An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith [e book reader pdf TXT] 📗

bring it thither. Such people may be called the effectual

demanders, and their demand the effectual demand; since it maybe sufficient

to effectuate the bringing of the commodity to market. It is different from

the absolute demand. A very poor man may be said, in some sense, to have a

demand for a coach and six; he might like to have it; but his demand is not

an effectual demand, as the commodity can never be brought to market in

order to satisfy it.

 

When the quantity of any commodity which is brought to market falls short of

the effectual demand, all those who are willing to pay the whole value of

the rent, wages, and profit, which must be paid in order to bring it

thither, cannot be supplied with the quantity which they want. Rather than

want it altogether, some of them will be willing to give more. A competition

will immediately begin among them, and the market price will rise more or

less above the natural price, according as either the greatness of the

deficiency, or the wealth and wanton luxury of the competitors, happen to

animate more or less the eagerness of the competition. Among competitors of

equal wealth and luxury, the same deficiency will generally occasion a more

or less eager competition, according as the acquisition of the commodity

happens to be of more or less importance to them. Hence the exorbitant price

of the necessaries of life during the blockade of a town, or in a famine.

 

When the quantity brought to market exceeds the effectual demand, it cannot

be all sold to those who are willing to pay the whole value of the rent,

wages, and profit, which must be paid in order to bring it thither. Some

part must be sold to those who are willing to pay less, and the low price

which they give for it must reduce the price of the whole. The market price

will sink more or less below the natural price, according as the greatness

of the excess increases more or less the competition of the sellers, or

according as it happens to be more or less important to them to get

immediately rid of the commodity. The same excess in the importation of

perishable, will occasion a much greater competition than in that of durable

commodities; in the importation of oranges, for example, than in that of old

iron.

 

When the quantity brought to market is just sufficient to supply the

effectual demand, and no more, the market price naturally comes to be either

exactly, or as nearly as can be judged of, the same with the natural price.

The whole quantity upon hand can be disposed of for this price, and can not

be disposed of for more. The competition of the different dealers obliges

them all to accept of this price, but does not oblige them to accept of

less.

 

The quantity of every commodity brought to market naturally suits itself to

the effectual demand. It is the interest of all those who employ their land,

labour, or stock, in bringing any commodity to market, that the quantity

never should exceed the effectual demand ; and it is the interest of all

other people that it never should fall short of that demand.

 

If at any time it exceeds the effectual demand, some of the component parts

of its price must be paid below their natural rate. If it is rent, the

interest of the landlords will immediately prompt them to withdraw a part of

their land; and if it is wages or profit, the interest of the labourers in

the one case, and of their employers in the other, will prompt them to

withdraw a part of their labour or stock, from this employment. The quantity

brought to market will soon be no more than sufficient to supply the

effectual demand. All the different parts of its price will rise to their

natural rate, and the whole price to its natural price.

 

If, on the contrary, the quantity brought to market should at any time fall

short of the effectual demand, some of the component parts of its price must

rise above their natural rate. If it is rent, the interest of all other

landlords will naturally prompt them to prepare more land for the raising of

this commodity ; if it is wages or profit, the interest of all other

labourers and dealers will soon prompt them to employ more labour and stock

in preparing and bringing it to market. The quantity brought thither will

soon be sufficient to supply the effectual demand. All the different parts

of its price will soon sink to their natural rate, and the whole price to

its natural price.

 

The natural price, therefore, is, as it were, the central price, to which

the prices of all commodities are continually gravitating. Different

accidents may sometimes keep them suspended a good deal above it, and

sometimes force them down even somewhat below it. But whatever may be the

obstacles which hinder them from settling in this centre of repose and

continuance, they are constantly tending towards it.

 

The whole quantity of industry annually employed in order to bring any

commodity to market, naturally suits itself in this manner to the effectual

demand. It naturally aims at bringing always that precise quantity thither

which may be sufficient to supply, and no more than supply, that demand.

 

But, in some employments, the same quantity of industry will, in different

years, produce very different quantities of commodities ; while, in others,

it will produce always the same, or very nearly the same. The same number of

labourers in husbandry will, in different years, produce very different

quantities of corn, wine, oil, hops, etc. But the same number of spinners or

weavers will every year produce the same, or very nearly the same, quantity

of linen and woollen cloth. It is only the average produce of the one

species of industry which can be suited, in any respect, to the effectual

demand ; and as its actual produce is frequently much greater, and

frequently much less, than its average produce, the quantity of the

commodities brought to market will sometimes exceed a good deal, and

sometimes fall short a good deal, of the effectual demand. Even though that

demand, therefore, should continue always the same, their market price will

be liable to great fluctuations, will sometimes fall a good deal below, and

sometimes rise a good deal above, their natural price. In the other species

of industry, the produce of equal quantities of labour being always the

same, or very nearly the same, it can be more exactly suited to the

effectual demand. While that demand continues the same, therefore, the

market price of the commodities is likely to do so too, and to be either

altogether, or as nearly as can be judged of, the same with the natural

price. That the price of linen and woollen cloth is liable neither to such

frequent, nor to such great variations, as the price of corn, every man’s

experience will inform him. The price of the one species of commodities

varies only with the variations in the demand; that of the other varies not

only with the variations in the demand, but with the much greater, and more

frequent, variations in the quantity of what is brought to market, in order

to supply that demand.

 

The occasional and temporary fluctuations in the market price of any

commodity fall chiefly upon those parts of its price which resolve

themselves into wages and profit. That part which resolves itself into rent

is less affected by them. A rent certain in money is not in the least

affected by them, either in its rate or in its value. A rent which consists

either in a certain proportion, or in a certain quantity, of the rude

produce, is no doubt affected in its yearly value by all the occasional and

temporary fluctuations in the market price of that rude produce; but it is

seldom affected by them in its yearly rate. In settling the terms of the

lease, the landlord and farmer endeavour, according to their best judgment,

to adjust that rate, not to the temporary and occasional, but to the average

and ordinary price of the produce.

 

Such fluctuations affect both the value and the rate, either of wages or of

profit, according as the market happens to be either overstocked or

understocked with commodities or with labour, with work done, or with work

to be done. A public mourning raises the price of black cloth ( with which

the market is almost always understocked upon such occasions), and augments

the profits of the merchants who possess any considerable quantity of it. It

has no effect upon the wages of the weavers. The market is understocked with

commodities, not with labour, with work done, not with work to be done. It

raises the wages of journeymen tailors. The market is here understocked with

labour. There is an effectual demand for more labour, for more work to be

done, than can be had. It sinks the price of coloured silks and cloths, and

thereby reduces the profits of the merchants who have any considerable

quantity of them upon hand. It sinks, too, the wages of the workmen employed

in preparing such commodities, for which all demand is stopped for six

months, perhaps for a twelvemonth. The market is here overstocked both with

commodities and with labour.

 

But though the market price of every particular commodity is in this manner

continually gravitating, if one may say so, towards the natural price; yet

sometimes particular accidents, sometimes natural causes, and sometimes

particular regulations of policy, may, in many commodities, keep up the

market price, for a long time together, a good deal above the natural price.

 

When, by an increase in the effectual demand, the market price of some

particular commodity happens to rise a good deal above the natural price,

those who employ their stocks in supplying that market, are generally

careful to conceal this change. If it was commonly known, their great profit

would tempt so many new rivals to employ their stocks in the same way, that,

the effectual demand being fully supplied, the market price would soon be

reduced to the natural price, and, perhaps, for some time even below it. If

the market is at a great distance from the residence of those who supply it,

they may sometimes be able to keep the secret for several years together,

and may so long enjoy their extraordinary profits without any new rivals.

Secrets of this kind, however, it must be acknowledged, can seldom be long

kept; and the extraordinary profit can last very little longer than they are

kept.

 

Secrets in manufactures are capable of being longer kept than secrets in

trade. A dyer who has found the means of producing a particular colour with

materials which cost only half the price of those commonly made use of, may,

with good management, enjoy the advantage of his discovery as long as he

lives, and even leave it as a legacy to his posterity. His extraordinary

gains arise from the high price which is paid for his private labour. They

properly consist in the high wages of that labour. But as they are repeated

upon every part of his stock, and as their whole amount bears, upon that

account, a regular proportion to it, they are commonly considered as

extraordinary profits of stock.

 

Such enhancements of the market price are evidently the effects of

particular accidents, of which, however, the operation may sometimes last

for many years together.

 

Some natural productions require such a singularity of soil and situation,

that all the land in a great country, which is fit for producing them, may

not be sufficient to