Chapter 1

The Revenue of Industry Icon

September 30, 2015

Section 1: The Profits of Industry in general

The general motives, which stimulate the demand of products, have been above investigated. 38 When the demand for any product whatever, is very lively, the productive agency, through whose means alone it is obtainable, is likewise in brisk demand, which necessarily raises its ratio of value= this is true generally, of every kind of productive agency. Industry, capital, and land, all yield, ceteris paribus, the largest profits, when the general demand for products is most active, affluence most expanded, profits most widely diffused, and production most vigorous and prolific.

Every one of these causes tends to diminish the quantity of labour in circulation in each department, and consequently to vary its natural rate of profit. It is scarcely necessary to cite examples in support of propositions so very evident. Among the agreeable or disagreeable circumstances attending an occupation, must be reckoned the consideration or contempt which it entails.

Some professions are partly paid in honour. Of any given price, the more is paid in this coin, the less may be paid in any other, without deducing the ratio of price.

Smith remarks, that the scholar, the poet, and the philosopher, are almost wholly paid in personal consideration. — Whether with reason or from prejudice, this is not entirely the case with the professions of a comic actor, a dancer, and innumerable others; they must, therefore, be paid in money what they are denied in estimation. “It seems absurd at first sight,” says Smith, “that we should despise their persons, and yet reward their talents with the most profuse liberality Whilst we do the one, however, we must of necessity do the other Should the public opinion or prejudice ever alter with regard to such occupations, their pecuniary recompense would quickly diminish.

More people would apply to them, and the competition would quickly reduce the price of their labour. Such talents, though far from being common, are by no means so rare as is imagined. Many people possess them in great perfection, who disdain to make this use of them; and many more are capable of acquiring them, if any thing could be honourably made by them.” 39

In the preceding chapter, we have seen that the demand for some products is always more steady and active than for oth- ers. Whence, we have inferred, that the agency directed to those particular products, receives the most ample remunera- tion.

Descending in our progress more and more into particular detail, we shall examine in this, and some following chap- ters, in what cases the profits of industry bear a greater or a less proportion to those of capital and of land, and vice versa; together with the reasons why certain ways of employing in- dustry, capital, or land, are more profitable than others. To begin, then, with the comparison of the relative profits of industry, to those of capital and land, we shall find these bear the highest ratio, where abundance of capital creates a de- mand for a great mass of industrious agency; as it did in Hol- land before the revolution. Industrious agency was very dearly paid there; as it still is in countries like the United States of America, where population, and consequently, the human agents of production, spite of their rapid increase, bear no proportion to the demands of an unlimited extent of land, and of the daily accumulation of capital by the prevalence of fru- gal habits.

In some countries, the functions of national administration are requited at the same time with high honour and large emolument; but it is only so, where, instead of being open to free competition, like other occupations and professions, they are in the disposal of royal favour. A nation, awake to its true interest, is careful not to lavish this double recompense on the training, and an interest higher than the ordinary rate; for the capital advanced has been actually sunk, and exists no longer than the life of the individual. official mediocrity; but to husband its pecuniary bounty, where it is prodigal of distinction and authority. Every temporary occupation is dearly paid; for the labourer must be indemnified as well for the time he is employed, as for that during which he is waiting for employment. A job coachmaster must charge more for the days he is employed, than may appear sufficient for his trouble and capital em- barked, because the busy days must pay for the idle ones; any thing else would be ruin to him. The hire of masquerade dresses is expensive for the same reason; the receipts of the carnival must pay for the whole year. Upon a cross road, an innkeeper must charge high for indifferent entertainment; for he may he some days before the arrival of another traveller.

It should, therefore, be calculated as an annuity. 41

This is why all employments of time and talents, which require a liberal education, are better paid than those, which require less education. Education is capital which ought to yield interest, independent of the ordinary profits of industry. There are facts, it is true, that militate against this principle;

but they are capable of explanation. The priesthood is sometimes very ill paid; 42 yet a religion, founded upon very com- plicated doctrines, and obscure historical facts, requires in its ministers a long course of study and probation, and such study and probation necessarily call for an advance of capital; it would seem requisite, therefore, for the continued ex- istence of the clerical profession, that the salary of the minister should pay the interest on the capital expended, as well as the wages of his personal trouble, which the profits of the inferior clergy rarely exceed, particularly in Catholic countries.

It must, however, be ascertained, whether the public have not themselves advanced this capital in the maintenance and education of clerical students at the public charge; in which case, the public advancing the capital, may find people enough to execute the duties for the mere wages of their labour, or a bare subsistence, especially where there is no family to be provided for.

However, the proneness of mankind to expect, that, if there be a single lucky chance, it will be sure to fall to their peculiar lot, attracts towards particular channels a portion of industry disproportionate to the profit they hold out. ‘In a perfectly fair lottery,’ says the author of the Wealth of Nations,’

those who draw prizes ought to gain all that is lost by those who draw blanks. In a profession, where twenty fail for one that succeeds, that one ought to gain all that should have been gained by the unsuccessful twenty.’ 40 Now many occupations are far from being paid according to this rate. The same author states his belief, that, how extravagant soever the fees of counsellors at law of celebrity may appear, the annual gains of all the counsellors of a large town bear but a very small proportion to their annual expense; so that this profession, must, in great part, derive its subsistence from some other independent source of revenue.

When, besides expensive training, peculiar natural talent is required for a particular branch of industry, the supply is still more limited in proportion to the demand, and must conse- quently be better paid. A great nation will probably contain but two or three artists capable of painting a superior picture, or modelling a beautiful statue; if such objects, then, be much in demand, those few can charge almost what they please; and, though much of the profit is but the return with interest of capital advanced in the acquisition of their art, yet the profit it brings leaves a very large surplus. 43

A celebrated painter, advocate, or physician, will have spent, of his own or rela- tions’ money, six or eight thousand dollars at most, in acquir- ing the ability from which his gains are derived; the interest of this sum calculated as an annuity, is but 800 dollars; so that, if he make 6000 dollars by his art, there remains an an- nual sum of 3000 dollars, which is wholly the salary of his skill and industry. If every thing affording revenue is to be set down as property, his fortune at ten years’ purchase may be reckoned 50,000 dollars, even supposing him not to have in- herited a sol.

It is hardly necessary to state, that these several causes of difference in the ratio of profit may act all in the same, or each in an opposite direction; or that, in the former case, the effect is more intense; whereas, in the latter, the opposite action of one controls and neutralizes the other. It would be a waste of time to prove, that the agreeable circumstances of a profession may balance the uncertainty of its product= or that a business that does not furnish constant occupation, and is moreover attended with danger, must be indemnified by a double increase of salary.

The last, and perhaps the principal cause of inequality in the profits of industry in general is, the degree of skill it may require.

When the skill requisite to any calling, whether of a superior or subordinate character, is attainable only by long and expensive training, that training must every year have involved a certain expense, and the total outlay forms an accumulated capital. In such case, its remuneration includes, over and above the wages of labour, an interest upon the capital advanced in

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