The author argues exclusive trade diminishes or keeps below natural levels both enjoyments and industry of all nations generally and of the American colonies particularly. It makes colony produce dearer elsewhere, lessening consumption and cramping colonial industry, while making other countries' produce dearer in the colonies. It excludes others from one market and confines colonies to one market, a great difference.
Chapter 75
What military and revenue advantages do European colonies provide mother countries?
Smith states European colonies of America never furnished military force for the mother country's defense; their own defense diverted military force, making them a cause of weakness. Only Spain and Portugal's colonies contributed revenue to defense or civil government. Taxes on other colonies, especially England's, seldom equaled peacetime expense and never covered wartime costs, making them a source of expense, not revenue.
Chapter 75
PART III. Of the Advantages which Europe has derived From… (part 2)4 cards
How does the colony monopoly affect Britain's ordinary rate of profit?
The author argues the monopoly of the colony trade raised the ordinary rate of British profit above what it otherwise would have been, both in that branch and in all other branches, by lessening the competition of British capitals. He notes that if British profit has fallen since the act of navigation, it would have fallen still lower without the monopoly.
Chapter 76
Why does a higher profit rate disadvantage Britain in non-monopoly trades?
The author argues that raising the ordinary profit rate subjects Britain to absolute disadvantage, since merchants must sell dearer and the country buys and sells less, and to relative disadvantage, since other countries gain proportionally. He adds that merchants complain of high British wages but stay silent about their own high profits of stock.
Chapter 76
What determines how much productive labour a capital maintains in foreign trade?
The author argues, citing the second book, that the productive labour maintained by capital in the foreign trade of consumption is exactly proportional to the frequency of its returns. A thousand pounds returned once a year maintains a year's worth of labour; returned two or three times, it maintains two or three times as much.
Chapter 76
How did the colony monopoly force British capital into distant and round-about trade?
The author argues the monopoly forced capital from neighbouring to distant trade, since colonies are understocked and pay slowly, with returns often taking three to five years. It also forced capital into round-about trade: Virginia and Maryland send over ninety-six thousand hogsheads of tobacco, but Britain consumes only about fourteen thousand, so the surplus must be re-exported.
Chapter 76
PART III. Of the Advantages which Europe has derived From… (part 3)4 cards
What distinction does Smith draw between the colony trade and its monopoly?
The author argues the effects of the colony trade itself are always and necessarily beneficial, while the monopoly of that trade is always and necessarily hurtful. Yet the colony trade is so beneficial that even under monopoly it remains greatly advantageous to Great Britain—but less so than it would be in its natural and free state.
Chapter 77
How does the monopoly redirect British capital, according to Smith?
Smith argues the monopoly turns capital from a foreign trade of consumption with a neighbouring country toward one with a more distant country, often from a direct trade into a round-about one, and sometimes into a carrying trade. In every case it moves capital from a direction maintaining more productive labour to one maintaining much less, and makes industry more precarious by suiting it to one market.
Chapter 77
Why do Spain and Portugal show monopoly alone cannot sustain manufactures?
Smith notes Spain and Portugal were manufacturing countries before acquiring considerable colonies, yet ceased to be so after gaining the richest and most fertile colonies in the world. He attributes this to the monopoly's bad effects aggravated by other causes: other monopolies, degraded value of gold and silver, improper export and transport taxes, and above all an irregular, partial administration of justice protecting wealthy debtors.
Chapter 77
How does the monopoly harm landlords and labourers, per Smith?
By raising mercantile profit, the monopoly discourages land improvement, since improvement depends on the difference between what land produces and what it could produce. This retards rent's natural increase. Higher profit also keeps interest rates higher, lowering the price of land relative to its rent. The monopoly also renders wages of labour less abundant than they otherwise would be.
Chapter 77
PART III. Of the Advantages which Europe has derived From… (part 4)4 cards
What does Smith call the sole purpose of Britain's dominion over her colonies?
The author argues the maintenance of the monopoly of colonial trade is the principal, or perhaps sole, end and purpose of British dominion over the colonies. He calls the monopoly the principal badge of dependency and the sole fruit gathered from it, and says whatever expense Britain lays out in maintaining the dependency is really laid out to support this monopoly.
Chapter 78
How does Smith characterize the cost of Britain's colonial wars?
Smith states the late war was altogether a colony quarrel and cost more than ninety million sterling, including new debt, the additional two shillings in the pound land tax, and sums borrowed from the sinking fund. He also calls the Spanish war beginning in 1739 principally a colony quarrel, aimed at preventing search of colony ships trading contraband with the Spanish Main.
Chapter 78
Why does Smith say no nation voluntarily gives up dominion over a province?
The author argues such a sacrifice, though often agreeable to national interest, is mortifying to national pride and contrary to the private interest of the governing part, who would lose disposal of places of trust and profit and opportunities of wealth and distinction. He says even the most visionary enthusiast could scarce propose it with serious hopes of adoption.
Chapter 78
What scheme does Smith describe for taxing the colonies by requisition?
Parliament would determine the sum each colony ought to pay, and the provincial assembly would assess and levy it as best suited the province. Smith notes Guernsey and Jersey are more lightly taxed than any part of Great Britain, and that if colonial contribution rose and fell with the land tax, the colonies might be considered virtually represented in parliament.
Chapter 78
PART III. Of the Advantages which Europe has derived From… (part 5)3 cards
According to Smith, why would American leaders likely defend their new stations obstinately?
Smith argues that almost every individual of the governing party in America fills, in his own fancy, a station superior to anything he had held or expected. Unless some new object of ambition appears, such a man, having the ordinary spirit, will die in defence of that station. He compares this to Parisians defending their own importance during the Ligue.
Chapter 79
Why does Smith think union with the colonies would not ruin the British constitution?
Smith notes that admitting most inhabitants of Italy to Roman citizenship ruined the Roman republic, since citizens could no longer be distinguished and a rabble could pack the assemblies. With fifty or sixty American representatives, however, the door-keeper of the house of commons could easily tell members apart. He argues the constitution would be completed, not hurt, by the union.
Chapter 79
What does Smith say about who actually benefits from the colonies' trade?
Smith argues that countries possessing American colonies and trading directly to the East Indies enjoy the show and splendour, but others often get more real benefit. Spanish and Portuguese colonies, for example, encourage the industry of France, Flanders, Holland, and Germany more than that of Spain and Portugal. Each nation engrosses the expense of supporting and defending its colonies, while sharing the trade advantages.
Chapter 79
PART III. Of the Advantages which Europe has derived From… (part 6)4 cards
How do the two kinds of monopoly differ in their effect on stock distribution?
Monopolies of the first kind always attract more of society's stock into the privileged trade than would go there naturally. Monopolies of the second kind may either attract or repel stock, depending on circumstances: in poor countries they tend to attract stock, while in rich countries they tend to repel it. Both kinds derange the natural distribution of stock and are therefore hurtful to society.
Chapter 80
Why might exclusive companies encourage the East India trade in poor countries like Sweden and Denmark?
The author argues that without an exclusive company, poor countries like Sweden and Denmark would probably never have sent a single ship to the East Indies. The company's monopoly secures adventurers against home competitors and offers the certainty of great profit, encouraging them to hazard their small capitals in so distant and uncertain an adventure.
Chapter 80
Why does the author argue Holland would send more ships to the East Indies under free trade?
The author argues Holland's mercantile capital is so great it continually overflows into foreign funds, loans, and distant trades. The limited stock of the Dutch East India company repels many great mercantile capitals that would otherwise enter the trade. A free East India trade would probably absorb much of this redundant capital, so Holland suffers a loss from the exclusion.
Chapter 80
Why did Europeans establish fewer thriving colonies in Africa and the East Indies than in America?
The author argues Africa and the East Indies were inhabited by more populous nations, many of them shepherds rather than hunters, making it harder to displace the natives. The 'genius of exclusive companies' was also unfavourable to new colonies. The Cape of Good Hope and Batavia succeeded mainly because of advantageous situations, which let them overcome the obstacles an exclusive company posed.
Chapter 80
PART III. Of the Advantages which Europe has derived From… (part 7)4 cards
Why does Smith think prohibiting company servants' private trade is futile?
The author argues that servants far from Europe, with the means to make a fortune in hand, will not abandon private business for moderate salaries on a simple order from their masters. Prohibiting them mainly lets superior servants oppress inferiors under pretence of executing orders, and pushes the private monopoly to operate secretly and indirectly instead.
Chapter 81
How does the servants' private monopoly differ in scope from the company's public trade?
The company's public trade covers only the trade with Europe, a part of the country's foreign trade. The servants' private trade may extend to all branches of inland and foreign trade. So the company's monopoly stunts only the surplus produce destined for Europe, while the servants' monopoly stunts every part of produce they deal in, degrading cultivation and reducing inhabitants.
Chapter 81
Why does Smith say servants' interests diverge more from the country's than their masters'?
The country belongs to their masters, who cannot avoid some regard for what belongs to them, and whose real interest, if they understood it, matches the country's. It does not belong to the servants, so they support their own interest with rigorous severity. Smith censures the system and situation, not the characters of those who acted in it.
Chapter 81
What verdict does Smith give on exclusive companies?
The author concludes that such exclusive companies are nuisances in every respect: always more or less inconvenient to the countries where they are established, and destructive to those that fall under their government. He notes that regulations sent from Europe were often weak but well meaning, and that servants in India sometimes showed more intelligence but less good meaning.
Chapter 81
CHAPTER VIII. (part 1)4 cards
Under the mercantile system, how were exports of manufacturing materials and tools treated?
The mercantile system discouraged exportation of the materials of manufacture and instruments of trade, aiming to give domestic workmen an advantage and let them undersell foreign rivals. By restraining export of a few low-priced commodities, it proposed to cause a much greater and more valuable exportation of others. Importation of instruments of trade was generally not encouraged and was often prohibited, as with wool cards.
Chapter 82
How did the legislature treat importation of manufacturing materials, and who benefited?
Importation of materials of manufacture was encouraged by duty exemptions and sometimes bounties, covering items like sheep's wool, cotton wool, undressed flax, dyeing drugs, and pig and bar iron from the colonies. The author argues merchants' private interest likely extorted these exemptions, though they are just and reasonable. He notes manufacturers sometimes pushed exemptions beyond true rude materials, as with linen yarn.
Chapter 82
What did Smith claim about who the mercantile system chiefly benefited?
The author argues the mercantile system principally encouraged industry carried on for the benefit of the rich and powerful, while industry for the poor and indigent was too often neglected or oppressed. He illustrates with linen: manufacturers sought bounties and high duties to sell cloth dear, while encouraging cheap foreign yarn imports to buy poor spinners' work cheaply.
Chapter 82
What did Smith say about the severity of laws protecting woollen manufacturers' monopolies?
Woollen manufacturers persuaded the legislature to ban foreign woollen cloth imports and to prohibit exporting live sheep and wool, creating monopolies against consumers and against sheep farmers. The author argues these laws, extorted by merchants' clamour, are crueller than revenue laws and, like Draco's laws, 'written in blood.' Under 8th Elizabeth, exporting sheep brought forfeiture and imprisonment.
Chapter 82
CHAPTER VIII. (part 2)4 cards
What did manufacturers claim about English wool to justify export restrictions?
The author reports that woollen manufacturers confidently asserted English wool was of peculiar, superior quality; that other countries' wool could not make tolerable manufactures without mixing it; that fine cloth could not be made without it; and that a total export ban would let England monopolize the world woollen trade and sell at whatever price it pleased. The author argues this doctrine is perfectly false.
Chapter 83
According to the author, what was the actual effect of the wool regulations on English wool prices?
The author argues the regulations depressed the price of English wool below what it naturally would be and far below its level in Edward III's time. He cites the Reverend John Smith's Memoirs of Wool noting the best English wool generally sells below inferior wool in Amsterdam, and says Scotch wool fell about one half after the Union subjected it to the same rules.
Chapter 83
Why does the author think the wool regulations barely reduced the quantity or quality of wool produced?
The author reasons the sheep farmer's main profit comes from the carcase, not the fleece, so a lower wool price is largely made up by higher mutton prices; landlords' and farmers' interest is little affected. Fleece quality depends greatly on the animal's health and bulk, so care for the carcase also improves the fleece. He thinks quantity was little affected, quality somewhat more.
Chapter 83
What alternative to prohibiting wool export does the author propose, and why?
The author argues a considerable tax on wool exportation, of five or even ten shillings per tod, would better serve everyone. It would raise revenue, hurt growers less than prohibition, still give manufacturers an advantage over foreigners, and reduce the smuggling temptation created by the price gap. He says prohibition hurts growers only to promote manufacturers, contrary to the sovereign's duty of equal treatment.
Chapter 83
CHAPTER VIII. (part 3)4 cards
What penalties did the 8th of William III impose for exporting knitting frames or engines?
The statute prohibited exporting frames or engines for knitting gloves or stockings. Offenders faced forfeiture of the frames or engines exported or attempted to be exported, plus a forty-pound penalty, one half to the king and the other half to the informer or person who sued for the same.
Chapter 84
Under the 23d Geo. II chap. 13, what penalties applied for enticing artificers abroad?
For the first offence, a fine of five hundred pounds for every artificer so enticed, plus twelve months imprisonment and until the fine was paid. For the second offence, one thousand pounds and two years imprisonment, also until the fine was paid. This increased the earlier 5th Geo. I penalties of one hundred pounds and three months.
Chapter 84
What happened to an artificer who ignored a warning to return to Britain?
After warning from a minister, consul, or secretary of state, an artificer exercising or teaching his trade abroad had six months to return and abide continually in the realm. Otherwise he was declared incapable of taking any legacy, being executor or administrator, or taking lands by descent, devise, or purchase; he forfeited all lands, goods, and chattels to the king, was declared an alien, and put out of the king's protection.
Chapter 84
What does the author argue about consumption and the mercantile system?
The author argues that consumption is the sole end and purpose of all production, and the producer's interest matters only so far as it promotes the consumer's. He contends the mercantile system almost constantly sacrifices the consumer to the producer, treating production rather than consumption as the ultimate object of industry and commerce, and that merchants and manufacturers were the principal architects of these regulations.
Chapter 84
CHAPTER IX. (part 1)3 cards
Which nation adopted the agricultural system, according to Smith?
Smith states that the system representing the produce of land as the sole source of revenue and wealth has, so far as he knows, never been adopted by any nation. It exists only in the speculations of a few learned and ingenious men in France. He therefore considers it not worth examining at great length, since it has done and probably will do no harm.
Chapter 85
How does the agricultural system divide society into classes?
The system divides people into three classes: the proprietors of land; the cultivators, farmers, and country labourers, called the productive class; and artificers, manufacturers, and merchants, called the barren or unproductive class. The productive class earns this name because its labour, after covering all necessary expenses, yields a neat produce or rent for the landlord.
Chapter 85
Why does the system call manufacturers and merchants unproductive?
The system argues their labour only replaces the stock that employs them plus ordinary profits, producing no new value. Manufacturing and mercantile stock merely continue the existence of their own value, unlike farming, which yields a rent to the landlord. Smith notes the lace-worker may raise a pennyworth of flax to £30, but the consumption during the work equals the value added, so the whole annual produce is not augmented.
Chapter 85
CHAPTER IX. (part 2)4 cards
According to Smith, what is the best way for a landed nation to raise up its own artificers and merchants?
The author argues that the most advantageous method is to grant the most perfect freedom of trade to the artificers, manufacturers, and merchants of all other nations. This raises the value of the surplus produce of its own land, and the continual increase of that surplus gradually establishes a fund which in due time necessarily raises up all the artificers, manufacturers, and merchants the nation has occasion for.
Chapter 86
How does oppressing foreign trade by high duties or prohibitions hurt a landed nation's own interest?
Smith says it hurts in two ways. First, by raising the price of all foreign goods and manufactures, it sinks the real value of the surplus produce of its own land. Second, by giving a monopoly of the home market to its own merchants and manufacturers, it raises mercantile and manufacturing profit relative to agricultural profit, drawing capital away from agriculture or preventing capital from going to it.
Chapter 86
What does Smith identify as the capital error of Quesnai's system?
The author argues the capital error lies in representing the class of artificers, manufacturers, and merchants as altogether barren and unproductive. Smith counters that this class reproduces annually the value of its own consumption and continues the stock that employs it, and that its labour fixes and realizes itself in a vendible commodity, unlike menial servants.
Chapter 86
How does Smith use the marriage analogy to defend merchants and manufacturers?
Smith argues we should not call a marriage barren though it produces only a son and daughter to replace the parents, without increasing the species. Likewise, artificers and manufacturers who only reproduce the stock that employs them should not be called barren. Farmers reproduce a neat produce, a free rent, and are more productive, but the superior produce of one class does not make the other barren.
Chapter 86
CHAPTER IX. (part 4)4 cards
Under the system of natural liberty, what three duties does the sovereign have?
The author argues the sovereign has three duties: first, protecting society from violence and invasion by other independent societies; second, protecting every member as far as possible from injustice or oppression by others, i.e. establishing an exact administration of justice; and third, erecting and maintaining public works and institutions that no individual or small group would profitably provide, though they may repay the expense to a great society.
Chapter 88
Why must the sovereign, not individuals, maintain certain public works and institutions?
The author argues that certain public works and institutions can never be in the interest of any individual or small number of individuals to erect and maintain, because the profit could never repay the expense to them. Yet such works may frequently do much more than repay the expense to a great society, so the sovereign must undertake them.
Chapter 88
What three topics does the following book promise to explain about sovereign expenses?
The author states the following book will explain: first, the necessary expenses of the sovereign or commonwealth, and which ought to be defrayed by the whole society versus some particular part or members; second, the different methods by which the whole society may contribute to defraying those expenses, with the advantages and inconveniencies of each; and third, the reasons modern governments mortgage revenue or contract debts, and the effects of those debts on real wealth.
Chapter 88
According to the appendix, what was the medium annual bounty per barrel of herrings?
The appendix computes the bounty on each barrel of sea-sticks at £0 8s 2¼d, but since a barrel of sea-sticks counts as only two-thirds of a fully packed barrel, deducting one-third brings it to £0 12s 3¾d per barrel fully packed. If exported, a premium of £0 2s 8d is added, making the bounty paid by government £0 14s 11¾d per barrel.
Chapter 88
PART I. Of the Expense of Defence. (part 1)2 cards
Why can shepherd nations field vastly larger armies than hunter nations?
A hunter army seldom exceeds two or three hundred men because the precarious subsistence of the chase cannot keep more together for long. A shepherd army may reach two or three hundred thousand, since it can move from one district to another as forage is consumed, with scarce any limit while nothing stops its progress. Smith notes a shepherd nation may be formidable to civilized neighbors, while a hunter nation never is.
Chapter 89
How does the proportion of soldiers to population differ between civilized and rude societies?
In a civilized society soldiers are maintained by the labour of non-soldiers, so their number cannot exceed what the rest can support after maintaining themselves and the officers of government and law. Smith says among modern European nations not more than about one hundredth part of inhabitants can serve as soldiers without ruin, whereas in the little agrarian states of ancient Greece a fourth or fifth sometimes took the field.
Chapter 89
PART I. Of the Expense of Defence. (part 2)4 cards
According to Smith, why is a militia inferior to a standing army in discipline?
The author argues a militia, however disciplined or exercised, is always inferior to a well-exercised standing army. Soldiers drilled only weekly or monthly cannot match daily practice in arms, and those bound to obey officers only occasionally never acquire the same awe or ready obedience as troops whose whole daily life is directed by their officers. In modern war, instant obedience matters more than superiority in handling arms.
Chapter 90
Which militias does Smith say come closest to standing armies, and why?
The author argues the best militias are those like the Tartar or Arab militia, which go to war under the same chieftains they obey in peace, giving them respect for officers and ready obedience near that of standing armies. The Highland militia had some similar advantage under its own chieftains, but being stationary shepherds, Highlanders were less willing to follow far or stay long, and were less expert in arms.
Chapter 90
How does Smith explain the outcomes of the Second Punic War battles?
The author argues Hannibal's army, formed through years of campaigning in Spain, Africa, and Italy, had the discipline of a standing army, while the Roman armies at Trebia, Thrasymenus, and Cannae were militia. This likely determined those battles. But as the Roman militia stayed in the field it became a standing army, and Hannibal's superiority declined. Scipio's forces then defeated Carthage's militia at Zama.
Chapter 90
What three great revolutions does Smith attribute to standing-army superiority?
The author argues the fall of the Greek republics and Persian empire resulted from the irresistible superiority of Philip of Macedon's standing army over militias. The second is the fall of Carthage and rise of Rome, explained by the same cause. The third, the fall of the western empire, came from barbarous shepherd militias defeating a civilized, degenerated Roman force.
Chapter 90
PART I. Of the Expense of Defence. (part 3)3 cards
According to Smith, what advantage does expensive modern weaponry give to nations?
The author argues that the great expense of firearms in modern war gives an evident advantage to the nation that can best afford it—thus to an opulent and civilized nation over a poor and barbarous one. He notes this reverses ancient times, when the opulent and civilized struggled to defend themselves against poor and barbarous nations.
Chapter 91
What does Smith say the invention of gunpowder did to the cost of defence?
Smith says the defence of society became more expensive partly through the natural progress of improvement, enhanced by a great revolution in the art of war occasioned by what he calls a mere accident: the invention of gunpowder. He argues firearms, though at first sight pernicious, are favourable to both the permanency and the extension of civilization.
Chapter 91
Why does Smith say fortifying a town became more difficult and expensive?
Because modern artillery is greatly superior to that of the ancients, making it much more difficult, and consequently much more expensive, to fortify a town so as to resist even a few weeks of attack by that superior artillery. Modern siege machines are also dearer and heavier than the ancient balista or catapulta, costing more to prepare and transport.
Chapter 91
PART II. Of the Expense of Justice4 cards
Why does Smith say civil government becomes necessary with valuable property?
Smith argues that where property is extensive, the rich are surrounded by unknown enemies driven by want and envy, and can sleep securely only under the civil magistrate's protection. Acquiring valuable property therefore necessarily requires establishing civil government, whereas where property is worth only two or three days' labour, government is not so necessary.
Chapter 92
What four causes naturally introduce subordination before civil institutions?
Smith lists four: superiority of personal qualifications (strength, beauty, wisdom, virtue), superiority of age, superiority of fortune, and superiority of birth. He notes invisible mental qualities are always disputed, so societies settle rank by plainer qualities. Birth and fortune are the two principal sources of distinction, and both operate with full force among nations of shepherds.
Chapter 92
Why does the authority of fortune peak among shepherds rather than hunters?
Hunters have universal poverty and equality, so age and personal qualities are the feeble sole foundations of authority. Shepherds admit great inequality of fortune: a chief whose herds maintain a thousand men commands them in war and judges them in peace. In opulent societies a far greater fortune commands scarce a dozen people, since dependents pay for everything they get.
Chapter 92
Who does Smith say civil government for property really defends?
Smith argues civil government, insofar as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all. Inferior men of wealth support their superiors' property so the superiors will defend theirs in turn.
Chapter 92
PART III. Of the Expense of public Works and public… (part 1)3 cards
According to Smith, what kinds of public works cannot be left to individuals?
The author argues that the sovereign must erect and maintain works highly advantageous to society whose profit could never repay the expense to any individual or small number of individuals, so they cannot be expected to be built or maintained privately. The expense required varies with the different periods of society.
Chapter 93
How does Smith propose most roads, bridges, canals, and harbours be funded?
Smith argues most such works can be managed to yield a particular revenue covering their own expense, without burdening general revenue: a small toll on carriages for highways, bridges, and canals, and a moderate port-duty on tonnage for harbours. The coinage and post-office similarly defray their own expense, the post-office yielding considerable revenue to the sovereign.
Chapter 93
Why can canal tolls be private property but highway tolls should not?
Smith argues a neglected highway remains passable, so private toll owners might keep levying nearly the same tolls while repairing nothing; canal tolls, by contrast, were given to Riquet's family because a neglected canal ceases navigation and destroys the toll profit. He therefore holds highway tolls should be managed by commissioners or trustees.
Chapter 93
PART III. Of the Expense of public Works and public… (part 2)4 cards
According to Smith, how do local revenue abuses compare with imperial revenue abuses?
The author argues that abuses in local or provincial administration of local revenue, however enormous they appear, are almost always trifling compared with those in administering the revenue of a great empire, and are much more easily corrected. He contrasts the six days' highway labour under British justices of the peace, scarce ever exacted with cruelty, with French corvées under the intendants, frequently the most cruel and oppressive.
Chapter 94
Why did Smith think particular branches of commerce might need extraordinary protection?
Smith notes that trade with barbarous and uncivilized nations, such as the western coast of Africa, required fortified stores for security, and disorders in Indostan were thought to make like precautions necessary. Both English and French East India companies were allowed to erect their first forts there under pretence of securing persons and property. Where vigorous governments forbid fortified places, ambassadors or consuls may be needed instead.
Chapter 94
What distinction does Smith draw between regulated and joint-stock companies?
Regulated companies admit any properly qualified person on paying a certain fine and submitting to company regulations, each member trading on his own stock and at his own risk. Joint-stock companies trade on a common stock, with members sharing profit or loss in proportion to their shares. Either type may or may not hold exclusive privileges. Smith compares regulated companies to town trade corporations, calling them enlarged monopolies of the same kind.
Chapter 94
What did Smith conclude about the long-run record of merchant companies?
The author argues that companies, though perhaps useful for first introducing some branches of commerce by making experiments at their own expense, have in the long run universally proved either burdensome or useless, and have either mismanaged or confined the trade. He says being merely useless is perhaps the highest eulogy a regulated company can justly receive, and describes the Turkey company as a strict and oppressive monopoly before the 26th of George II.
Chapter 94
PART III. Of the Expense of public Works and public… (part 3)4 cards
Why does Smith doubt Parliament's oversight of the £13,000 for forts and garrisons?
Smith argues Parliament gives little attention to the application of millions, so it is unlikely to scrutinize £13,000 a year. The cursitor baron of exchequer, from his profession and education, is not likely to be skilled in the proper expense of forts and garrisons. Naval captains may inquire and report to the admiralty board, but that board has no direct jurisdiction over the committee.
Chapter 95
How does Smith distinguish a joint-stock company from a private copartnery?
In a private copartnery, no partner can transfer his share without the company's consent, but each may withdraw and demand payment of his share. In a joint-stock company, no member can demand payment from the company, but each can transfer his share without consent, introducing a new member. Also, private partners are bound for company debts to the whole extent of their fortunes; joint-stock members only to the extent of their share.
Chapter 95
Why does Smith say negligence and profusion prevail in joint-stock companies?
The directors manage other people's money rather than their own, so they cannot be expected to watch over it with the same anxious vigilance as partners in a private copartnery. Like stewards of a rich man, they consider attention to small matters beneath their master's honour and readily dispense with it. Smith argues joint-stock companies for foreign trade have therefore seldom maintained competition against private adventurers without an exclusive privilege, and often failed even with one.
Chapter 95
Why was the Hudson's Bay company more successful than the Royal African company?
Smith says its necessary expense was much smaller: it maintained no more than about 120 people in its settlements. This sufficed to prepare cargo beforehand for ships that could stay only six to eight weeks because of ice, an advantage private adventurers could not acquire for years. Its moderate capital, said not to exceed £110,000, divided among few proprietors, approached a private copartnery in vigilance.
Chapter 95
PART III. Of the Expense of public Works and public… (part 4)4 cards
What did the East India Company claim were the effects of competition on Indian and English prices?
The company argued competition raised prices in India so goods were not worth buying, and overstocked the English market so prices sank too low for profit. Smith doubts the Indian price rise, since extra demand was a drop in the ocean of Indian commerce, and notes increased demand generally lowers prices in the long run by encouraging production and competition.
Chapter 96
How was the East India Company consolidated and what monopoly did it gain?
By an indenture tripartite in 1702 the two companies were partly united, and by act of parliament in 1708 perfectly consolidated as the United Company of Merchants trading to the East Indies. The act let separate traders continue until Michaelmas 1711, while empowering directors, on three years notice, to redeem their £7,200 capital. From 1708 or 1711 the company held the monopoly of English trade to the East Indies.
Chapter 96
What financial troubles hit the company by 1773 despite its territorial revenues?
Despite revenues said to include a neat territorial income of over £2 million and trade profits of £400,000 to £500,000 a year, by 1773 the company's debts had grown: arrears to the treasury and customs, a bank loan, and over £1,200,000 in bills drawn from India and wantonly accepted. It cut its dividend to six per cent, sought release from the £400,000 payment, and requested a £1,400,000 loan to avoid bankruptcy.
Chapter 96
What did the 1773 regulations change, and why does Smith doubt they would help?
The settlements of Madras, Bombay and Calcutta were subjected to a governor-general and council at Calcutta; a new supreme court replaced the Mayor's court; the voting qualification rose from £500 to £1,000 with a one-year possession rule; and directors served four years with rotation. Smith argues such courts cannot govern an empire, since most proprietors care little about its prosperity, seeking only influence in appointing plunderers.
Chapter 96
PART III. Of the Expense of public Works and public… (part 5)4 cards
According to Smith, what three circumstances justify establishing a joint-stock company?
The author argues three circumstances must concur: the undertaking must be reducible to strict rule and method; it must be of greater and more general utility than most common trades; and it must require greater capital than can easily be collected into a private copartnery. He names banking, insurance, canals, and city water works as the four trades where all three concur.
Chapter 97
Why does Smith say endowed teachers tend to neglect their duties?
The author argues that when a teacher's salary comes from an endowment independent of his success, the necessity of application is diminished. If he is also barred from taking fees, his interest is set directly against his duty. Where the governing authority is the college itself, members are indulgent to one another; at Oxford, most public professors had long given up even the pretence of teaching.
Chapter 97
What effect do scholarships and graduate privileges have on education, per Smith?
The author argues that privileges of graduates, obtainable only by residing a certain number of years at certain universities, force students to those universities independent of the teachers' merit. Likewise, charitable foundations of scholarships and bursaries attach students to particular colleges regardless of merit. He compares graduate privileges to statutes of apprenticeship, which he says improved education as much as those statutes improved arts and manufactures.
Chapter 97
Which trades does Smith say may succeed as joint-stock companies without exclusive privilege?
The author argues banking, insurance, navigable cuts or canals, and aqueducts or pipes supplying a city with water may be successfully managed by joint-stock companies without exclusive privilege. He cites the two Edinburgh banks and the London Assurance and Royal Exchange Assurance companies as examples lacking such privilege. He denies the same reasonableness for copper, lead-smelting, and glass-grinding companies.
Chapter 97
PART III. Of the Expense of public Works and public… (part 6)4 cards
Why did Latin remain the language of church service after it ceased to be understood?
The author explains that the reverence of the people naturally preserves established forms and ceremonies of religion long after the circumstances that first introduced and made them reasonable are gone. Though Latin was no longer understood by the great body of the people, church service continued in it, creating two languages in Europe—a sacred and learned language of the priests, and a profane language of the people.
Chapter 98
Why did Greek and Hebrew study enter universities later than Latin?
The church held the Latin Vulgate to be equally divinely inspired and of equal authority with the Greek and Hebrew originals, so knowledge of those languages was not indispensably requisite to a churchman. The first reformers found the Greek and Hebrew texts more favorable to their opinions and exposed errors in the Vulgate, forcing Catholic clergy to defend or explain it, which required knowledge of the originals. Greek also came in with classical learning.
Chapter 98
How did the modern university course of philosophy differ from the ancient division?
The ancient division was into physics, ethics, and logic. In European universities, philosophy was taught as subservient to theology, so doctrines of spirits and the Deity were expanded and split off as metaphysics or pneumatics, set in opposition to physics and deemed more sublime and useful for a particular profession. Ontology arose comparing the two. Logic was taught first, then ontology, pneumatology, a debased moral philosophy, and a short superficial physics.
Chapter 98
How did teaching moral philosophy as subservient to theology change its content?
In ancient moral philosophy, the duties of human life were treated as subservient to the happiness and perfection of human life, and virtue was represented as necessarily productive of the most perfect happiness in this life. When moral philosophy came to be taught only as subservient to theology, duties were treated as chiefly subservient to happiness in a life to come; virtue was often represented as inconsistent with happiness here, and heaven earned only by penance and mortification. Casuistry and ascetic morality dominated, corrupting the most important branch.
Chapter 98
PART III. Of the Expense of public Works and public… (part 7)4 cards
Who paid the teachers of philosophy and rhetoric in ancient Greece and Rome?
According to the chapter, the state did not support these schools; they were long merely tolerated. Teachers lived on honoraries or fees from their scholars. The state at most assigned a place to teach in—the Academy to Plato, the Lyceum to Aristotle, the Portico to Zeno—sometimes done by private donors. No teacher appears to have had a public salary until about the time of Marcus Antoninus.
Chapter 99
Why did law become a science in Rome but not in ancient Greece?
The author argues Rome's principal courts had a single judge or a small number, deliberating publicly, so judges anxious to avoid blame sought shelter in precedent. Greek courts were large, disorderly bodies deciding by clamour and faction, where blame for injustice was divided among hundreds or thousands. This attention to practice and precedent formed Roman law into a regular, orderly system.
Chapter 99
How does Smith describe the mental effects of the division of labour on workers?
The author argues that workers confined to a few simple operations lose the habit of mental exertion and become as stupid and ignorant as possible for a human creature. They cannot relish rational conversation, conceive generous sentiments, or judge the interests of their country, and are incapable of defending it in war unless particular pains have been taken. This, he says, is the state into which the labouring poor must necessarily fall unless government intervenes.
Chapter 99
Why does Smith say endowed public teachers are less diligent than private ones?
The author argues that public teachers' diligence is corrupted because their salaries make them independent of success and reputation. Endowments also handicap private teachers, who compete like a merchant trading without a bounty against one with a considerable bounty. Graduation privileges, obtainable only by attending public lectures, further disadvantage private teachers, reducing them to the lowest order of men of letters.
Chapter 99
PART III. Of the Expense of public Works and public… (part 8)4 cards
What does Smith propose to encourage common people's education?
The author argues the public can encourage essential education by giving small premiums and little badges of distinction to children of the common people who excel, and can impose the necessity of acquiring these parts of education by obliging every man to undergo an examination or probation before obtaining freedom in any corporation or being allowed to set up trade in a village or town corporate.
Chapter 100
How did Greek and Roman republics maintain martial spirit?
They facilitated acquisition of military and gymnastic exercises by appointing a place for learning and granting certain masters the privilege of teaching there, without salaries or exclusive privileges; masters were paid by scholars. They gave premiums and badges to those who excelled, and obliged citizens to serve a certain number of years when called upon, imposing the necessity of learning exercises.
Chapter 100
Why does Smith say instruction of inferior ranks deserves state attention?
The author argues that even if the state derived no advantage, it should attend so people are not altogether uninstructed, since gross ignorance benumbs understandings. He also claims the state gains: the instructed are less liable to delusions of enthusiasm and superstition, more decent and orderly, more respectable and respectful of superiors, and more able to see through interested complaints of faction and sedition.
Chapter 100
Why are established clergy vulnerable to new sects?
The author argues clergy of an established, well-endowed religion often become men of learning and elegance but gradually lose the qualities that gave them authority with inferior ranks. When attacked by popular, bold enthusiasts, they feel defenceless and commonly call on the civil magistrate to persecute, destroy, or drive out adversaries as disturbers of the public peace, as with Roman Catholic clergy against Protestants and the Church of England against dissenters.
Chapter 100
PART III. Of the Expense of public Works and public… (part 9)4 cards
What two remedies does Smith propose for the unsocial rigor of small sects?
The author proposes two remedies: first, the study of science and philosophy, made nearly universal among people of middling or higher rank by requiring probation in the sciences before entering a liberal profession or office; second, the frequency and gaiety of public diversions, which the state encourages by giving entire liberty to those who amuse the people through painting, poetry, music, dancing, and drama.
Chapter 101
How does Smith distinguish the austere and liberal systems of morality?
The author argues that every civilized society with established ranks has two moral systems: the strict or austere, admired by the common people, and the liberal or loose, esteemed by people of fashion. Their main distinction is the degree of disapprobation for vices of levity—luxury, intemperate mirth, and breaches of chastity—which the loose system indulges and the austere system abhors.
Chapter 101
Why does joining a small religious sect improve the morals of the common people?
The author argues that a man of low condition in a great city is sunk in obscurity, his conduct observed by nobody, so he may neglect it. By joining a small sect he gains consideration; fellow sectaries, for the sect's credit, observe his conduct and punish deviation with expulsion or excommunication, so the morals of the common people in little sects have been remarkably regular and orderly.
Chapter 101
Why can a sovereign not be secure with an established clergy?
The author argues that the clergy of an established church form a great incorporation whose interest is never the same as, and sometimes opposite to, the sovereign's. Their authority depends on the supposed certainty of their doctrine, so if the sovereign derides or doubts even a trifling part, or protects those who do, they may proscribe him and turn the people toward a more orthodox prince.
Chapter 101
PART III. Of the Expense of public Works and public… (part 10)3 cards
According to Smith, what weakened the temporal power of the clergy in Europe?
The author argues that the gradual improvements of arts, manufactures, and commerce destroyed the clergy's temporal power, just as they destroyed the power of the great barons. The clergy could exchange their rude produce for manufactured goods, spend revenues on themselves, and grant leases to tenants, who then became independent. Charity and hospitality shrank, retainers dwindled, and ties of interest binding common people to the clergy dissolved.
Chapter 102
Why did the clergy's charity and hospitality give them political power?
The clergy's revenues, from lands and tithes, were largely paid in kind and exceeded what they could consume, with no arts or manufactures to exchange for. They used the surplus in profuse hospitality and charity, maintaining the poor and feeding knights and gentlemen. This procured them veneration among inferior ranks, adding weight to their spiritual authority and command of temporal force.
Chapter 102
Why did the Reformation spread so successfully, according to Smith?
The author argues the new doctrines won popular favor through enthusiastic zeal, the teachers' superior knowledge of ecclesiastical history, austere manners contrasted with disorderly clergy, and skill in the arts of popularity. Reason recommended them to some, novelty to many, contempt for the established clergy to more, and passionate, coarse eloquence to by far the greatest number. Princes hostile to Rome could then overturn the weakened church.
Chapter 102
PART III. Of the Expense of public Works and public… (part 11)4 cards
What effect did the 10th of Queen Anne, ch. 12 have on Scottish church patronage?
It restored the rights of patronage, abolishing the more popular mode of electing pastors that had subsisted for about twenty-two years after the act establishing presbytery under William III. The earlier arrangement had been repealed on account of the confusions and disorders the popular elections almost everywhere occasioned.
Chapter 103
According to Smith, how does mediocrity of church benefices affect the clergy's conduct and influence?
The author argues that where benefices are nearly equal and modest, clergymen must rely on exemplary morals, since levity and vanity would make a man of small fortune ridiculous. This wins the esteem of common people, giving presbyterian clergy more influence over ordinary minds than clergy of richer established churches.
Chapter 103
How do church benefices affect whether universities or churches attract eminent men of letters?
Where benefices are moderate, a university chair is generally a better establishment, so universities pick from churchmen and tend to hold the country's most eminent men. Where benefices are large, the church drains universities of their ablest members, leaving few eminent professors, as Smith says Voltaire observed of France.
Chapter 103
What maxim does Smith state about the wealth of a church relative to the state?
The author lays it down as a certain maxim that, all other things equal, the richer the church, the poorer must be either the sovereign or the people, and the less able the state to defend itself. Church revenue, such as tithes, is a branch of the general revenue diverted from defence.
Chapter 103
PART IV. Of the Expense of supporting the Dignity of the…4 cards
According to Smith, why does the sovereign's dignity expense vary across societies?
Smith states this expense varies with the different periods of improvement and with the different forms of government. In an opulent and improved society, where all orders of people grow more expensive in houses, furniture, tables, dress, and equipage, the sovereign cannot alone hold out against the fashion and naturally becomes more expensive in those articles too; his dignity seems to require it.
Chapter 104
Why does Smith say a monarch requires greater dignity expense than a republican magistrate?
Smith argues that in point of dignity a monarch is more raised above his subjects than the chief magistrate of any republic is ever supposed to be above his fellow-citizens. A greater expense is therefore necessary for supporting that higher dignity. We naturally expect more splendour in the court of a king than in the mansion-house of a doge or burgo-master.
Chapter 104
For which expenses does Smith say general contribution by the whole society is reasonable?
Smith says the expense of defending the society and that of supporting the dignity of the chief magistrate are both laid out for the general benefit of the whole society, so it is reasonable they be defrayed by general contribution, all members contributing as nearly as possible in proportion to their respective abilities. He also allows justice administration may be so defrayed, though fees of court are proper.
Chapter 104
How does Smith propose defraying the expense of administering justice?
Smith says the expense may be considered as laid out for the whole society, but those who occasion it are those whose injustice makes redress necessary, and those most immediately benefited are those restored to or maintained in their rights. It may therefore properly be defrayed by the particular contribution of one or both sets, that is, by fees of court, resorting to general contribution only to convict criminals without sufficient estate.
Chapter 104
PART I.1 cards
What is the post-office called, and why is it the exception among mercantile projects?
The chapter calls the post-office properly a mercantile project: government advances the cost of offices and horses or carriages, repaid with large profit by duties on what is carried. It is perhaps the only mercantile project successfully managed by every sort of government, because the capital advanced is not very considerable, there is no mystery in the business, and returns are certain and immediate.
Chapter 105
PART II. Of Taxes. (part 1)2 cards
According to Smith, what are the three sources of private revenue from which all taxes are paid?
Smith states that private revenue arises ultimately from three sources: rent, profit, and wages. Every tax must finally be paid from one or other of these, or from all of them indifferently. He uses this division to organize his examination of taxes into four sorts: those intended to fall on rent, on profit, on wages, and indifferently on all three.
Chapter 106
How may a tax burden the people more than it benefits the sovereign, according to Smith?
Smith identifies four ways: first, many officers whose salaries eat up the tax's produce and whose perquisites add another burden; second, obstructing industry and discouraging branches of business that would employ multitudes; third, forfeitures and penalties that may ruin unsuccessful evaders, ending the community's benefit from their capitals; fourth, frequent visits and odious examination by tax-gatherers, exposing people to trouble, vexation, and oppression.
Chapter 106
PART II. Of Taxes. (part 2)4 cards
Why does Smith prefer a register of leases to an actual survey for a land tax?
Smith calls the register of leases the simple and obvious expedient, while an actual survey and valuation of all lands is laborious and expensive. He notes states may have feared lessor and lessee would combine to conceal real lease terms. He cites Doomsday-book and the Prussian, Silesian, Bohemian, Milanese, and Savoyard surveys as examples of the costly survey method.
Chapter 107
Why does Smith say a survey-based land tax inevitably becomes unequal over time?
Smith argues that however equal at first, a land tax assessed by general survey and valuation must become unequal within a moderate period. Preventing this would require continual government attention to every farm's changing state and produce. He notes Prussia, Bohemia, Sardinia, and Milan attempt this, but calls such attention unsuitable to government and likely to cause more vexation than relief.
Chapter 107
Why does Smith call the tythe unequal despite appearing equal?
Smith argues a fixed portion of produce equals very different portions of rent. On rich lands a tenth may cost the landlord only a fifth of rent; on poor lands it may cost half. He also says the tythe discourages landlord improvement and farmer cultivation, since the church shares largely in profit without bearing expense, citing madder confined to the United Provinces.
Chapter 107
How does Smith say a produce-based land tax affects the sovereign's incentives in Asia?
Smith says in China the sovereign's principal revenue is a tenth of produce, though estimated so moderately it may not exceed a thirtieth in many provinces. Bengal under Mahometan government and ancient Egypt are said to have taken about a fifth. In Asia this tax is said to interest the sovereign in improvement, so those rulers were attentive to roads and canals.
Chapter 107
PART II. Of Taxes. (part 3)3 cards
According to Smith, on whom does a tax on house-rent ultimately fall?
The author argues it falls partly on the inhabitant, who gives up some conveniency by taking a cheaper house, and partly on the owner of the ground, whose ground-rent is reduced. It does not, for any considerable time, affect the building-rent, since builders would quit the trade and thereby restore profit to its proper level. The exact proportion of the division is not easy to ascertain and varies with circumstances.
Chapter 108
Why does Smith consider ground-rents a more proper subject of taxation than house-rents?
The author argues a tax on ground-rents would not raise house rents and would fall altogether on the ground-owner, who acts as a monopolist. Ground-rents are enjoyed without care or attention, so taxing them discourages no industry. He adds that ground-rents exceeding ordinary land rent owe to the sovereign's good government, making it reasonable that this fund contribute peculiarly to supporting that government.
Chapter 108
How does Smith distinguish the rent of houses from the rent of land?
The author argues the rent of land is paid for a productive subject, since the land produces it. The rent of houses is paid for an unproductive subject: neither the house nor its ground produces anything. The payer must therefore draw the rent from some other source of revenue, distinct and independent. So far as a house tax falls on inhabitants, it is like a tax on consumable commodities, drawn indifferently from wages, profits, or rent.
Chapter 108
PART II. Of Taxes. (part 4)4 cards
Why does Smith say the interest of money is less fit for direct taxation than land rent?
Smith gives two reasons. First, land's quantity and value are never secret and can be ascertained exactly, while a man's capital stock is almost always secret, hard to assess, and constantly fluctuating; tracking it would require endless vexatious inquisition. Second, land cannot be removed, but stock easily can: its owner is "a citizen of the world" and may move it abroad, drying up industry, profits, rent, and wages.
Chapter 109
How did England's land tax intend to tax stock, and how did the rate change?
The land tax intended stock to be taxed in the same proportion as land. When land was taxed at four shillings in the pound, stock was to be taxed at one-fifth of the supposed interest. At the original six per cent legal interest, each hundred pounds of stock was taxed twenty-four shillings; after the legal rate fell to five per cent, only twenty shillings.
Chapter 109
According to Smith, who ultimately pays a tax on the profits of stock in a particular trade?
Smith argues such a tax never finally falls on the dealers, who in ordinary cases must have their reasonable profit and under free competition seldom get more. It always falls on the consumers, who pay it in the price of goods, generally with some overcharge. When proportioned to the dealer's trade it oppresses no one; when equal on all dealers it favors the great and oppresses the small.
Chapter 109
Why were voluntary self-assessed taxes on stock said to work at Hamburg and in the Swiss cantons?
At Hamburg every inhabitant paid a quarter per cent of his possessions, declaring on oath the sum without revealing its amount or facing examination, and it was generally supposed paid with great fidelity. Smith attributes such conscientious payment to small republics with confidence in magistrates and belief the tax is necessary and faithfully applied. He notes merchants in hazardous trade would dread exposing their circumstances, fearing ruin of credit.
Chapter 109
PART II. Of Taxes. (part 5)4 cards
According to Smith, on whom does a land tax imposed during a lease ultimately fall?
Smith argues a tax on farm stock cannot be shifted to consumers, since the farmer must maintain output and cannot raise prices. During an existing lease it may distress or ruin the farmer, but upon renewal of the lease the tax must always fall upon the landlord, since the farmer can only secure his reasonable profit by paying less rent.
Chapter 110
How does the personal taille affect French farmers' behavior, per Smith?
Smith says farmers assessed in proportion to the stock they appear to employ grow afraid to keep a good team of horses or oxen, and cultivate with the meanest instruments they can. Distrusting their assessors, they counterfeit poverty to avoid overpayment. Smith notes they likely lose more through reduced produce than they save in tax, and the public, farmer, and landlord all suffer.
Chapter 110
Why does Smith say a poll tax on slaves differs from one on freemen?
Smith argues a poll tax on freemen is paid by the persons on whom it is imposed, and is either arbitrary or unequal, often both. A tax on slaves, though unequal since slaves differ in value, is in no respect arbitrary: every master who knows his own slaves' number knows exactly what he owes. Smith adds that taxes are badges of liberty, not slavery, to those who pay them.
Chapter 110
Why did the Dutch tax direct successions from parent to child at zero?
Smith explains that a father's death seldom increases and often diminishes the revenue of children living in his house, through loss of his industry, office, or a life-rent estate. A tax would cruelly aggravate that loss. He notes it might be otherwise for emancipated children who already received their portion and live on independent funds.
Chapter 110
PART II. Of Taxes. (part 6)4 cards
According to Smith, what happens to wages when a direct tax is imposed on them?
Smith argues that if the demand for labour and the price of provisions stay the same, a direct tax on wages forces wages to rise by more than the tax itself. His example: a one-fifth tax requires wages to rise one-fourth, not one-fifth, so the labourer can still buy the same subsistence after paying the tax. The employer advances the increase, not the labourer.
Chapter 111
Who ultimately bears the cost of a tax on wages, according to Smith?
The final burden differs by case. For manufacturing labour, the master manufacturer advances the higher wages and charges them with profit onto goods, so consumers pay. For country labour, the farmer advances more capital and retains more produce, so the landlord bears it through lower rent, plus the farmer's added profit. Smith says such taxes also reduce rent and raise manufactured prices more than a direct assessment would.
Chapter 111
Why does Smith say capitation taxes cannot be both equal and certain?
If proportioned to fortune, capitation taxes become arbitrary and uncertain, since fortune changes daily and can only be guessed without an intolerable yearly inquisition. If proportioned to rank instead, they become unequal, because fortunes differ greatly within the same rank. Smith concludes they are either arbitrary or unequal, and that uncertainty is always a great grievance, especially in a heavy tax.
Chapter 111
How did English and French poll-tax collection differ in outcome, per Smith?
Smith says English poll-taxes never produced the expected sum, because the mild government accepted whatever the assessment yielded and excused those who could not or would not pay. France's more severe government assessed a fixed sum on each generality that the intendant had to find, so the capitation always produced the expected sum, with overcharges compensating for failures.
Chapter 111
PART II. Of Taxes. (part 7)4 cards
How do taxes on luxuries differ from taxes on necessaries in their price effects?
The author argues taxes on luxuries raise only the price of the taxed commodity and are paid by consumers without retribution, falling indifferently on wages, profits, and rent. Taxes on necessaries, by raising wages, raise the price of all manufactures, diminishing their sale, and are paid partly by landlords through reduced rent and partly by rich consumers, always with a considerable overcharge.
Chapter 112
Why does the author say middling and superior ranks should oppose taxes on necessaries?
The author argues that the final payment of taxes on necessaries and on wages falls altogether on the middling and superior ranks themselves, always with a considerable overcharge. Landlords pay in a double capacity: as landlords through reduced rent, and as rich consumers through increased expense. Sir Matthew Decker's observation that such taxes are sometimes repeated four or five times is called perfectly just.
Chapter 112
Which four commodities does the chapter name as Britain's principal taxed necessaries?
The chapter names salt, leather, soap, and candles as the principal taxes upon necessaries in Great Britain. Salt is taxed at three shillings and fourpence a bushel, about three times its original price; leather and soap at three halfpence a pound; candles at a penny. The author notes these heavy taxes raise the expense of the sober and industrious poor and so raise wages.
Chapter 112
What four objections does the author raise to Decker's licence scheme?
The author argues the licence scheme would be more unequal, since a sober consumer would pay more heavily than a drunken one in proportion to consumption, and hospitable families more lightly. It would also destroy the convenience of piece-meal payment, by which a workman pays tax as he can afford it, each payment voluntary. The chapter says four objections are raised but develops these two in the text given.
Chapter 112
PART II. Of Taxes. (part 8)3 cards
What fraud does Smith describe involving bounties and drawbacks on exported goods?
Smith states that to obtain a bounty or drawback, goods are sometimes shipped and sent to sea, then clandestinely re-landed elsewhere in the country. He calls this a species of smuggling more destructive of public revenue than any other, and notes the defalcation from bounties and drawbacks, much of it fraudulently obtained, is very great.
Chapter 113
What figures does Smith give for the customs revenue in the year ending 5 January 1755?
Gross customs produce was £5,068,000. Bounties paid out came to £167,806, and drawbacks on debentures and certificates to £2,156,800, totaling £2,324,600. After these deductions the revenue was £2,743,400; subtracting £287,900 for management left a neat revenue of £2,455,500. Management cost between five and six percent of gross.
Chapter 113
What system does Smith propose to make customs administration resemble the excise?
The author reports a proposal: importers could either store goods in their own private warehouse, paying duties immediately with no later drawback, under customs inspection; or lodge them in a public warehouse, paying no duty until taken out for home consumption, and duty-free if exported under security. Dealers would be subject to inspection and required to justify duty payment by certificates, as with excise duties on imported rum.
Chapter 113
PART II. Of Taxes. (part 9)4 cards
What composition do private families pay in lieu of malt inspection, and why is it criticized?
Private families brewing for their own use escape the tax-gatherer's visit but must compound at seven shillings and sixpence a-head, equal to the excise on ten bushels of malt. The author argues it is difficult to imagine any equitable reason why those who brew or distil for private use should not pay a composition of the same kind as those who malt privately.
Chapter 114
What proposal does the chapter describe for replacing beer and ale duties with a higher malt tax?
It is frequently said that abolishing all duties on beer and ale and trebling the malt tax from six to eighteen shillings a-quarter would raise more revenue than the present heavier taxes. The chapter's figures show this single tax would produce £2,876,685, exceeding the combined average of £2,595,835 by £280,832.
Chapter 114
How does the author answer Dr Davenant's objection that a heavy malt tax would fall on the maltster and barley land?
The author argues no tax can long reduce profit in a trade, since profits keep level with neighboring trades; dealers get the tax back in higher prices. Barley price was never a monopoly price, so malt, beer, and ale taxes have never lowered barley price or barley-land rent. Only private brewers would suffer, and their exemption is unjust.
Chapter 114
Why does the author say reducing distillery duties while raising the malt tax could increase revenue?
In malt-spirit distilling, malt is often only a third of the materials, and both the opportunity and temptation to smuggle are greater than in brewing or malting, due to smaller bulk, greater value, and duties of 3s. 10⅔d. per gallon. Raising malt duties and lowering distillery duties would reduce smuggling and might further augment revenue.
Chapter 114
PART II. Of Taxes. (part 10)4 cards
What did Smith estimate could be saved annually by charging the whole malt revenue as one duty?
Smith states that by charging upon malt the whole revenue presently levied by the different duties on malt and malt liquors, a saving of more than £50,000 might be made in the annual expense of the excise. He presents this as a supposition rather than a certainty, and pairs it with a similar suggestion that confining customs duties to a few goods and levying them under excise laws might save much more.
Chapter 115
How does Smith argue taxes on consumable commodities affect productive labour?
Smith argues that all taxes on consumable commodities tend to reduce the quantity of productive labour below what it otherwise would be. They raise the price of the taxed commodity, discouraging its consumption and production. For foreign goods, the higher price may help domestic substitutes in one branch but discourages industry in almost every other, since the buyer must sell his own goods cheaper to pay for the dearer import.
Chapter 115
What is the alcavala of Spain, and what effects does Smith attribute to it?
The alcavala was a Spanish tax on the sale of every sort of property, moveable or immoveable, repeated at every sale. Smith says it was first ten per cent, later fourteen, and at his time six per cent. He reports that Ustaritz imputed to it the ruin of Spanish manufactures, and Smith adds that the decline of agriculture might likewise be imputed to it, since it fell on the rude produce of land too.
Chapter 115
How does Smith contrast British inland commerce with French and Spanish tax systems?
Smith argues the uniform taxation across the united kingdom leaves inland and coasting trade almost entirely free, with goods carried without permits or visits, except a few minor cases and coastwise certificates. He calls this freedom perhaps a principal cause of Great Britain's prosperity and wishes it extended to Ireland and the plantations. By contrast, France's varied provincial revenue laws and Spain's alcavala interrupt interior commerce.
Chapter 115
PART II. Of Taxes. (part 11)3 cards
What three reforms of French finances does Smith propose?
Smith proposes abolishing the taille and capitation and increasing the vingtiemes to replace that revenue; making the gabelle, aides, traites, tobacco taxes and customs uniform throughout the kingdom; and placing all these taxes under government administration so the farmers-general's exorbitant profits accrue to the state. He notes private interest is likely to block all three.
Chapter 116
How does Smith compare French and British taxation?
The author argues the French system is in every respect inferior to the British. Britain levies ten million sterling on fewer than eight million people without any order being oppressed, while France, with perhaps twenty-three or twenty-four million people, better soil and longer cultivation, paid only about fifteen million sterling into its treasury in 1765-1766, yet its people are acknowledged more oppressed by taxes.
Chapter 116
Why does Smith say Holland's heavy taxes are excusable?
Smith argues that once proper subjects of taxation are exhausted, states must tax improper ones like necessaries. Holland's expensive wars for independence and debts, plus the cost of preserving Holland and Zealand from the sea, forced heavy taxes. He also credits the republican form of government, which gives wealthy merchants a share in administration and keeps their capital and residence in the country.
Chapter 116
CHAPTER III. (part 1)4 cards
In rude societies, why did the sovereign have to save rather than borrow?
The author argues that in a rude state there are no great mercantile or manufacturing capitals, so few could and nobody would lend to government in extraordinary exigencies. Individuals hoarded and concealed savings from distrust of the government's justice, fearing plunder if their hoard was known. The sovereign, foreseeing the impossibility of borrowing, was driven to save.
Chapter 117
Why does a commercial society make government borrowing both necessary and easy?
Commerce brings luxury, so the sovereign's ordinary expense rises to his revenue and he cannot amass treasure; war then forces borrowing since new taxes arrive slowly. Meanwhile merchants with quick-returning capitals can advance large sums, and confidence in the justice of government makes them willing to lend, since the transferable security often sells above its original price.
Chapter 117
How does Smith describe the uniform progress of public debts among European nations?
The author argues nations, like private men, generally began by borrowing on personal credit without assigning or mortgaging any particular fund, and when that resource failed they moved to borrowing on assignments or mortgages of particular funds. Britain's unfunded debt is contracted the first way, consisting of debts bearing no interest and interest-bearing navy and exchequer bills.
Chapter 117
What role does the Bank of England play in Britain's unfunded debt?
The Bank of England, either by voluntarily discounting navy and exchequer bills at their current value, or by agreeing with government for certain considerations to circulate exchequer bills at par and pay the interest due on them, keeps up their value and facilitates their circulation. This frequently enables government to contract a very large debt of this kind. France, having no bank, lacked this.
Chapter 117
CHAPTER III. (part 2)4 cards
What did Smith say improvident anticipations necessarily gave birth to?
The author argues that when governments overloaded a fund by anticipating a second or third time before the first anticipation expired, the fund became insufficient to pay both principal and interest. It then had to be charged with interest only, or a perpetual annuity equal to the interest, and such improvident anticipations necessarily gave birth to the more ruinous practice of perpetual funding.
Chapter 118
How did the fall in interest rates create the sinking fund?
During Anne's reign the market rate fell from six to five per cent, and five per cent was made the legal maximum for private loans. Creditors accepted five per cent, saving one per cent, or one-sixth of the annuities paid from the aggregate, South-sea, and general funds. This surplus over the annuities charged laid the foundation of the sinking fund, which amounted to £523,454:7:7½ in 1717.
Chapter 118
Why does Smith say tontines raise more money than annuities on separate lives?
The author argues that an annuity with a right of survivorship is really worth more than an equal annuity for a separate life, and because of the confidence every man has in his own good fortune, the principle behind lotteries, it generally sells for more than it is worth. Governments therefore generally prefer tontines, since the expedient raising most money is almost always preferred.
Chapter 118
Why did England's lenders prefer perpetual annuities over life annuities?
The author argues the difference arose from the lenders' views, not government anxiety. In England, government sat in the greatest mercantile city, so merchants advanced money, intending to increase their capitals by selling subscriptions at a profit. Life annuities, especially on their own lives, would sell at a loss and diminish in value, so they could never make as convenient a transferable stock as a perpetual annuity.
Chapter 118
CHAPTER III. (part 3)4 cards
What did Smith conclude about ever fully discharging the public debt from ordinary revenue?
The author argues it would be "altogether chimerical" to expect the public debt to ever be completely discharged by savings from ordinary revenue as it stands. He notes that during eleven years of peace only about £10 million was paid off, while a seven-year war contracted over £100 million, and much of even that small reduction came from extraneous sums, not ordinary revenue.
Chapter 119
How does funding the public expense differ from raising revenue within the year?
Smith explains that funding defrays expense by destroying existing capital, diverting annual produce from productive to unproductive labour. Raising revenue within the year only turns private revenue from one unproductive use to another and hinders accumulation of new capital without necessarily destroying existing capital. However, funding keeps taxes lighter, so private ability to save is less impaired, letting frugality repair government waste—an advantage only during war.
Chapter 119
Why does Smith reject the claim that interest payments on the debt leave the nation no poorer?
Smith says this apology rests on the sophistry of the mercantile system. It falsely assumes the whole debt is owed to inhabitants of the country, when the Dutch and other foreign nations hold a considerable share. Even if all debt were domestic, he argues it would not be less pernicious, because transferring revenue from landowners and capital owners—who have a particular interest in maintaining land and stock—to public creditors who lack that interest must cause neglect of land and waste or removal of capital.
Chapter 119
What does Smith say would happen to wars under a system of raising revenue within the year?
The author argues wars would generally be more speedily concluded and less wantonly undertaken. People feeling the complete burden during war would soon grow weary, and governments would not need to prolong it. Foresight of heavy, unavoidable burdens would keep people from calling for war without real interest. The periods when private accumulation was impaired would be rarer and shorter than under funding.
Chapter 119
CHAPTER III. (part 4)4 cards
How did Rome's reduction of the As after the First Punic War function as a bankruptcy?
Rome reduced the As from twelve ounces of copper to two ounces, enabling the republic to pay its great debts with a sixth of what it really owed. Smith notes this sudden bankruptcy provoked no popular clamour; the law was carried by a tribune and was probably very popular, since it relieved the poor debtors who dominated the assemblies.
Chapter 120
Why did the Roman poor support reducing the coin, according to Smith?
The poor were chronically indebted to the rich, who lent at exorbitant interest to secure votes at annual elections. Debts accumulated beyond repayment, leaving debtors subject to severe execution and bound to vote for their creditors' candidates. Reducing the coin to a sixth let them pay with a sixth of what they owed, equivalent to the most advantageous new tables.
Chapter 120
How does Smith distinguish an augmentation from an adulteration of the coin?
An augmentation directly raises the denomination, calling smaller pieces by the old name; it is always open and avowed. Adulteration mixes more alloy while keeping the same denomination, weight, and appearance, and is generally concealed. Smith argues both are unjust, but augmentation is open violence while adulteration is treacherous fraud, so adulteration excites far greater indignation once discovered.
Chapter 120
What conditions does Smith say are needed to liberate Britain's public revenue?
Smith argues liberation can never occur while the surplus above the peace-establishment expense is so small; it requires either considerable augmentation of revenue or equally considerable reduction of expense. He suggests a more equal land tax, a more equal house-rent tax, and customs and excise alterations, but doubts even these could offset further debt accumulation in the next war.
Chapter 120
CHAPTER III. (part 5)4 cards
Why does Smith say gold and silver are scarce in America?
The author argues the scarcity is a matter of choice, not necessity: Americans prefer to convert the value of gold and silver into active and productive stock—instruments of trade, clothing materials, furniture, and iron work for settlements—rather than hold costly dead stock. Paper currency suffices for domestic business, and where gold and silver are necessary for exterior commerce, they are generally found.
Chapter 121
How did Massachusetts Bay use paper money in 1747?
The chapter states that colony governments like Massachusetts Bay advanced paper money on extraordinary emergencies to defray public expense, then later redeemed it at its depreciated value. In 1747 that colony paid the greater part of its public debts with the tenth part of the money for which its bills had been granted, citing Hutchinson's History of Massachusetts Bay.
Chapter 121
Why do the tobacco colonies use little gold and silver?
In trade with Virginia and Maryland, British merchants advanced goods on long credit and were paid in tobacco at a rated price. It suited those particular correspondents, who profited by selling tobacco, to receive payment in goods rather than money. Smith notes these colonies are said to have less gold and silver than any other in America, yet are reckoned as thriving as their neighbours.
Chapter 121
What made payments from sugar colonies irregular, according to Smith?
Smith attributes irregular and uncertain returns not to the size of balances due but to the quantity of uncultivated land, which tempted planters to over-trade and settle more waste land than their capitals suited. Jamaica, with much uncultivated land, was more irregular than fully cultivated Barbadoes, Antigua, and St. Christopher's; the new acquisitions of Grenada, Tobago, St. Vincent's, and Dominica were similarly irregular.
Chapter 121
CHAPTER III. (part 6)4 cards
What wars does Smith cite as colonial expenses for Britain?
Smith cites the last war, undertaken altogether on account of the colonies, which cost Great Britain upwards of ninety millions, and the Spanish war of 1739, principally undertaken on their account, which with the consequent French war cost upwards of forty millions. He says a great part of that ought justly to be charged to the colonies.
Chapter 122
Why does Smith say colonies contributing neither revenue nor force are not provinces?
Smith argues that countries contributing neither revenue nor military force toward supporting the empire cannot be considered provinces. They may be appendages, a sort of splendid and showy equipage of the empire. If the empire can no longer support that equipage, it ought to lay it down, and accommodate expense to revenue.
Chapter 122
What does Smith claim about Britain's empire west of the Atlantic?
The author argues that Britain's rulers amused the people for over a century with the imagination of a great empire west of the Atlantic, but it has existed in imagination only: not an empire but the project of an empire, not a gold mine but the project of a gold mine. It costs immense expense without likely profit, since the monopoly's effects are mere loss to the great body of the people.
Chapter 122
What does Smith recommend if colonies refuse British taxes yet remain provinces?
Smith warns that if the colonies, despite refusing to submit to British taxes, are still considered provinces, their defence in a future war may cost as much as any former war. He concludes Britain should free herself from defending such provinces in war and supporting their establishments in peace, accommodating future views to the real mediocrity of her circumstances.
Chapter 122
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Text used: Project Gutenberg eBook #3300 (Public domain in the United States). Generated from the full text; cards paraphrase the source.
Version: Public domain edition. Retrieved 2026-10-18. Cards reviewed 2026-10-18.
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