# Extract Economic Entities

You are an analytical economist specializing in classical economic theory.
Your task is to extract distinct economic entities from a chapter of
Adam Smith's *The Wealth of Nations*.

## Source Chapter

---
id: book-3-chapter-02
title: "OF THE DISCOURAGEMENT OF AGRICULTURE IN THE ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE."
book: "3"
chapter: 2
artifact_type: content
---

CHAPTER II.
OF THE DISCOURAGEMENT OF AGRICULTURE
IN THE ANCIENT STATE OF EUROPE, AFTER THE FALL OF THE ROMAN EMPIRE.



      When the German and Scythian nations overran the western provinces of the
      Roman empire, the confusions which followed so great a revolution lasted
      for several centuries. The rapine and violence which the barbarians
      exercised against the ancient inhabitants, interrupted the commerce
      between the towns and the country. The towns were deserted, and the
      country was left uncultivated; and the western provinces of Europe, which
      had enjoyed a considerable degree of opulence under the Roman empire, sunk
      into the lowest state of poverty and barbarism. During the continuance of
      those confusions, the chiefs and principal leaders of those nations
      acquired, or usurped to themselves, the greater part of the lands of those
      countries. A great part of them was uncultivated; but no part of them,
      whether cultivated or uncultivated, was left without a proprietor. All of
      them were engrossed, and the greater part by a few great proprietors.

      This original engrossing of uncultivated lands, though a great, might have
      been but a transitory evil. They might soon have been divided again, and
      broke into small parcels, either by succession or by alienation. The law
      of primogeniture hindered them from being divided by succession; the
      introduction of entails prevented their being broke into small parcels by
      alienation.

      When land, like moveables, is considered as the means only of subsistence
      and enjoyment, the natural law of succession divides it, like them, among
      all the children of the family; of all of whom the subsistence and
      enjoyment may be supposed equally dear to the father. This natural law of
      succession, accordingly, took place among the Romans who made no more
      distinction between elder and younger, between male and female, in the
      inheritance of lands, than we do in the distribution of moveables. But
      when land was considered as the means, not of subsistence merely, but of
      power and protection, it was thought better that it should descend
      undivided to one. In those disorderly times, every great landlord was a
      sort of petty prince. His tenants were his subjects. He was their judge,
      and in some respects their legislator in peace and their leader in war. He
      made war according to his own discretion, frequently against his
      neighbours, and sometimes against his sovereign. The security of a landed
      estate, therefore, the protection which its owner could afford to those
      who dwelt on it, depended upon its greatness. To divide it was to ruin it,
      and to expose every part of it to be oppressed and swallowed up by the
      incursions of its neighbours. The law of primogeniture, therefore, came to
      take place, not immediately indeed, but in process of time, in the
      succession of landed estates, for the same reason that it has generally
      taken place in that of monarchies, though not always at their first
      institution. That the power, and consequently the security of the
      monarchy, may not be weakened by division, it must descend entire to one
      of the children. To which of them so important a preference shall be
      given, must be determined by some general rule, founded not upon the
      doubtful distinctions of personal merit, but upon some plain and evident
      difference which can admit of no dispute. Among the children of the same
      family there can be no indisputable difference but that of sex, and that
      of age. The male sex is universally preferred to the female; and when all
      other things are equal, the elder everywhere takes place of the younger.
      Hence the origin of the right of primogeniture, and of what is called
      lineal succession.

      Laws frequently continue in force long after the circumstances which first
      gave occasion to them, and which could alone render them reasonable, are
      no more. In the present state of Europe, the proprietor of a single acre
      of land is as perfectly secure in his possession as the proprietor of
      100,000. The right of primogeniture, however, still continues to be
      respected; and as of all institutions it is the fittest to support the
      pride of family distinctions, it is still likely to endure for many
      centuries. In every other respect, nothing can be more contrary to the
      real interest of a numerous family, than a right which, in order to enrich
      one, beggars all the rest of the children.

      Entails are the natural consequences of the law of primogeniture. They
      were introduced to preserve a certain lineal succession, of which the law
      of primogeniture first gave the idea, and to hinder any part of the
      original estate from being carried out of the proposed line, either by
      gift, or device, or alienation; either by the folly, or by the misfortune
      of any of its successive owners. They were altogether unknown to the
      Romans. Neither their substitutions, nor fidei commisses, bear any
      resemblance to entails, though some French lawyers have thought proper to
      dress the modern institution in the language and garb of those ancient
      ones.

      When great landed estates were a sort of principalities, entails might not
      be unreasonable. Like what are called the fundamental laws of some
      monarchies, they might frequently hinder the security of thousands from
      being endangered by the caprice or extravagance of one man. But in the
      present state of Europe, when small as well as great estates derive their
      security from the laws of their country, nothing can be more completely
      absurd. They are founded upon the most absurd of all suppositions, the
      supposition that every successive generation of men have not an equal
      right to the earth, and to all that it possesses; but that the property of
      the present generation should be restrained and regulated according to the
      fancy of those who died, perhaps five hundred years ago. Entails, however,
      are still respected, through the greater part of Europe; In those
      countries, particularly, in which noble birth is a necessary qualification
      for the enjoyment either of civil or military honours. Entails are thought
      necessary for maintaining this exclusive privilege of the nobility to the
      great offices and honours of their country; and that order having usurped
      one unjust advantage over the rest of their fellow-citizens, lest their
      poverty should render it ridiculous, it is thought reasonable that they
      should have another. The common law of England, indeed, is said to abhor
      perpetuities, and they are accordingly more restricted there than in any
      other European monarchy; though even England is not altogether without
      them. In Scotland, more than one fifth, perhaps more than one third part
      of the whole lands in the country, are at present supposed to be under
      strict entail.

      Great tracts of uncultivated land were in this manner not only engrossed
      by particular families, but the possibility of their being divided again
      was as much as possible precluded for ever. It seldom happens, however,
      that a great proprietor is a great improver. In the disorderly times which
      gave birth to those barbarous institutions, the great proprietor was
      sufficiently employed in defending his own territories, or in extending
      his jurisdiction and authority over those of his neighbours. He had no
      leisure to attend to the cultivation and improvement of land. When the
      establishment of law and order afforded him this leisure, he often wanted
      the inclination, and almost always the requisite abilities. If the expense
      of his house and person either equalled or exceeded his revenue, as it did
      very frequently, he had no stock to employ in this manner. If he was an
      economist, he generally found it more profitable to employ his annual
      savings in new purchases than in the improvement of his old estate. To
      improve land with profit, like all other commercial projects, requires an
      exact attention to small savings and small gains, of which a man born to a
      great fortune, even though naturally frugal, is very seldom capable. The
      situation of such a person naturally disposes him to attend rather to
      ornament, which pleases his fancy, than to profit, for which he has so
      little occasion. The elegance of his dress, of his equipage, of his house
      and household furniture, are objects which, from his infancy, he has been
      accustomed to have some anxiety about. The turn of mind which this habit
      naturally forms, follows him when he comes to think of the improvement of
      land. He embellishes, perhaps, four or five hundred acres in the
      neighbourhood of his house, at ten times the expense which the land is
      worth after all his improvements; and finds, that if he was to improve his
      whole estate in the same manner, and he has little taste for any other, he
      would be a bankrupt before he had finished the tenth part of it. There
      still remain, in both parts of the united kingdom, some great estates
      which have continued, without interruption, in the hands of the same
      family since the times of feudal anarchy. Compare the present condition of
      those estates with the possessions of the small proprietors in their
      neighbourhood, and you will require no other argument to convince you how
      unfavourable such extensive property is to improvement.

      If little improvement was to be expected from such great proprietors,
      still less was to be hoped for from those who occupied the land under
      them. In the ancient state of Europe, the occupiers of land were all
      tenants at will. They were all, or almost all, slaves, but their slavery
      was of a milder kind than that known among the ancient Greeks and Romans,
      or even in our West Indian colonies. They were supposed to belong more
      directly to the land than to their master. They could, therefore, be sold
      with it, but not separately. They could marry, provided it was with the
      consent of their master; and he could not afterwards dissolve the marriage
      by selling the man and wife to different persons. If he maimed or murdered
      any of them, he was liable to some penalty, though generally but to a
      small one. They were not, however, capable of acquiring property. Whatever
      they acquired was acquired to their master, and he could take it from them
      at pleasure. Whatever cultivation and improvement could be carried on by
      means of such slaves, was properly carried on by their master. It was at
      his expense. The seed, the cattle, and the instruments of husbandry, were
      all his. It was for his benefit. Such slaves could acquire nothing but
      their daily maintenance. It was properly the proprietor himself,
      therefore, that in this case occupied his own lands, and cultivated them
      by his own bondmen. This species of slavery still subsists in Russia,
      Poland, Hungary, Bohemia, Moravia, and other parts of Germany. It is only
      in the western and south-western provinces of Europe that it has gradually
      been abolished altogether.

      But if great improvements are seldom to be expected from great
      proprietors, they are least of all to be expected when they employ slaves
      for their workmen. The experience of all ages and nations, I believe,
      demonstrates that the work done by slaves, though it appears to cost only
      their maintenance, is in the end the dearest of any. A person who can
      acquire no property can have no other interest but to eat as much and to
      labour as little as possible. Whatever work he does beyond what is
      sufficient to purchase his own maintenance, can be squeezed out of him by
      violence only, and not by any interest of his own. In ancient Italy, how
      much the cultivation of corn degenerated, how unprofitable it became to
      the master, when it fell under the management of slaves, is remarked both
      by Pliny and Columella. In the time of Aristotle, it had not been much
      better in ancient Greece. Speaking of the ideal republic described in the
      laws of Plato, to maintain 5000 idle men (the number of warriors supposed
      necessary for its defence), together with their women and servants, would
      require, he says, a territory of boundless extent and fertility, like the
      plains of Babylon.

      The pride of man makes him love to domineer, and nothing mortifies him so
      much as to be obliged to condescend to persuade his inferiors. Wherever
      the law allows it, and the nature of the work can afford it, therefore, he
      will generally prefer the service of slaves to that of freemen. The
      planting of sugar and tobacco can afford the expense of slave cultivation.
      The raising of corn, it seems, in the present times, cannot. In the
      English colonies, of which the principal produce is corn, the far greater
      part of the work is done by freemen. The late resolution of the Quakers in
      Pennsylvania, to set at liberty all their negro slaves, may satisfy us
      that their number cannot be very great. Had they made any considerable
      part of their property, such a resolution could never have been agreed to.
      In our sugar colonies., on the contrary, the whole work is done by slaves,
      and in our tobacco colonies a very great part of it. The profits of a
      sugar plantation in any of our West Indian colonies, are generally much
      greater than those of any other cultivation that is known either in Europe
      or America; and the profits of a tobacco plantation, though inferior to
      those of sugar, are superior to those of corn, as has already been
      observed. Both can afford the expense of slave cultivation but sugar can
      afford it still better than tobacco. The number of negroes, accordingly,
      is much greater, in proportion to that of whites, in our sugar than in our
      tobacco colonies.

      To the slave cultivators of ancient times gradually succeeded a species of
      farmers, known at present in France by the name of metayers. They are
      called in Latin Coloni Partiarii. They have been so long in disuse in
      England, that at present I know no English name for them. The proprietor
      furnished them with the seed, cattle, and instruments of husbandry, the
      whole stock, in short, necessary for cultivating the farm. The produce was
      divided equally between the proprietor and the farmer, after setting aside
      what was judged necessary for keeping up the stock, which was restored to
      the proprietor, when the farmer either quitted or was turned out of the
      farm.

      Land occupied by such tenants is properly cultivated at the expense of the
      proprietors, as much as that occupied by slaves. There is, however, one
      very essential difference between them. Such tenants, being freemen, are
      capable of acquiring property; and having a certain proportion of the
      produce of the land, they have a plain interest that the whole produce
      should be as great as possible, in order that their own proportion may be
      so. A slave, on the contrary, who can acquire nothing but his maintenance,
      consults his own ease, by making the land produce as little as possible
      over and above that maintenance. It is probable that it was partly upon
      account of this advantage, and partly upon account of the encroachments
      which the sovereigns, always jealous of the great lords, gradually
      encouraged their villains to make upon their authority, and which seem, at
      least, to have been such as rendered this species of servitude altogether
      inconvenient, that tenure in villanage gradually wore out through the
      greater part of Europe. The time and manner, however, in which so
      important a revolution was brought about, is one of the most obscure
      points in modern history. The church of Rome claims great merit in it; and
      it is certain, that so early as the twelfth century, Alexander III.
      published a bull for the general emancipation of slaves. It seems,
      however, to have been rather a pious exhortation, than a law to which
      exact obedience was required from the faithful. Slavery continued to take
      place almost universally for several centuries afterwards, till it was
      gradually abolished by the joint operation of the two interests above
      mentioned; that of the proprietor on the one hand, and that of the
      sovereign on the other. A villain, enfranchised, and at the same time
      allowed to continue in possession of the land, having no stock of his own,
      could cultivate it only by means of what the landlord advanced to him, and
      must therefore have been what the French call a metayer.

      It could never, however, be the interest even of this last species of
      cultivators, to lay out, in the further improvement of the land, any part
      of the little stock which they might save from their own share of the
      produce; because the landlord, who laid out nothing, was to get one half
      of whatever it produced. The tithe, which is but a tenth of the produce,
      is found to be a very great hindrance to improvement. A tax, therefore,
      which amounted to one half, must have been an effectual bar to it. It
      might be the interest of a metayer to make the land produce as much as
      could be brought out of it by means of the stock furnished by the
      proprietor; but it could never be his interest to mix any part of his own
      with it. In France, where five parts out of six of the whole kingdom are
      said to be still occupied by this species of cultivators, the proprietors
      complain, that their metayers take every opportunity of employing their
      master’s cattle rather in carriage than in cultivation; because, in the
      one case, they get the whole profits to themselves, in the other they
      share them with their landlord. This species of tenants still subsists in
      some parts of Scotland. They are called steel-bow tenants. Those ancient
      English tenants, who are said by Chief-Baron Gilbert and Dr Blackstone to
      have been rather bailiffs of the landlord than farmers, properly so
      called, were probably of the same kind.

      To this species of tenantry succeeded, though by very slow degrees,
      farmers, properly so called, who cultivated the land with their own stock,
      paying a rent certain to the landlord. When such farmers have a lease for
      a term of years, they may sometimes find it for their interest to lay out
      part of their capital in the further improvement of the farm; because they
      may sometimes expect to recover it, with a large profit, before the
      expiration of the lease. The possession, even of such farmers, however,
      was long extremely precarious, and still is so in many parts of Europe.
      They could, before the expiration of their term, be legally ousted of
      their leases by a new purchaser; in England, even, by the fictitious
      action of a common recovery. If they were turned out illegally by the
      violence of their master, the action by which they obtained redress was
      extremely imperfect. It did not always reinstate them in the possession of
      the land, but gave them damages, which never amounted to a real loss. Even
      in England, the country, perhaps of Europe, where the yeomanry has always
      been most respected, it was not till about the 14th of Henry VII. that the
      action of ejectment was invented, by which the tenant recovers, not
      damages only, but possession, and in which his claim is not necessarily
      concluded by the uncertain decision of a single assize. This action has
      been found so effectual a remedy, that, in the modern practice, when the
      landlord has occasion to sue for the possession of the land, he seldom
      makes use of the actions which properly belong to him as a landlord, the
      writ of right or the writ of entry, but sues in the name of his tenant, by
      the writ of ejectment. In England, therefore the security of the tenant is
      equal to that of the proprietor. In England, besides, a lease for life of
      forty shillings a-year value is a freehold, and entitles the lessee to a
      vote for a member of parliament; and as a great part of the yeomanry have
      freeholds of this kind, the whole order becomes respectable to their
      landlords, on account of the political consideration which this gives
      them. There is, I believe, nowhere in Europe, except in England, any
      instance of the tenant building upon the land of which he had no lease,
      and trusting that the honour of his landlord would take no advantage of so
      important an improvement. Those laws and customs, so favourable to the
      yeomanry, have perhaps contributed more to the present grandeur of
      England, than all their boasted regulations of commerce taken together.

      The law which secures the longest leases against successors of every kind,
      is, so far as I know, peculiar to Great Britain. It was introduced into
      Scotland so early as 1449, by a law of James II. Its beneficial influence,
      however, has been much obstructed by entails; the heirs of entail being
      generally restrained from letting leases for any long term of years,
      frequently for more than one year. A late act of parliament has, in this
      respect, somewhat slackened their fetters, though they are still by much
      too strait. In Scotland, besides, as no leasehold gives a vote for a
      member of parliament, the yeomanry are upon this account less respectable
      to their landlords than in England.

      In other parts of Europe, after it was found convenient to secure tenants
      both against heirs and purchasers, the term of their security was still
      limited to a very short period; in France, for example, to nine years from
      the commencement of the lease. It has in that country, indeed, been lately
      extended to twentyseven, a period still too short to encourage the tenant
      to make the most important improvements. The proprietors of land were
      anciently the legislators of every part of Europe. The laws relating to
      land, therefore, were all calculated for what they supposed the interest
      of the proprietor. It was for his interest, they had imagined, that no
      lease granted by any of his predecessors should hinder him from enjoying,
      during a long term of years, the full value of his land. Avarice and
      injustice are always short-sighted, and they did not foresee how much this
      regulation must obstruct improvement, and thereby hurt, in the long-run,
      the real interest of the landlord.

      The farmers, too, besides paying the rent, were anciently, it was
      supposed, bound to perform a great number of services to the landlord,
      which were seldom either specified in the lease, or regulated by any
      precise rule, but by the use and wont of the manor or barony. These
      services, therefore, being almost entirely arbitrary, subjected the tenant
      to many vexations. In Scotland the abolition of all services not precisely
      stipulated in the lease, has, in the course of a few years, very much
      altered for the better the condition of the yeomanry of that country.

      The public services to which the yeomanry were bound, were not less
      arbitrary than the private ones. To make and maintain the high roads, a
      servitude which still subsists, I believe, everywhere, though with
      different degrees of oppression in different countries, was not the only
      one. When the king’s troops, when his household, or his officers of any
      kind, passed through any part of the country, the yeomanry were bound to
      provide them with horses, carriages, and provisions, at a price regulated
      by the purveyor. Great Britain is, I believe, the only monarchy in Europe
      where the oppression of purveyance has been entirely abolished. It still
      subsists in France and Germany.

      The public taxes, to which they were subject, were as irregular and
      oppressive as the services. The ancient lords, though extremely unwilling
      to grant, themselves, any pecuniary aid to their sovereign, easily allowed
      him to tallage, as they called it, their tenants, and had not knowledge
      enough to foresee how much this must, in the end, affect their own
      revenue. The taille, as it still subsists in France may serve as an
      example of those ancient tallages. It is a tax upon the supposed profits
      of the farmer, which they estimate by the stock that he has upon the farm.
      It is his interest, therefore, to appear to have as little as possible,
      and consequently to employ as little as possible in its cultivation, and
      none in its improvement. Should any stock happen to accumulate in the
      hands of a French farmer, the taille is almost equal to a prohibition of
      its ever being employed upon the land. This tax, besides, is supposed to
      dishonour whoever is subject to it, and to degrade him below, not only the
      rank of a gentleman, but that of a burgher; and whoever rents the lands of
      another becomes subject to it. No gentleman, nor even any burgher, who has
      stock, will submit to this degradation. This tax, therefore, not only
      hinders the stock which accumulates upon the land from being employed in
      its improvement, but drives away all other stock from it. The ancient
      tenths and fifteenths, so usual in England in former times, seem, so far
      as they affected the land, to have been taxes of the same nature with the
      taille.

      Under all these discouragements, little improvement could be expected from
      the occupiers of land. That order of people, with all the liberty and
      security which law can give, must always improve under great disadvantage.
      The farmer, compared with the proprietor, is as a merchant who trades with
      burrowed money, compared with one who trades with his own. The stock of
      both may improve; but that of the one, with only equal good conduct, must
      always improve more slowly than that of the other, on account of the large
      share of the profits which is consumed by the interest of the loan. The
      lands cultivated by the farmer must, in the same manner, with only equal
      good conduct, be improved more slowly than those cultivated by the
      proprietor, on account of the large share of the produce which is consumed
      in the rent, and which, had the farmer been proprietor, he might have
      employed in the further improvement of the land. The station of a farmer,
      besides, is, from the nature of things, inferior to that of a proprietor.
      Through the greater part of Europe, the yeomanry are regarded as an
      inferior rank of people, even to the better sort of tradesmen and
      mechanics, and in all parts of Europe to the great merchants and master
      manufacturers. It can seldom happen, therefore, that a man of any
      considerable stock should quit the superior, in order to place himself in
      an inferior station. Even in the present state of Europe, therefore,
      little stock is likely to go from any other profession to the improvement
      of land in the way of farming. More does, perhaps, in Great Britain than
      in any other country, though even there the great stocks which are in some
      places employed in farming, have generally been acquired by fanning, the
      trade, perhaps, in which, of all others, stock is commonly acquired most
      slowly. After small proprietors, however, rich and great farmers are in
      every country the principal improvers. There are more such, perhaps, in
      England than in any other European monarchy. In the republican governments
      of Holland, and of Berne in Switzerland, the farmers are said to be not
      inferior to those of England.

      The ancient policy of Europe was, over and above all this, unfavourable to
      the improvement and cultivation of land, whether carried on by the
      proprietor or by the farmer; first, by the general prohibition of the
      exportation of corn, without a special licence, which seems to have been a
      very universal regulation; and, secondly, by the restraints which were
      laid upon the inland commerce, not only of corn, but of almost every other
      part of the produce of the farm, by the absurd laws against engrossers,
      regraters, and forestallers, and by the privileges of fairs and markets.
      It has already been observed in what manner the prohibition of the
      exportation of corn, together with some encouragement given to the
      importation of foreign corn, obstructed the cultivation of ancient Italy,
      naturally the most fertile country in Europe, and at that time the seat of
      the greatest empire in the world. To what degree such restraints upon the
      inland commerce of this commodity, joined to the general prohibition of
      exportation, must have discouraged the cultivation of countries less
      fertile, and less favourably circumstanced, it is not, perhaps, very easy
      to imagine.


## Extraction Guidelines

---
id: extraction-rules
name: extraction_rules
artifact_type: content
description: Guidelines for extracting economic entities from source text
version: 1.0.0
---

# Entity Extraction Rules

## What Constitutes an Entity

An economic entity is a distinct concept, actor, mechanism, or institution
that plays a functional role in Adam Smith's economic analysis. Extract
entities at the level of specificity where they carry independent meaning.

## Extraction Criteria

1. **Concepts**: Abstract economic ideas (e.g., "division of labour",
   "effectual demand", "natural price"). Extract when Smith defines,
   explains, or argues about the concept.

2. **Actors**: Economic agents with defined roles (e.g., "the labourer",
   "the merchant", "the sovereign"). Extract when the actor performs
   a distinct economic function.

3. **Mechanisms**: Processes or dynamics that produce economic effects
   (e.g., "accumulation of stock", "market price adjustment",
   "foreign trade"). Extract when the mechanism is described as
   producing specific outcomes.

4. **Institutions**: Organised structures that shape economic behaviour
   (e.g., "the corporation", "the guild", "the joint-stock company").
   Extract when the institution's economic function is described.

## Granularity Rules

- Extract at the level of a single coherent concept.
- Do NOT extract synonyms as separate entities — choose the primary term
  Smith uses and note variations.
- DO extract distinct aspects of a broad concept as separate entities when
  Smith treats them independently (e.g., "wages of labour" and "profits
  of stock" are separate from "price of commodities" even though they
  compose it).
- If an entity appears across multiple chapters, extract it on first
  significant appearance and note cross-references in later chapters.

## Naming Conventions

- Use Smith's own terminology where possible.
- Normalise to lowercase except for proper nouns.
- Use the most common form Smith uses (e.g., "division of labour" not
  "divided labour").

## Quality Checks

- Each entity must have a definition that would be comprehensible without
  reading the source chapter.
- Each entity must cite the specific book and chapter of first appearance.
- **Economic Domain** must be EXACTLY ONE of: Production, Distribution,
  Exchange, Consumption, Accumulation, Regulation, or General Theory.
  Do not combine multiple domains. Do not use any other value.
- **Source Chapter format**: Use `Book [Roman numeral], Chapter [number]`
  — for example `Book I, Chapter 3`. Do not include the chapter title,
  quotation marks, markdown formatting, or asterisks. Use Roman numerals
  for the book (I, II, III, IV, V).


## VSM Framework Context

Use the following VSM framework as context to guide your extraction.
Prioritize entities that are likely to have clear mappings to VSM concepts,
but do not exclude entities simply because they lack an obvious mapping.

---
id: vsm-framework
name: vsm_framework
artifact_type: content
description: Stafford Beer's Viable System Model reference for economic analysis
version: 1.0.0
---

# Stafford Beer's Viable System Model (VSM)

The Viable System Model (VSM) is a model of the organisational structure of any
autonomous system capable of producing itself. It was created by management
cybernetician Stafford Beer in his books *Brain of the Firm* (1972) and
*The Heart of Enterprise* (1979).

## Core Principle: Viability

A viable system is any system organised in such a way as to meet the demands
of surviving in a changing environment. One of the prime features of systems
that survive is that they are adaptable. The VSM expresses a model for a
viable system, which is an abstracted cybernetic description applicable to
any organisation that is a going concern.

## The Five Systems

### System 1 (S1) — Operations

The primary activities that produce the organisation's purpose. These are the
operational units that directly create value. Each operational element is itself
a viable system (the principle of recursion).

**In economic terms:** Productive enterprises, factories, farms, workshops,
individual labourers performing specialised tasks, merchant operations.

**Key properties:** Autonomy within constraints, self-organisation,
direct engagement with the environment.

### System 2 (S2) — Coordination

The information channels and bodies that allow the primary activities in
System 1 to communicate with each other and that allow System 3 to monitor
and coordinate activities. System 2 dampens oscillations and resolves
conflicts between operational units.

**In economic terms:** Market price mechanisms, trade customs, standard
weights and measures, commercial law, banking clearinghouses, trade guilds.

**Key properties:** Anti-oscillatory, dampening, scheduling, conflict
resolution, standardisation.

### System 3 (S3) — Control / Operational Management

The structures and controls that establish the rules, resources, rights,
and responsibilities of System 1 and provide an interface between Systems 1
and Systems 4/5. System 3 represents the day-to-day control of the
organisation. It optimises the internal environment.

**In economic terms:** Government regulation of trade, taxation policy, labour
laws, enforcement of contracts, the "invisible hand" as emergent internal
regulation, guilds and corporations governing members.

**Key properties:** Internal regulation, resource allocation, accountability,
synergy extraction, performance management.

### System 3* (S3*) — Audit / Monitoring

The audit and monitoring channel that allows System 3 to verify information
coming from System 1 through channels other than those provided by System 2.
System 3* provides sporadic, direct access to operational reality.

**In economic terms:** Market inspections, quality checks, auditing of accounts,
surprise investigations into trade practices, verification of weights and measures.

**Key properties:** Sporadic direct investigation, reality checking, bypassing
normal reporting channels.

### System 4 (S4) — Intelligence / Adaptation

The bodies and processes that look outward to the environment to monitor
how the organisation needs to adapt to remain viable. System 4 captures
all relevant information about the outside-and-then environment. It is
responsible for strategic responses.

**In economic terms:** Foreign intelligence about trade opportunities,
market research, new technology adoption, colonial exploration and trade
route development, understanding of foreign economic systems.

**Key properties:** Environmental scanning, future orientation, strategic
planning, modelling, research and development.

### System 5 (S5) — Policy / Identity

The policy-making body that balances demands from Systems 3 and 4 and defines
the identity, values, and purpose of the organisation. System 5 provides
closure to the whole system and represents its supreme authority.

**In economic terms:** Sovereign authority, constitutional principles governing
economic policy, national economic identity, the philosophical foundations
of economic systems (mercantilism vs. free trade), the overarching purpose
of the commonwealth.

**Key properties:** Identity, ethos, supreme command, policy closure,
balancing internal and external perspectives.

## Key Concepts

### Recursion

Every viable system contains and is contained in a viable system. The same
five-system structure recurs at every level of organisation. A workshop is
a viable system within a factory, which is a viable system within an
industry, which is a viable system within a national economy.

### Variety

A measure of the number of possible states of a system. The Law of Requisite
Variety (Ashby's Law) states that only variety can absorb variety. A
controller must have at least as much variety as the system it controls.

### Requisite Variety

The principle that for effective regulation, the variety of the regulator
must match the variety of the system being regulated. This is achieved
through variety attenuation (reducing the variety coming up from operations)
and variety amplification (increasing the variety of management's responses).

### Attenuation and Amplification

Variety engineering mechanisms. Attenuation reduces variety (e.g., reporting
summaries, statistical aggregation, standardisation). Amplification increases
variety (e.g., delegation, empowerment, decentralisation).

### Algedonic Signals

Emergency signals that bypass the normal management hierarchy to alert
higher systems of critical situations requiring immediate attention. Named
from the Greek words for pain (algos) and pleasure (hedone).

**In economic terms:** Market panics, famine signals, sudden price collapses,
trade embargoes, economic crises that demand immediate sovereign intervention.

### Autonomy

The degree of freedom granted to operational units (System 1) to self-organise
within constraints set by System 3. Beer argued that maximum autonomy
consistent with systemic cohesion yields maximum viability.

### Viability

The capacity of a system to maintain a separate existence and survive in a
changing environment. A viable system continuously adapts while maintaining
its identity.


## Existing Entities

The following entities have already been extracted from previous chapters
of this work. Do NOT re-extract any of these. If one of these entities
appears in the current chapter, you may omit it entirely — the infospace
already contains it. Only extract entities that are genuinely new.

- accumulation-of-stock
- active-and-productive-stock
- adulteration-of-metals
- adulterine-guilds
- advanced-state-of-society
- advancing-state-of-manufacture
- agricultural-capital
- agricultural-comparative-advantage
- agricultural-cultivation
- agricultural-demand
- agricultural-efficiency
- agricultural-improvement
- agricultural-improvement-foundation
- agricultural-labour
- agricultural-market-integration
- agricultural-price-ceilings
- agricultural-price-differential
- agricultural-price-discovery
- agricultural-price-discrimination
- agricultural-price-elasticity
- agricultural-price-equalization
- agricultural-price-floors
- agricultural-price-mechanism
- agricultural-price-regulation
- agricultural-price-stability
- agricultural-price-transmission
- agricultural-price-volatility
- agricultural-productivity
- agricultural-specialization
- agricultural-stock
- agricultural-supply
- agricultural-surplus
- agricultural-surplus-determination
- agricultural-technology
- agricultural-trade
- annual-consumption-of-metals
- annual-industry-employed-in-production
- annual-produce-of-land-and-labour
- apprenticeships
- artificer-neighbourhood-settlement
- artificer-planter-independence
- artificer-planter-transition
- artificer-servant-status
- artificers-and-retailers
- artificial-grasses
- artificial-market-creation
- artisan-specialisation
- assaying
- assize-of-bread
- assize-of-bread-and-ale
- aulnagers
- average-price-of-corn
- bank-capital-adequacy
- bank-capital-structure
- bank-circulation-limits
- bank-competition-effects
- bank-credit-allocation
- bank-credit-cycles
- bank-credit-extension
- bank-credit-quality
- bank-economic-contribution
- bank-economic-contribution-metrics
- bank-economic-cycles
- bank-economic-development
- bank-economic-development-metrics
- bank-economic-efficiency
- bank-economic-efficiency-factors
- bank-economic-efficiency-metrics
- bank-economic-growth
- bank-economic-resilience
- bank-economic-resilience-factors
- bank-economic-resilience-metrics
- bank-economic-stability
- bank-failure-mechanisms
- bank-financial-development
- bank-financial-innovation
- bank-financial-innovation-adoption
- bank-financial-innovation-diffusion
- bank-financial-innovation-factors
- bank-financial-innovation-impact
- bank-financial-innovation-metrics
- bank-financial-intermediation
- bank-financial-intermediation-efficiency
- bank-financial-stability
- bank-financial-stability-factors
- bank-financial-stability-metrics
- bank-financial-system-integration
- bank-financial-system-stability
- bank-information-asymmetry
- bank-interest-rate-determination
- bank-liquidity-management
- bank-market-discipline
- bank-market-structure
- bank-monetary-policy
- bank-monetary-stability
- bank-notes
- bank-operational-efficiency
- bank-operational-risk
- bank-public-utility
- bank-regulatory-compliance
- bank-regulatory-effectiveness
- bank-regulatory-evolution
- bank-regulatory-framework
- bank-regulatory-framework-evolution
- bank-reserves
- bank-risk-management
- bank-systemic-risk
- bank-systemic-risk-management
- bank-systemic-stability
- bank-transaction-costs
- barbarous-nations-barrier
- barter-and-exchange
- benevolence
- bills-of-exchange
- bleacher
- butcher-trade
- canal-communication
- capital
- capital-accumulation
- capital-employed
- capital-employment-advantages
- capital-employment-effects
- capital-employment-security-gradient
- capital-replacement
- capital-security-preference
- capital-security-visibility
- carriage-value-savings
- carrying-trade
- cash-accounts
- certificates
- cheap-years
- circulating-capital
- circulating-capital-components
- circulation-of-money
- coal-heaver
- coal-price
- coarser-and-finer-materials
- coined-money
- collier
- colony-prosperity
- combination-of-masters
- combination-of-workmen
- command-over-labour
- commerce-between-town-and-country
- commercial-interactions
- commercial-society
- commercial-transactions
- common-annual-profits-of-manufacturing-stock
- common-labour-wages
- common-returns-of-stock
- competition-among-buyers
- competition-among-dealers
- competition-among-sellers
- complete-manufacture
- component-parts-of-price
- contract
- conversion-price
- copper-money
- corn-land
- corn-rent
- corporation-laws
- corporation-privileges-and-market-prices
- country-gentlemen
- country-life-charms
- cultivation-improvement-priority
- dead-stock
- dear-years
- debasement-of-currency
- declining-manufacture
- degradation-of-coin
- demand-for-labour
- discount-of-bills
- distant-country-subsistence
- distant-market-manufacturing
- distant-sale-manufacturing
- division-of-labour
- division-of-labour-advantage
- double-coincidence-of-wants
- drawing-and-redrawing
- dwelling-house-distinction
- early-and-rude-state-of-society
- early-navigation-advantages
- economic-accessibility-determinants
- economic-accessibility-gradient
- economic-backwardness
- economic-connectivity-importance
- economic-development-constraints
- economic-development-geography
- economic-development-geography-theory
- economic-development-sequence
- economic-development-spatial-patterns
- economic-geography
- economic-geography-determinism
- economic-geography-impact
- economic-isolation-effects
- economic-opportunity-cost
- economic-opportunity-geography
- economic-prosperity-symptoms
- economic-spatial-inequality
- economic-spatial-organisation
- economic-stagnation-symptoms
- effectual-demand
- encroachment-upon-capital
- equal-profit-employment-choice
- exchange
- exchangeable-value
- exchequer
- exclusive-corporation
- exportation-bounty
- exportation-of-gold-and-silver-as-effect-of-declension
- extraordinary-profits
- farmer
- farmers-capital
- farmers-profit
- favour
- feudal-government-effects
- fixed-capital
- flax-grower
- fluctuations-in-value-of-gold-and-silver
- foreign-capital-exportation
- foreign-commerce-manufactures-birth
- foreign-trade
- foreign-trade-of-consumption
- four-methods-of-employing-capital
- frozen-ocean-barrier
- frugal-and-industrious-borrowers
- frugality-versus-prodigality
- fruit-garden
- fruit-wall
- funds-for-maintaining-labour
- funds-for-maintaining-productive-labour
- funds-for-maintaining-unproductive-hands
- gold-money
- gold-price-variation
- gross-revenue
- higgling-and-bargaining-of-the-market
- home-trade
- hop-garden
- human-folly-injustice-exposure
- human-nature
- idle-consumers
- immediate-consumption
- improved-farm-advantages
- improved-land
- inclosure
- increase-of-money-as-effect-of-prosperity
- inland-market-limitation
- inland-navigation-extent
- inland-parts-of-the-country
- inland-trade
- inn-or-tavern-keeper
- instruments-of-husbandry
- interest
- interest-of-money
- interest-or-use-of-money
- journeymen
- judgment-in-labour-application
- kelp
- kitchen-garden
- labour-of-inspection-and-direction
- labouring-cattle
- labouring-poor
- land-carriage
- land-mines-and-fisheries
- landlord
- landlords-share
- legal-rate-of-interest
- legal-tender
- licence-to-gather-natural-produce
- lowest-rate-of-wages
- machinery-invention
- manufactured-produce
- manufacturer
- manufacturing-capital
- manufacturing-process-subdivision
- manufacturing-subdivision
- maritime-commerce-development
- maritime-employment
- market-access-cost-structure
- market-access-development-sequence
- market-access-economic-potential
- market-access-gradient
- market-access-inequality
- market-access-opportunity-cost
- market-based-economic-geography
- market-based-economic-identity
- market-based-economic-structure
- market-based-productivity-limits
- market-based-specialisation
- market-communication-channels
- market-demand-regulation
- market-development-prerequisites
- market-driven-division
- market-extent
- market-extent-advantageousness
- market-extent-economic-impact
- market-extent-measurement
- market-for-surplus-produce
- market-integration-barriers
- market-integration-potential
- market-integration-timeline
- market-obstruction
- market-price-adjustment
- market-price-of-bullion
- market-price-of-commodities
- market-price-of-things
- market-price-regulation-mechanism
- market-proximity-advantage
- market-rate-of-interest
- market-regulation-of-prices
- market-separation
- market-size-economies
- market-size-specialisation-threshold
- market-size-specialization
- market-size-threshold
- market-town-economy
- market-town-formation
- masquerade-dress-trade
- master-artificer
- master-manufacturer
- materials-and-subsistence
- measure-of-exchangeable-value
- mediterranean-civilisation-pattern
- menial-servants
- merchant
- metal-currency
- military-employment
- mine-fertility
- mine-situation
- mint
- mint-price
- modern-states-inversion
- modes-of-expense-affecting-public-opulence
- money
- money-rent
- moneys-worth
- monied-interest
- monopoly-effects-on-market-price
- monopoly-price-of-land
- mutual-gain-reciprocity
- mutual-good-offices
- mutual-servitude
- natural-complement-of-riches
- natural-course-of-things
- natural-development-sequence
- natural-inclinations-thwarting
- natural-liberty-in-banking
- natural-market-advantages
- natural-order-inversion
- natural-order-of-economic-development
- natural-preference-cultivation
- natural-price-as-central-price
- natural-price-of-commodities
- natural-produce-of-land
- natural-progress-of-improvement
- natural-rates-of-wages-profit-and-rent
- natural-rent-of-land
- natural-state-of-employments
- navigable-rivers
- neat-revenue
- necessity
- nominal-measure-of-value
- nominal-price-of-commodities
- non-standard-metal
- occasional-and-temporary-market-fluctuations
- ordinary-market-price-of-land
- ordinary-rates-of-wages-profit-and-rent
- ordinary-state-of-employments
- original-destination-of-man
- original-government-manners
- overstocked-market-conditions
- paper-money
- pasture-land
- payment-in-kind
- perfect-liberty-in-trade
- permanent-market-price-enhancements
- perpetual-fund-for-maintenance-of-labour
- piece-work-wages
- pin-maker-trade
- planter-independence
- poacher
- potato-cultivation
- precious-metals-consumption
- price-in-labour
- price-in-money
- price-of-commodities
- prime-cost-of-commodities
- principal-clerk
- principal-employments
- private-misconduct-versus-public-prodigality
- prodigals
- prodigals-and-projectors
- productive-abilities
- productive-and-unproductive-labour
- productive-labourers
- productive-powers-of-labour
- profits-of-stock
- progressive-state-of-society
- progressive-wealth-consequentiality
- promissory-notes
- proportion-between-metals
- proportion-between-productive-and-unproductive-hands
- public-education-of-professionals
- public-executioner
- public-fiars
- public-law-on-coinage
- public-lottery
- public-mourning-effects
- public-registers-of-manufactures
- quantity-of-labour
- rate-of-interest
- rate-of-profit
- real-measure-of-value
- real-price-of-commodities
- real-value-of-corn-rent
- regulated-proportion
- religious-occupational-restrictions
- rent-of-land
- requisite-variety-in-banking
- retail-trade
- retailers
- revenue
- revenue-constituting-profit-and-rent
- revenue-destined-for-capital-replacement
- rice-countries
- river-navigation-infrastructure
- rude-produce
- rural-urban-reciprocity
- scarcity-of-hands
- sea-coast-development
- security-preference-capital
- seed-as-fixed-capital
- seignorage
- self-love
- settlement-laws
- silver-money
- silver-price-variation
- skill-and-dexterity
- smuggling-trade
- sober-people
- societys-general-stock
- spare-revenue
- species-of-industry-with-consistent-output
- species-of-industry-with-variable-output
- speculative-trade
- stamp-masters
- standard-metal
- standard-weight-of-coin
- stationary-country
- statute-of-labourers
- statutes-of-apprenticeship-effects
- sterling-mark
- stock
- stock-lent-at-interest
- stock-of-the-country
- stock-of-the-farmer
- subsistence
- subsistence-agriculture
- subsistence-industry-priority
- subsistence-necessity-priority
- subsistence-of-the-dealer
- subsistence-prioritization
- sugar-colonies
- superfluity
- superior-hardship-and-superior-skill
- surplus-produce
- tale
- temporary-price-of-corn
- territorial-cultivation-completeness
- territorial-cultivation-limit
- territorial-improvement-support
- territorial-support-limitation
- three-original-sources-of-revenue
- three-way-employment-of-stock
- thriving-country
- tobacco-colonies
- toil-and-trouble-of-acquiring
- town-country-dependency
- town-market-function
- town-reproduction-impossibility
- trade-capital
- trade-encouragement
- trade-route-dependency
- transportation-cost-differential
- transportation-infrastructure-importance
- transportation-mode-economic-effects
- treasure-trove
- treaty
- truck
- two-branches-of-circulation
- uncultivated-land-availability
- unimproved-land
- university-of-trades
- unproductive-labourers
- unstamped-bars
- usury
- value-in-exchange
- value-in-use
- value-of-gold
- value-of-silver
- variety-of-talents
- venison
- victuals
- vineyard
- wages-of-a-journeyman
- wages-of-labour
- waggon-way-through-the-air-metaphor
- water-carriage
- water-pond-metaphor
- weighing
- whole-produce-of-labour
- wholesale-merchants
- wholesale-trade
- wood-price
- wool-grower

## Instructions

1. Read the source chapter carefully.
2. Review the list of existing entities above and do not duplicate them.
3. Identify all distinct economic concepts, actors, mechanisms, and institutions
   that are NOT already in the existing entities list.
4. For each new entity, produce a separate markdown document following the
   Economic Entity Schema v1.0.
5. Each entity document must include:
   - An H1 heading with the entity name
   - A Definition section (20-150 words)
   - A Source Chapter section citing the specific chapter
   - A Context section describing where in the argument the entity appears
   - An Economic Domain section classifying the entity
6. Optionally include Smith's Original Wording (direct quote) and
   Modern Interpretation sections.
7. Use neutral, analytical language throughout.
8. Ensure each entity is distinct and self-contained.

## Output Format

Output each entity as a separate markdown document, delimited by
`--- ENTITY: <entity-name> ---` markers.

Use **H2 headings** (`##`) for each section inside the entity document.
Do NOT use inline `Section:` format or H3 headings.

Example of a correctly formatted entity:

```
--- ENTITY: division of labour ---

# Division of Labour

## Definition

The separation of a work process into distinct tasks performed by specialised
workers, increasing productivity through greater dexterity, saved time, and
the invention of labour-saving machinery.

## Source Chapter

Book I, Chapter 1

## Context

The opening chapter's central argument, illustrated by Smith's pin factory
example showing how dividing 18 operations dramatically increases output.

## Economic Domain

Production

---
```
