10. We thus see the fundamental objection to Smith's system, or rather his utter want of system. It is utterly wanting in uniformity of principle. Each class of cases is explained by different principles, which is manifestly contrary to the fundamental nature of Natural Philosophy.

Colonel Perronet Thompson, who was a good mathematician, published a pamphlet entitled "The True Theory of Rent in opposition to Mr. Ricardo and others," in which he maintained that the simple cause of rent is everywhere the same as that which gives rise to the rent of the vineyard which produces Tokay. That this must be true is manifest to any one who has the slightest notion of a Physical Science. But it is very surprising that Malthus, who was also a good mathematician, should dispute this. He says1"First: That the price of Tokay is not a necessary price, the same quantity would be produced although the price were considerably lower.

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Secondly: That neither the purchasers of Tokay, nor the cultivators of it, live upon the produce.

"Thirdly: That there is no limit to the price of Tokay but the tastes and fortunes of a few opulent individuals.

"How, then, can it possibly be said with truth that the simple cause of rent is everywhere the same as that which gives rise to the rent of the vineyard which produces Tokay? and how entirely inapplicable is a reference to Tokay as an illustration of the true theory of Rent!"

It is amazing that so able a man as Malthus should bring so flimsy an objection against the manifest truth of Thompson's doctrine. Malthus's knowledge of mathematics should have shewn him that it could by no possibility be anything else than true.

He says that neither the purchasers nor the cultivators of Tokay live exclusively upon the produce. But neither do the producers nor the purchasers of any other article whatever live exclusively upon it. The cultivators and purchasers of corn do not live exclusively upon corn. The purchasers and cultivators of kelp do not live upon kelp. The producers and purchasers of stones from quarries do not live upon the stones. The producers and purchasers of shoes, cloth, or any other manufactures, do not live upon cloth or shoes. The growers and purchasers of cattle do not live exclusively on meat; and so on of all other products; no 1 Principles of Political Economy, ch. 3, § 2.

person can live upon any single product. The producers and purchasers of all these things do not live upon them directly, but upon them indirectly, i. e., upon their VALUE, that is upon the various things which they can get in exchange for them.

The cultivators of corn must have meat and clothing and many other things besides bread, which they obtain by exchanging a certain portion of their corn for these things; and the surplus value of the corn which remains beyond that maintenance is what gives profit and rent.

So it is with shoes or any other product. Persons do not live upon them directly; but indirectly, by obtaining what they want in exchange for them, and the surplus value which remains after providing for their maintenance is profit.

It is manifestly precisely the same with Tokay. The producers of it must exchange away a certain portion of it to provide for their maintenance; and its surplus value above that gives profit and rent.

Now it is manifest that the whole value of the product is due to the Intensity of Demand and the Limitation of Supply: and the greater the Demand and the greater the Limitation of Supply is, the greater will be the Value, the greater the surplus, and the greater the Profit and Rent.

Hence it is precisely the same principle in all products whatever ; in Tokay, in corn, in kelp, in quarries, in cattle, in shoes, in manufactures of all sorts; it is the ratio of Demand and Supply alone which determines Value; and the greater the Demand and the less the Supply, the greater will be the surplus above cost. It is in all cases only a difference of degree, and not a difference of principle.

If the supply were greatly increased the Value might so much diminish, that not only there might be no profit at all, but not even sufficient to defray the cost, and then production must cease. Formerly the preparation of kelp was protected by very high duties on barilla and salt. In consequence of this great quantities of kelp were manufactured in the Western Islands and Highlands. of Scotland, and brought great revenues to the proprietors. The kelp-shores of one island, North Uist, let for £7,000 a year; and about 20,000 tons were made in Scotland, which sold for about £20 a ton. After the war the duties on barilla and salt were repealed. Barilla was so much cheaper and of such superior quality,

that the value of kelp immediately diminished; at last it ceased to be produced, and most of the unfortunate proprietors, whose incomes came principally from kelp, were totally ruined. Now, the cost and the qualities of the kelp remained exactly the same as before; but its value was diminished by the greater cheapness and superior qualities of barilla. And since then barilla itself has, in its turn, been almost entirely superseded by the superior quality and cheapness of artificial soda.

The very same principle appears from Ricardo's theory of Rent. The actual quantity of corn necessary to support the producers remains exactly the same whatever its value may be. But as the corn, at whatever cost produced, sells for the same price in the same market, the portion of it produced with the least cost leaves the greatest margin between cost and value, out of which all Profit and Rent comes; and this excess of Value is entirely due to the Intensity of the Demand and the Limitation of the Supply.

Thus the same principle governs all cases whatever, in strict accordance with the principles of Natural Philosophy: and the value of every product, invariably and at all times, depends exclusively upon Demand and Supply.

From this it follows that if all landlords were swept away the consumers receive no benefit. The products of the earth would not be sold the least cheaper. There would be exactly the same Demand and exactly the same Supply, and therefore the value would remain the same. It can make no manner of difference to the consumer whether the whole profits go to the farmer alone, or whether they are divided between landlord and farmer.

It is precisely the same with a capitalist and a trader or manufacturer. These latter almost invariably carry on their trade by means of money borrowed at interest. But the interest is not a cause of price, but must come out of profits. If the trader traded on his own money, he and others would endeavour to limit the supply so that the value of the product would afford an interest for the capital; and whether he takes that interest himself, or divides it with a capitalist, can make no difference to the con

sumer.

Thus we see that Nature alone give quantities and qualities, but man alone gives Value; and whether Agriculture, Commerce, and Labour are productive, i. e., produce a profit, or not, depends upon exactly the same principle, that is, whether the Intensity of the

Demand, and the Limitation of the Supply of the product or the labour are so great that their VALUE exceeds the cost of production, or maintenance.

11. Smith notices the high rent paid for land in some parts of Shetland 1—“ The sea in the neighbourhood of Shetland is more than commonly abundant in fish, which make a great part of the subsistence of their inhabitants. But in order to profit by the produce of the water they must have a habitation upon the land. The rent of the land is in proportion, not to what the farmer can make by the land, but to what he can make both by the land and the water. It is partly paid in sea-fish; and one of the very few instances in which rent makes a part of the price of that commodity is to be found in that country."

It is quite clear that it is exactly the reverse, and that rents in Shetland are paid out of the bountiful supply of fish. It is surprising that Smith did not see that fishermen everywhere else must have a dwelling on land, as well as in Shetland, for which they must pay rent. And rent must bear the same relation to price everywhere else as it does in Shetland. Why should rent form a part of the price of fish in Shetland and not elsewhere? How is it possible that the Laws of Value can be fundamentally different in Shetland to all the rest of the world? This is just one of those examples which has brought the Science of Economics into such disrepute, because Economists, from want of a scientific education, make the whole subject a mass of contradictions and peculiarities, without any great fundamental principles. But the fault is evidently not in the subject but in the manner of treating it. A dwelling near the sea is necessary for the fishermen. The sea is part of their domain out of which they make their profits; and it is the abundance of the fish which enables them to pay a high rent for the land. And the rent no more enters into the price of the fish than the rent of corn land enters into the price of corn.

Rent in this case, as in all other cases of trading rents, arises out of the competition for a position by means of which profits may be made.

12. A French writer, M. de Fontenay, has seen this truth very clearly. He says?" It may be as well to say something here of Wealth of Nations, B. I., ch. 10. 2 Du Revenu Foncier, p. 260.

one of the most striking instances of the advantages of position. I mean the high price paid for buying or hiring spaces in a great city. Some Economists have thought they see in that the rent of land: they have let themselves be duped by a word, as Montaigne would say. To think that it is really for a piece of land that one pays in Paris two or three hundred francs the metre, is as if one were to think that in buying the number of a hackney coach it is for three yellow numbers that he pays six to eight thousand francs -and that when a notary sells his practice, it is a double knob of gilt copper, twenty paper cases or so, five or six shabby tables, and a bad earthenware stove, that he sells for 500,000 francs. The space of ground, like the number, the practice, is only a representative sign of the acquired rights, a title to advantages and profits which may be discounted. What one pays for in the price of the space of ground is a share in the enjoyment of innumerable improvements of an advanced civilization: it is an immense opportunity to exert oneself and to shine, to know and to be known. It is a powerful agglomeration of rich consumers if one is a producer; of producers and products of all kinds if one is more especially a consumer. It is a multitude of free enjoyments, the pavement, the trottoirs, gas, water, fêtes, theatres, palaces, walks, museums, shops, libraries, marts of all kinds of wealth, material and intellectual. The inhabitant of Paris who gives up to a stranger his share in these advantages has the perfect right to sell them to him at a good price. For it is he, or they whose right he represents, the citizens of a great city, who have gradually made it what it is. It is they who by their labours, their sacrifices, their struggles of every kind, by their gold or by their blood, have acquired and paid for these rights, this security, this progress, this public luxury, these works of general utility, these refinements of civilization, this immense development of intellectual and material life."

And de Fontenay most justly says in other parts of the same work "Wherever there is a revenue you perceive capital ”—“ The theory of revenue must be the same for all classes of human production.

"Unfortunately this simple and sensible idea has been falsified by the spirit of system. Ask an Economist who knows the masters by heart what revenue is; and he will answer: that industrial revenues, the net profits of the forge, of manufactures, of banking