--- ENTITY: productive and unproductive labour ---

# Productive and Unproductive Labour

## Definition

A fundamental classification of economic activity distinguishing labour that
adds value to materials through transformation into vendible commodities from
labour that provides services without creating lasting value. Productive labour
fixes and realizes itself in particular subjects or commodities that endure
after the labour is past and can be stored, exchanged, or employed again,
while unproductive labour perishes in the very instant of performance without
leaving any vendible commodity or value that can be stored or exchanged.

## Source Chapter

Book II, Chapter 3

## Context

The central analytical framework of this chapter, introduced to explain how
different types of labour affect capital accumulation and economic growth.
Smith uses this distinction to show why manufacturers grow rich while those
maintaining unproductive servants grow poor, and how this affects the overall
productive capacity of a nation.

## Economic Domain

Production

---
--- ENTITY: capital accumulation ---

# Capital Accumulation

## Definition

The process by which savings from revenue are added to capital stock, enabling
the employment of additional productive labour. Capital grows through
parsimony when individuals save part of their revenue and either employ it
themselves in maintaining productive hands or lend it to others, creating a
perpetual fund for maintaining productive labour across time.

## Source Chapter

Book II, Chapter 3

## Context

The chapter's primary focus, explaining how individual saving behavior
accumulates into national capital growth. Smith argues that parsimony, not
industry, is the immediate cause of capital increase, and that this process
determines whether a nation tends toward industry or idleness.

## Economic Domain

Accumulation

---
--- ENTITY: revenue destined for capital replacement ---

# Revenue Destined for Capital Replacement

## Definition

That portion of annual produce which immediately replaces capital by renewing
provisions, materials, and finished work withdrawn from capital. This revenue
maintains only productive hands and pays wages of productive labour, forming
the foundation for continued production and economic growth.

## Source Chapter

Book II, Chapter 3

## Context

Smith divides annual produce into two parts: one replacing capital and one
constituting revenue. This portion is crucial because it determines the
proportion between productive and unproductive hands in society and thus the
general character of inhabitants as to industry or idleness.

## Economic Domain

Accumulation

---
--- ENTITY: revenue constituting profit and rent ---

# Revenue Constituting Profit and Rent

## Definition

That portion of annual produce which forms revenue either as profit of stock
or rent of land. This revenue may maintain either productive or unproductive
hands indifferently, unlike capital replacement revenue which maintains only
productive labour. It represents the surplus after capital renewal.

## Source Chapter

Book II, Chapter 3

## Context

The second major division of annual produce, distinguished from capital
replacement revenue. Smith notes that owners of this revenue often show
predilection for maintaining unproductive hands, affecting the overall
productive capacity of society.

## Economic Domain

Distribution

---
--- ENTITY: spare revenue ---

# Spare Revenue

## Definition

That portion of revenue which remains after necessary subsistence is met and
which may be employed in maintaining either productive or unproductive hands.
Productive labourers have little spare revenue, while landlords and merchants
have most to spare, giving them greater influence over the proportion of
productive versus unproductive labour in society.

## Source Chapter

Book II, Chapter 3

## Context

Smith explains how different social classes use their revenue, noting that
spare revenue is the key determinant of whether additional labour will be
productive or unproductive, thus affecting capital accumulation and economic
growth.

## Economic Domain

Distribution

---
--- ENTITY: funds for maintaining productive labour ---

# Funds for Maintaining Productive Labour

## Definition

The capital and revenue sources that employ productive hands whose labour
adds value to materials. These funds are much greater in rich countries and
bear a much greater proportion to those likely to be employed in maintaining
idleness, determining the general character of inhabitants as industrious or
idle.

## Source Chapter

Book II, Chapter 3

## Context

Smith argues that the proportion between these funds and those for maintaining
unproductive hands determines whether a country tends toward industry or
idleness, with rich countries having larger proportions of productive labour.

## Economic Domain

Production

---
--- ENTITY: funds for maintaining unproductive hands ---

# Funds for Maintaining Unproductive Hands

## Definition

Capital and revenue sources that employ unproductive labourers and those who
do not labour at all, including servants, soldiers, churchmen, lawyers,
physicians, and entertainers. These funds tend to have predilection for
unproductive labour, especially among the wealthy, affecting the overall
productive capacity of society.

## Source Chapter

Book II, Chapter 3

## Context

Smith contrasts these funds with those for productive labour, noting that
their proportion determines whether a society tends toward industry or
idleness, and that rich countries often maintain larger proportions of
unproductive hands.

## Economic Domain

Production

---
--- ENTITY: proportion between productive and unproductive hands ---

# Proportion Between Productive and Unproductive Hands

## Definition

The ratio determining the relative numbers of productive labourers who add
value to materials versus unproductive labourers who provide services without
creating vendible commodities. This proportion depends on the relative size
of funds for maintaining productive versus unproductive hands, and determines
whether a country tends toward industry or idleness.

## Source Chapter

Book II, Chapter 3

## Context

The central analytical relationship in the chapter, showing how the division
of annual produce between capital replacement and revenue affects the overall
productive capacity and economic character of a nation.

## Economic Domain

General Theory

---
--- ENTITY: frugality versus prodigality ---

# Frugality Versus Prodigality

# Frugality Versus Prodigality

## Definition

The contrasting principles governing individual and public expenditure that
determine capital accumulation. Frugality increases public capital by saving
revenue for productive employment, while prodigality diminishes it by
consuming capital through excessive expenditure on unproductive labour and
consumption.

## Source Chapter

Book II, Chapter 3

## Context

Smith presents this as the fundamental economic choice affecting national
wealth, arguing that individual frugality accumulates capital while
prodigality destroys it, with public prodigality being particularly harmful
when it employs revenue in maintaining unproductive hands.

## Economic Domain

Accumulation

---
--- ENTITY: perpetual fund for maintenance of labour ---

# Perpetual Fund for Maintenance of Labour

# Perpetual Fund for Maintenance of Labour

## Definition

The accumulated capital created through individual saving that provides
continuous employment for productive labour across all future time periods.
Like a founder of a public work-house, a frugal person establishes a fund
that, though not legally protected, is guarded by the evident interest of all
who may ever possess any share of it.

## Source Chapter

Book II, Chapter 3

## Context

Smith uses this concept to show how individual saving creates lasting economic
benefits beyond the immediate year, establishing a permanent capacity for
productive employment that characterizes wealthy nations.

## Economic Domain

Accumulation

---
--- ENTITY: encroachment upon capital ---

# Encroachment Upon Capital

## Definition

The process by which individuals who spend beyond their income consume their
capital stock, perverting funds consecrated to productive employment for
maintaining unproductive labour. This diminishes the quantity of labour that
adds value to subjects and consequently reduces the real wealth and revenue
of the country's inhabitants.

## Source Chapter

Book II, Chapter 3

## Context

Smith describes how prodigality leads to capital consumption, comparing it to
perverting revenues of pious foundations to profane purposes, and showing how
this behavior impoverishes both the individual and the country.

## Economic Domain

Accumulation

---
--- ENTITY: exportation of gold and silver as effect of declension ---

# Exportation of Gold and Silver as Effect of Declension

## Definition

The consequence rather than cause of economic decline, where diminishing
annual produce leads to reduced domestic circulation of money, forcing its
exportation to purchase consumable goods abroad. This exportation continues
for some time to support consumption beyond the value of domestic produce.

## Source Chapter

Book II, Chapter 3

## Context

Smith refutes the mercantilist view that gold and silver export causes
economic decline, arguing instead that it is the effect of declining
production and can even temporarily alleviate the misery of declension.

## Economic Domain

Exchange

---
--- ENTITY: increase of money as effect of prosperity ---

# Increase of Money as Effect of Prosperity

## Definition

The natural consequence of economic growth where increased annual produce
requires greater money circulation. The increased produce naturally employs
itself in purchasing additional gold and silver necessary for circulating the
rest, making monetary increase the effect rather than cause of public
prosperity.

## Source Chapter

Book II, Chapter 3

## Context

Smith's complementary argument to the previous entity, showing that monetary
growth follows rather than leads economic development, refuting mercantilist
concerns about money scarcity.

## Economic Domain

Exchange

---
--- ENTITY: private misconduct versus public prodigality ---

# Private Misconduct Versus Public Prodigality

# Private Misconduct Versus Public Prodigality

## Definition

The distinction between individual economic errors and government
extravagance as causes of reduced productive funds. While private misconduct
rarely affects great nations due to compensation by others' good conduct,
public prodigality employing revenue in maintaining unproductive hands can
significantly diminish funds for productive labour.

## Source Chapter

Book II, Chapter 3

## Context

Smith argues that public prodigality is more dangerous than private misconduct
because it operates at scale and is not compensated by others' frugality,
potentially leading to national impoverishment.

## Economic Domain

Regulation

---
--- ENTITY: natural progress of improvement ---

# Natural Progress of Improvement

## Definition

The inherent tendency of societies to accumulate capital and improve through
individual efforts to better their condition, protected by law and allowed by
liberty. This principle frequently restores health to the economic
constitution despite government extravagance and administrative errors.

## Source Chapter

Book II, Chapter 3

## Context

Smith's optimistic conclusion that individual self-interest and frugality
generally overcome government interference, allowing England's progress toward
opulence despite public prodigality.

## Economic Domain

General Theory

---
--- ENTITY: modes of expense affecting public opulence ---

# Modes of Expense Affecting Public Opulence

## Definition

The distinction between spending revenue on immediately consumable items
versus durable commodities, where the latter contributes more to public
opulence by providing useful goods to inferior ranks, encouraging frugality,
and maintaining more productive hands than extravagant hospitality.

## Source Chapter

Book II, Chapter 3

## Context

Smith's final analysis showing how different spending patterns affect
national wealth, arguing that investment in durable goods creates more
lasting economic benefits than consumption of perishable items.

## Economic Domain

Consumption

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