# 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

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id: book-5-chapter-03
title: "OF PUBLIC DEBTS."
book: "5"
chapter: 3
artifact_type: content
---

CHAPTER III.
OF PUBLIC DEBTS.



      In that rude state of society which precedes the extension of commerce and
      the improvement of manufactures; when those expensive luxuries, which
      commerce and manufactures can alone introduce, are altogether unknown; the
      person who possesses a large revenue, I have endeavoured to show in the
      third book of this Inquiry, can spend or enjoy that revenue in no other
      way than by maintaining nearly as many people as it can maintain. A large
      revenue may at all times be said to consist in the command of a large
      quantity of the necessaries of life. In that rude state of things, it is
      commonly paid in a large quantity of those necessaries, in the materials
      of plain food and coarse clothing, in corn and cattle, in wool and raw
      hides. When neither commerce nor manufactures furnish any thing for which
      the owner can exchange the greater part of those materials which are over
      and above his own consumption, he can do nothing with the surplus, but
      feed and clothe nearly as many people as it will feed and clothe. A
      hospitality in which there is no luxury, and a liberality in which there
      is no ostentation, occasion, in this situation of things, the principal
      expenses of the rich and the great. But these I have likewise endeavoured
      to show, in the same book, are expenses by which people are not very apt
      to ruin themselves. There is not, perhaps, any selfish pleasure so
      frivolous, of which the pursuit has not sometimes ruined even sensible
      men. A passion for cock-fighting has ruined many. But the instances, I
      believe, are not very numerous, of people who have been ruined by a
      hospitality or liberality of this kind; though the hospitality of luxury,
      and the liberality of ostentation have ruined many. Among our feudal
      ancestors, the long time during which estates used to continue in the same
      family, sufficiently demonstrates the general disposition of people to
      live within their income. Though the rustic hospitality, constantly
      exercised by the great landholders, may not, to us in the present times,
      seem consistent with that order which we are apt to consider as
      inseparably connected with good economy; yet we must certainly allow them
      to have been at least so far frugal, as not commonly to have spent their
      whole income. A part of their wool and raw hides, they had generally an
      opportunity of selling for money. Some part of this money, perhaps, they
      spent in purchasing the few objects of vanity and luxury, with which the
      circumstances of the times could furnish them; but some part of it they
      seem commonly to have hoarded. They could not well, indeed, do any thing
      else but hoard whatever money they saved. To trade, was disgraceful to a
      gentleman; and to lend money at interest, which at that time was
      considered as usury, and prohibited by law, would have been still more so.
      In those times of violence and disorder, besides, it was convenient to
      have a hoard of money at hand, that in case they should be driven from
      their own home, they might have something of known value to carry with
      them to some place of safety. The same violence which made it convenient
      to hoard, made it equally convenient to conceal the hoard. The frequency
      of treasure-trove, or of treasure found, of which no owner was known,
      sufficiently demonstrates the frequency, in those times, both of hoarding
      and of concealing the hoard. Treasure-trove was then considered as an
      important branch of the revenue of the sovereign. All the treasure-trove
      of the kingdom would scarce, perhaps, in the present times, make an
      important branch of the revenue of a private gentleman of a good estate.

      The same disposition, to save and to hoard, prevailed in the sovereign, as
      well as in the subjects. Among nations, to whom commerce and manufacture
      are little known, the sovereign, it has already been observed in the
      Fourth book, is in a situation which naturally disposes him to the
      parsimony requisite for accumulation. In that situation, the expense, even
      of a sovereign, cannot be directed by that vanity which delights in the
      gaudy finery of a court. The ignorance of the times affords but few of the
      trinkets in which that finery consists. Standing armies are not then
      necessary; so that the expense, even of a sovereign, like that of any
      other great lord can be employed in scarce any thing but bounty to his
      tenants, and hospitality to his retainers. But bounty and hospitality very
      seldom lead to extravagance; though vanity almost always does. All the
      ancient sovereigns of Europe, accordingly, it has already been observed,
      had treasures. Every Tartar chief, in the present times, is said to have
      one.

      In a commercial country, abounding with every sort of expensive luxury,
      the sovereign, in the same manner as almost all the great proprietors in
      his dominions, naturally spends a great part of his revenue in purchasing
      those luxuries. His own and the neighbouring countries supply him
      abundantly with all the costly trinkets which compose the splendid, but
      insignificant, pageantry of a court. For the sake of an inferior pageantry
      of the same kind, his nobles dismiss their retainers, make their tenants
      independent, and become gradually themselves as insignificant as the
      greater part of the wealthy burghers in his dominions. The same frivolous
      passions, which influence their conduct, influence his. How can it be
      supposed that he should be the only rich man in his dominions who is
      insensible to pleasures of this kind? If he does not, what he is very
      likely to do, spend upon those pleasures so great a part of his revenue as
      to debilitate very much the defensive power of the state, it cannot well
      be expected that he should not spend upon them all that part of it which
      is over and above what is necessary for supporting that defensive power.
      His ordinary expense becomes equal to his ordinary revenue, and it is well
      if it does not frequently exceed it. The amassing of treasure can no
      longer be expected; and when extraordinary exigencies require
      extraordinary expenses, he must necessarily call upon his subjects for an
      extraordinary aid. The present and the late king of Prussia are the only
      great princes of Europe, who, since the death of Henry IV. of France, in
      1610, are supposed to have amassed any considerable treasure. The
      parsimony which leads to accumulation has become almost as rare in
      republican as in monarchical governments. The Italian republics, the
      United Provinces of the Netherlands, are all in debt. The canton of Berne
      is the single republic in Europe which has amassed any considerable
      treasure. The other Swiss republics have not. The taste for some sort of
      pageantry, for splendid buildings, at least, and other public ornaments,
      frequently prevails as much in the apparently sober senate-house of a
      little republic, as in the dissipated court of the greatest king.

      The want of parsimony, in time of peace, imposes the necessity of
      contracting debt in time of war. When war comes, there is no money in the
      treasury, but what is necessary for carrying on the ordinary expense of
      the peace establishment. In war, an establishment of three or four times
      that expense becomes necessary for the defence of the state; and
      consequently, a revenue three or four times greater than the peace
      revenue. Supposing that the sovereign should have, what he scarce ever
      has, the immediate means of augmenting his revenue in proportion to the
      augmentation of his expense; yet still the produce of the taxes, from
      which this increase of revenue must be drawn, will not begin to come into
      the treasury, till perhaps ten or twelve months after they are imposed.
      But the moment in which war begins, or rather the moment in which it
      appears likely to begin, the army must be augmented, the fleet must be
      fitted out, the garrisoned towns must be put into a posture of defence;
      that army, that fleet, those garrisoned towns, must be furnished with
      arms, ammunition, and provisions. An immediate and great expense must be
      incurred in that moment of immediate danger, which will not wait for the
      gradual and slow returns of the new taxes. In this exigency, government
      can have no other resource but in borrowing.

      The same commercial state of society which, by the operation of moral
      causes, brings government in this manner into the necessity of borrowing,
      produces in the subjects both an ability and an inclination to lend. If it
      commonly brings along with it the necessity of borrowing, it likewise
      brings with it the facility of doing so.

      A country abounding with merchants and manufacturers, necessarily abounds
      with a set of people through whose hands, not only their own capitals, but
      the capitals of all those who either lend them money, or trust them with
      goods, pass as frequently, or more frequently, than the revenue of a
      private man, who, without trade or business, lives upon his income, passes
      through his hands. The revenue of such a man can regularly pass through
      his hands only once in a year. But the whole amount of the capital and
      credit of a merchant, who deals in a trade of which the returns are very
      quick, may sometimes pass through his hands two, three, or four times in a
      year. A country abounding with merchants and manufacturers, therefore,
      necessarily abounds with a set of people, who have it at all times in
      their power to advance, if they chuse to do so, a very large sum of money
      to government. Hence the ability in the subjects of a commercial state to
      lend.

      Commerce and manufactures can seldom flourish long in any state which does
      not enjoy a regular administration of justice; in which the people do not
      feel themselves secure in the possession of their property; in which the
      faith of contracts is not supported by law; and in which the authority of
      the state is not supposed to be regularly employed in enforcing the
      payment of debts from all those who are able to pay. Commerce and
      manufactures, in short, can seldom flourish in any state, in which there
      is not a certain degree of confidence in the justice of government. The
      same confidence which disposes great merchants and manufacturers upon
      ordinary occasions, to trust their property to the protection of a
      particular government, disposes them, upon extraordinary occasions, to
      trust that government with the use of their property. By lending money to
      government, they do not even for a moment diminish their ability to carry
      on their trade and manufactures; on the contrary, they commonly augment
      it. The necessities of the state render government, upon most occasions
      willing to borrow upon terms extremely advantageous to the lender. The
      security which it grants to the original creditor, is made transferable to
      any other creditor; and from the universal confidence in the justice of
      the state, generally sells in the market for more than was originally paid
      for it. The merchant or monied man makes money by lending money to
      government, and instead of diminishing, increases his trading capital. He
      generally considers it as a favour, therefore, when the administration
      admits him to a share in the first subscription for a new loan. Hence the
      inclination or willingness in the subjects of a commercial state to lend.

      The government of such a state is very apt to repose itself upon this
      ability and willingness of its subjects to lend it their money on
      extraordinary occasions. It foresees the facility of borrowing, and
      therefore dispenses itself from the duty of saving.

      In a rude state of society, there are no great mercantile or manufacturing
      capitals. The individuals, who hoard whatever money they can save, and who
      conceal their hoard, do so from a distrust of the justice of government;
      from a fear, that if it was known that they had a hoard, and where that
      hoard was to be found, they would quickly be plundered. In such a state of
      things, few people would be able, and nobody would be willing to lend
      their money to government on extraordinary exigencies. The sovereign feels
      that he must provide for such exigencies by saving, because he foresees
      the absolute impossibility of borrowing. This foresight increases still
      further his natural disposition to save.

      The progress of the enormous debts which at present oppress, and will in
      the long-run probably ruin, all the great nations of Europe, has been
      pretty uniform. Nations, like private men, have generally begun to borrow
      upon what may be called personal credit, without assigning or mortgaging
      any particular fund for the payment of the debt; and when this resource
      has failed them, they have gone on to borrow upon assignments or mortgages
      of particular funds.

      What is called the unfunded debt of Great Britain, is contracted in the
      former of those two ways. It consists partly in a debt which bears, or is
      supposed to bear, no interest, and which resembles the debts that a
      private man contracts upon account; and partly in a debt which bears
      interest, and which resembles what a private man contracts upon his bill
      or promissory-note. The debts which are due, either for extraordinary
      services, or for services either not provided for, or not paid at the time
      when they are performed; part of the extraordinaries of the army, navy,
      and ordnance, the arrears of subsidies to foreign princes, those of
      seamen’s wages, etc. usually constitute a debt of the first kind. Navy and
      exchequer bills, which are issued sometimes in payment of a part of such
      debts, and sometimes for other purposes, constitute a debt of the second
      kind; exchequer bills bearing interest from the day on which they are
      issued, and navy bills six months after they are issued. The bank of
      England, either by voluntarily discounting those bills at their current
      value, or by agreeing with government for certain considerations to
      circulate exchequer bills, that is, to receive them at par, paying the
      interest which happens to be due upon them, keeps up their value, and
      facilitates their circulation, and thereby frequently enables government
      to contract a very large debt of this kind. In France, where there is no
      bank, the state bills (billets d’etat {See Examen des Reflections
      Politiques sur les Finances.}) have sometimes sold at sixty and seventy
      per cent. discount. During the great recoinage in king William’s time,
      when the bank of England thought proper to put a stop to its usual
      transactions, exchequer bills and tallies are said to have sold from
      twenty-five to sixty per cent. discount; owing partly, no doubt, to the
      supposed instability of the new government established by the Revolution,
      but partly, too, to the want of the support of the bank of England.

      When this resource is exhausted, and it becomes necessary, in order to
      raise money, to assign or mortgage some particular branch of the public
      revenue for the payment of the debt, government has, upon different
      occasions, done this in two different ways. Sometimes it has made this
      assignment or mortgage for a short period of time only, a year, or a few
      years, for example; and sometimes for perpetuity. In the one case, the
      fund was supposed sufficient to pay, within the limited time, both
      principal and interest of the money borrowed. In the other, it was
      supposed sufficient to pay the interest only, or a perpetual annuity
      equivalent to the interest, government being at liberty to redeem, at any
      time, this annuity, upon paying back the principal sum borrowed. When
      money was raised in the one way, it was said to be raised by anticipation;
      when in the other, by perpetual funding, or, more shortly, by funding.

      In Great Britain, the annual land and malt taxes are regularly anticipated
      every year, by virtue of a borrowing clause constantly inserted into the
      acts which impose them. The bank of England generally advances at an
      interest, which, since the Revolution, has varied from eight to three per
      cent., the sums of which those taxes are granted, and receives payment as
      their produce gradually comes in. If there is a deficiency, which there
      always is, it is provided for in the supplies of the ensuing year. The
      only considerable branch of the public revenue which yet remains
      unmortgaged, is thus regularly spent before it comes in. Like an
      improvident spendthrift, whose pressing occasions will not allow him to
      wait for the regular payment of his revenue, the state is in the constant
      practice of borrowing of its own factors and agents, and of paying
      interest for the use of its own money.

      In the reign of king William, and during a great part of that of queen
      Anne, before we had become so familiar as we are now with the practice of
      perpetual funding, the greater part of the new taxes were imposed but for
      a short period of time (for four, five, six, or seven years only), and a
      great part of the grants of every year consisted in loans upon
      anticipations of the produce of those taxes. The produce being frequently
      insufficient for paying, within the limited term, the principal and
      interest of the money borrowed, deficiencies arose; to make good which, it
      became necessary to prolong the term.

      In 1697, by the 8th of William III., c. 20, the deficiencies of several
      taxes were charged upon what was then called the first general mortgage or
      fund, consisting of a prolongation to the first of August 1706, of several
      different taxes, which would have expired within a shorter term, and of
      which the produce was accumulated into one general fund. The deficiencies
      charged upon this prolonged term amounted to £5,160,459: 14: 9½.

      In 1701, those duties, with some others, were still further prolonged, for
      the like purposes, till the first of August 1710, and were called the
      second general mortgage or fund. The deficiencies charged upon it amounted
      to £2,055,999: 7: 11½.

      In 1707, those duties were still further prolonged, as a fund for new
      loans, to the first of August 1712, and were called the third general
      mortgage or fund. The sum borrowed upon it was £983,254:11:9¼.

      In 1708, those duties were all (except the old subsidy of tonnage and
      poundage, of which one moiety only was made a part of this fund, and a
      duty upon the importation of Scotch linen, which had been taken off by the
      articles of union) still further continued, as a fund for new loans, to
      the first of August 1714, and were called the fourth general mortgage or
      fund. The sum borrowed upon it was £925,176:9:2¼.

      In 1709, those duties were all (except the old subsidy of tonnage and
      poundage, which was now left out of this fund altogether) still further
      continued, for the same purpose, to the first of August 1716, and were
      called the fifth general mortgage or fund. The sum borrowed upon it was
      £922,029:6s.

      In 1710, those duties were again prolonged to the first of August 1720,
      and were called the sixth general mortgage or fund. The sum borrowed upon
      it was £1,296,552:9:11¾.

      In 1711, the same duties (which at this time were thus subject to four
      different anticipations), together with several others, were continued for
      ever, and made a fund for paying the interest of the capital of the
      South-sea company, which had that year advanced to government, for paying
      debts, and making good deficiencies, the sum of £9,177,967:15:4d, the
      greatest loan which at that time had ever been made.

      Before this period, the principal, so far as I have been able to observe,
      the only taxes, which, in order to pay the interest of a debt, had been
      imposed for perpetuity, were those for paying the interest of the money
      which had been advanced to government by the bank and East-India company,
      and of what it was expected would be advanced, but which was never
      advanced, by a projected land bank. The bank fund at this time amounted to
      £3,375,027:17:10½, for which was paid an annuity or interest of
      £206,501:15:5d. The East-India fund amounted to £3,200,000, for which was
      paid an annuity or interest of £160,000; the bank fund being at six per
      cent., the East-India fund at five per cent. interest.

      In 1715, by the first of George I., c. 12, the different taxes which had
      been mortgaged for paying the bank annuity, together with several others,
      which, by this act, were likewise rendered perpetual, were accumulated
      into one common fund, called the aggregate fund, which was charged not
      only with the payment of the bank annuity, but with several other
      annuities and burdens of different kinds. This fund was afterwards
      augmented by the third of George I., c.8., and by the fifth of George I.,
      c. 3, and the different duties which were then added to it were likewise
      rendered perpetual.

      In 1717, by the third of George I., c. 7, several other taxes were
      rendered perpetual, and accumulated into another common fund, called the
      general fund, for the payment of certain annuities, amounting in the whole
      to £724,849:6:10½.

      In consequence of those different acts, the greater part of the taxes,
      which before had been anticipated only for a short term of years were
      rendered perpetual, as a fund for paying, not the capital, but the
      interest only, of the money which had been borrowed upon them by different
      successive anticipations.

      Had money never been raised but by anticipation, the course of a few years
      would have liberated the public revenue, without any other attention of
      government besides that of not overloading the fund, by charging it with
      more debt than it could pay within the limited term, and not of
      anticipating a second time before the expiration of the first
      anticipation. But the greater part of European governments have been
      incapable of those attentions. They have frequently overloaded the fund,
      even upon the first anticipation; and when this happened not to be the
      case, they have generally taken care to overload it, by anticipating a
      second and a third time, before the expiration of the first anticipation.
      The fund becoming in this manner altogether insufficient for paying both
      principal and interest of the money borrowed upon it, it became necessary
      to charge it with the interest only, or a perpetual annuity equal to the
      interest; and such improvident anticipations necessarily gave birth to the
      more ruinous practice of perpetual funding. But though this practice
      necessarily puts off the liberation of the public revenue from a fixed
      period, to one so indefinite that it is not very likely ever to arrive;
      yet, as a greater sum can, in all cases, be raised by this new practice
      than by the old one of anticipation, the former, when men have once become
      familiar with it, has, in the great exigencies of the state, been
      universally preferred to the latter. To relieve the present exigency, is
      always the object which principally interests those immediately concerned
      in the administration of public affairs. The future liberation of the
      public revenue they leave to the care of posterity.

      During the reign of queen Anne, the market rate of interest had fallen
      from six to five per cent.; and, in the twelfth year of her reign, five
      per cent. was declared to be the highest rate which could lawfully be
      taken for money borrowed upon private security. Soon after the greater
      part of the temporary taxes of Great Britain had been rendered perpetual,
      and distributed into the aggregate, South-sea, and general funds, the
      creditors of the public, like those of private persons, were induced to
      accept of five per cent. for the interest of their money, which occasioned
      a saving of one per cent. upon the capital of the greater part or the
      debts which had been thus funded for perpetuity, or of one-sixth of the
      greater part of the annuities which were paid out of the three great funds
      above mentioned. This saving left a considerable surplus in the produce of
      the different taxes which had been accumulated into those funds, over and
      above what was necessary for paying the annuities which were now charged
      upon them, and laid the foundation of what has since been called the
      sinking fund. In 1717, it amounted to £523,454:7:7½. In 1727, the interest
      of the greater part of the public debts was still further reduced to four
      per cent.; and, in 1753 and 1757, to three and a-half, and three per
      cent., which reductions still further augmented the sinking fund.

      A sinking fund, though instituted for the payment of old, facilitates very
      much the contracting of new debts. It is a subsidiary fund, always at
      hand, to be mortgaged in aid of any other doubtful fund, upon which money
      is proposed to be raised in any exigency of the state. Whether the sinking
      fund of Great Britain has been more frequently applied to the one or to the
      other of those two purposes, will sufficiently appear by and by.

      Besides those two methods of borrowing, by anticipations and by a
      perpetual funding, there are two other methods, which hold a sort of
      middle place between them; these are, that of borrowing upon annuities for
      terms of years, and that of borrowing upon annuities for lives.

      During the reigns of king William and queen Anne, large sums were
      frequently borrowed upon annuities for terms of years, which were
      sometimes longer and sometimes shorter. In 1695, an act was passed for
      borrowing one million upon an annuity of fourteen per cent., or £140,000
      a-year, for sixteen years. In 1691, an act was passed for borrowing a
      million upon annuities for lives, upon terms which, in the present times,
      would appear very advantageous; but the subscription was not filled up. In
      the following year, the deficiency was made good, by borrowing upon
      annuities for lives, at fourteen per cent. or a little more than seven
      years purchase. In 1695, the persons who had purchased those annuities
      were allowed to exchange them for others of ninety-six years, upon paying
      into the exchequer sixty-three pounds in the hundred; that is, the
      difference between fourteen per cent. for life, and fourteen per cent. for
      ninety-six years, was sold for sixty-three pounds, or for four and a-half
      years purchase. Such was the supposed instability of government, that even
      these terms procured few purchasers. In the reign of queen Anne, money
      was, upon different occasions, borrowed both upon annuities for lives, and
      upon annuities for terms of thirty-two, of eighty-nine, of ninety-eight,
      and of ninety-nine years. In 1719, the proprietors of the annuities for
      thirty-two years were induced to accept, in lieu of them, South-sea stock
      to the amount of eleven and a-half years purchase of the annuities,
      together with an additional quantity of stock, equal to the arrears which
      happened then to be due upon them. In 1720, the greater part of the other
      annuities for terms of years, both long and short, were subscribed into
      the same fund. The long annuities, at that time, amounted to £666,821:
      8:3½ a-year. On the 5th of January 1775, the remainder of them, or what
      was not subscribed at that time, amounted only to £136,453:12:8d.

      During the two wars which began in 1739 and in 1755, little money was
      borrowed, either upon annuities for terms of years, or upon those for
      lives. An annuity for ninety-eight or ninety-nine years, however, is worth
      nearly as much as a perpetuity, and should therefore, one might think, be
      a fund for borrowing nearly as much. But those who, in order to make
      family settlements, and to provide for remote futurity, buy into the
      public stocks, would not care to purchase into one of which the value was
      continually diminishing; and such people make a very considerable
      proportion, both of the proprietors and purchasers of stock. An annuity
      for a long term of years, therefore, though its intrinsic value may be
      very nearly the same with that of a perpetual annuity, will not find
      nearly the same number of purchasers. The subscribers to a new loan, who
      mean generally to sell their subscription as soon as possible, prefer
      greatly a perpetual annuity, redeemable by parliament, to an irredeemable
      annuity, for a long term of years, of only equal amount. The value of the
      former may be supposed always the same, or very nearly the same; and it
      makes, therefore, a more convenient transferable stock than the latter.

      During the two last-mentioned wars, annuities, either for terms of years
      or for lives, were seldom granted, but as premiums to the subscribers of a
      new loan, over and above the redeemable annuity or interest, upon the
      credit of which the loan was supposed to be made. They were granted, not
      as the proper fund upon which the money was borrowed, but as an additional
      encouragement to the lender.

      Annuities for lives have occasionally been granted in two different ways;
      either upon separate lives, or upon lots of lives, which, in French, are
      called tontines, from the name of their inventor. When annuities are
      granted upon separate lives, the death of every individual annuitant
      disburdens the public revenue, so far as it was affected by his annuity.
      When annuities are granted upon tontines, the liberation of the public
      revenue does not commence till the death of all the annuitants
      comprehended in one lot, which may sometimes consist of twenty or thirty
      persons, of whom the survivors succeed to the annuities of all those who
      die before them; the last survivor succeeding to the annuities of the
      whole lot. Upon the same revenue, more money can always be raised by
      tontines than by annuities for separate lives. An annuity, with a right of
      survivorship, is really worth more than an equal annuity for a separate
      life; and, from the confidence which every man naturally has in his own
      good fortune, the principle upon which is founded the success of all
      lotteries, such an annuity generally sells for something more than it is
      worth. In countries where it is usual for government to raise money by
      granting annuities, tontines are, upon this account, generally preferred
      to annuities for separate lives. The expedient which will raise most
      money, is almost always preferred to that which is likely to bring about,
      in the speediest manner, the liberation of the public revenue.

      In France, a much greater proportion of the public debts consists in
      annuities for lives than in England. According to a memoir presented by
      the parliament of Bourdeaux to the king, in 1764, the whole public debt of
      France is estimated at twenty-four hundred millions of livres; of which
      the capital, for which annuities for lives had been granted, is supposed
      to amount to three hundred millions, the eighth part of the whole public
      debt. The annuities themselves are computed to amount to thirty millions
      a-year, the fourth part of one hundred and twenty millions, the supposed
      interest of that whole debt. These estimations, I know very well, are not
      exact; but having been presented by so very respectable a body as
      approximations to the truth, they may, I apprehend, be considered as such.
      It is not the different degrees of anxiety in the two governments of
      France and England for the liberation of the public revenue, which
      occasions this difference in their respective modes of borrowing; it
      arises altogether from the different views and interests of the lenders.

      In England, the seat of government being in the greatest mercantile city
      in the world, the merchants are generally the people who advance money to
      government. By advancing it, they do not mean to diminish, but, on the
      contrary, to increase their mercantile capitals; and unless they expected
      to sell, with some profit, their share in the subscription for a new loan,
      they never would subscribe. But if, by advancing their money, they were to
      purchase, instead of perpetual annuities, annuities for lives only,
      whether their own or those of other people, they would not always be so
      likely to sell them with a profit. Annuities upon their own lives they
      would always sell with loss; because no man will give for an annuity upon
      the life of another, whose age and state of health are nearly the same
      with his own, the same price which he would give for one upon his own. An
      annuity upon the life of a third person, indeed, is, no doubt, of equal
      value to the buyer and the seller; but its real value begins to diminish
      from the moment it is granted, and continues to do so, more and more, as
      long as it subsists. It can never, therefore, make so convenient a
      transferable stock as a perpetual annuity, of which the real value may be
      supposed always the same, or very nearly the same.

      In France, the seat of government not being in a great mercantile city,
      merchants do not make so great a proportion of the people who advance
      money to government. The people concerned in the finances, the
      farmers-general, the receivers of the taxes which are not in farm, the
      court-bankers, etc. make the greater part of those who advance their money
      in all public exigencies. Such people are commonly men of mean birth, but
      of great wealth, and frequently of great pride. They are too proud to
      marry their equals, and women of quality disdain to marry them. They
      frequently resolve, therefore, to live bachelors; and having neither any
      families of their own, nor much regard for those of their relations, whom
      they are not always very fond of acknowledging, they desire only to live
      in splendour during their own time, and are not unwilling that their
      fortune should end with themselves. The number of rich people, besides,
      who are either averse to marry, or whose condition of life renders it
      either improper or inconvenient for them to do so, is much greater in
      France than in England. To such people, who have little or no care for
      posterity, nothing can be more convenient than to exchange their capital
      for a revenue, which is to last just as long, and no longer, than they
      wish it to do.

      The ordinary expense of the greater part of modern governments, in time of
      peace, being equal, or nearly equal, to their ordinary revenue, when war
      comes, they are both unwilling and unable to increase their revenue in
      proportion to the increase of their expense. They are unwilling, for fear
      of offending the people, who, by so great and so sudden an increase of
      taxes, would soon be disgusted with the war; and they are unable, from not
      well knowing what taxes would be sufficient to produce the revenue wanted.
      The facility of borrowing delivers them from the embarrassment which this
      fear and inability would otherwise occasion. By means of borrowing, they
      are enabled, with a very moderate increase of taxes, to raise, from year
      to year, money sufficient for carrying on the war; and by the practice of
      perpetual funding, they are enabled, with the smallest possible increase
      of taxes, to raise annually the largest possible sum of money. In great
      empires, the people who live in the capital, and in the provinces remote
      from the scene of action, feel, many of them, scarce any inconveniency
      from the war, but enjoy, at their ease, the amusement of reading in the
      newspapers the exploits of their own fleets and armies. To them this
      amusement compensates the small difference between the taxes which they
      pay on account of the war, and those which they had been accustomed to pay
      in time of peace. They are commonly dissatisfied with the return of peace,
      which puts an end to their amusement, and to a thousand visionary hopes of
      conquest and national glory, from a longer continuance of the war.

      The return of peace, indeed, seldom relieves them from the greater part of
      the taxes imposed during the war. These are mortgaged for the interest of
      the debt contracted, in order to carry it on. If, over and above paying
      the interest of this debt, and defraying the ordinary expense of
      government, the old revenue, together with the new taxes, produce some
      surplus revenue, it may, perhaps, be converted into a sinking fund for
      paying off the debt. But, in the first place, this sinking fund, even
      supposing it should be applied to no other purpose, is generally
      altogether inadequate for paying, in the course of any period during which
      it can reasonably be expected that peace should continue, the whole debt
      contracted during the war; and, in the second place, this fund is almost
      always applied to other purposes.

      The new taxes were imposed for the sole purpose of paying the interest of
      the money borrowed upon them. If they produce more, it is generally
      something which was neither intended nor expected, and is, therefore,
      seldom very considerable. Sinking funds have generally arisen, not so much
      from any surplus of the taxes which was over and above what was necessary
      for paying the interest or annuity originally charged upon them, as from a
      subsequent reduction of that interest; that of Holland in 1655, and that
      of the ecclesiastical state in 1685, were both formed in this manner.
      Hence the usual insufficiency of such funds.

      During the most profound peace, various events occur, which require an
      extraordinary expense; and government finds it always more convenient to
      defray this expense by misapplying the sinking fund, than by imposing a
      new tax. Every new tax is immediately felt more or less by the people. It
      occasions always some murmur, and meets with some opposition. The more
      taxes may have been multiplied, the higher they may have been raised upon
      every different subject of taxation; the more loudly the people complain
      of every new tax, the more difficult it becomes, too, either to find out
      new subjects of taxation, or to raise much higher the taxes already
      imposed upon the old. A momentary suspension of the payment of debt is not
      immediately felt by the people, and occasions neither murmur nor
      complaint. To borrow of the sinking fund is always an obvious and easy
      expedient for getting out of the present difficulty. The more the public
      debts may have been accumulated, the more necessary it may have become to
      study to reduce them; the more dangerous, the more ruinous it may be to
      misapply any part of the sinking fund; the less likely is the public debt
      to be reduced to any considerable degree, the more likely, the more
      certainly, is the sinking fund to be misapplied towards defraying all the
      extraordinary expenses which occur in time of peace. When a nation is
      already overburdened with taxes, nothing but the necessities of a new war,
      nothing but either the animosity of national vengeance, or the anxiety for
      national security, can induce the people to submit, with tolerable
      patience, to a new tax. Hence the usual misapplication of the sinking
      fund.

      In Great Britain, from the time that we had first recourse to the ruinous
      expedient of perpetual funding, the reduction of the public debt, in time
      of peace, has never borne any proportion to its accumulation in time of
      war. It was in the war which began in 1668, and was concluded by the
      treaty of Ryswick, in 1697, that the foundation of the present enormous
      debt of Great Britain was first laid.

      On the 31st of December 1697, the public debts of Great Britain, funded
      and unfunded, amounted to £21,515,742:13:8½. A great part of those debts
      had been contracted upon short anticipations, and some part upon annuities
      for lives; so that, before the 31st of December 1701, in less than four
      years, there had partly been paid off; and partly reverted to the public,
      the sum of £5,121,041:12:0¾d; a greater reduction of the public debt than
      has ever since been brought about in so short a period of time. The
      remaining debt, therefore, amounted only to £16,394,701:1:7¼d.

      In the war which began in 1702, and which was concluded by the treaty of
      Utrecht, the public debts were still more accumulated. On the 31st of
      December 1714, they amounted to £53,681,076:5:6½. The subscription into
      the South-sea fund, of the short and long annuities, increased the capital
      of the public debt; so that, on the 31st of December 1722, it amounted to
      £55,282,978:1:3 ⅚. The reduction of the debt began in 1723, and went on
      so slowly, that, on the 31st of December 1739, during seventeen years-of
      profound peace, the whole sum paid off was no more than £8,328,554:17:11
      ³⁄₁₂, the capital of the public debt, at that time, amounting to
      £46,954,623:3:4 ⁷⁄₁₂.

      The Spanish war, which began in 1739, and the French war which soon
      followed it, occasioned a further increase of the debt, which, on the 31st
      of December 1748, after the war had been concluded by the treaty of
      Aix-la-Chapelle, amounted to £78,293,313:1:10¾. The most profound peace,
      of 17 years continuance, had taken no more than £8,328,354, 17:11¼ from
      it. A war, of less than nine years continuance, added £31,338,689:18: 6
      ⅙ to it. {See James Postlethwaite’s History of the Public Revenue.}

      During the administration of Mr Pelham, the interest of the public debt
      was reduced, or at least measures were taken for reducing it, from four to
      three per cent.; the sinking fund was increased, and some part of the
      public debt was paid off. In 1755, before the breaking out of the late
      war, the funded debt of Great Britain amounted to £72,289,675. On the 5th
      of January 1763, at the conclusion of the peace, the funded debt amounted
      debt to £122,603,336:8:2¼. The unfunded debt has been stated at
      £13,927,589:2:2. But the expense occasioned by the war did not end with
      the conclusion of the peace; so that, though on the 5th of January 1764,
      the funded debt was increased (partly by a new loan, and partly by funding
      a part of the unfunded debt) to £129,586,789:10:1¾, there still remained
      (according to the very well informed author of Considerations on the Trade
      and Finances of Great Britain) an unfunded debt, which was brought to
      account in that and the following year, of £9,975,017: 12:2 ¹⁵⁄₄₄d. In
      1764, therefore, the public debt of Great Britain, funded and unfunded
      together, amounted, according to this author, to £139,561,807:2:4. The
      annuities for lives, too, which had been granted as premiums to the
      subscribers to the new loans in 1757, estimated at fourteen years
      purchase, were valued at £472,500; and the annuities for long terms of
      years, granted as premiums likewise, in 1761 and 1762, estimated at
      twenty-seven and a-half years purchase, were valued at £6,826,875. During
      a peace of about seven years continuance, the prudent and truly patriotic
      administration of Mr Pelham was not able to pay off an old debt of six
      millions. During a war of nearly the same continuance, a new debt of more
      than seventy-five millions was contracted.

      On the 5th of January 1775, the funded debt of Great Britain amounted to
      £124,996,086, 1:6¼d. The unfunded, exclusive of a large civil-list debt,
      to £4,150,236:3:11 ⅞. Both together, to £129,146,322:5:6. According to
      this account, the whole debt paid off, during eleven years of profound
      peace, amounted only to £10,415,476:16:9 ⅞. Even this small reduction of
      debt, however, has not been all made from the savings out of the ordinary
      revenue of the state. Several extraneous sums, altogether independent of
      that ordinary revenue, have contributed towards it. Amongst these we may
      reckon an additional shilling in the pound land tax, for three years; the
      two millions received from the East-India company, as indemnification for
      their territorial acquisitions; and the one hundred and ten thousand
      pounds received from the bank for the renewal of their charter. To these
      must be added several other sums, which, as they arose out of the late
      war, ought perhaps to be considered as deductions from the expenses of it.
      The principal are,


   The produce of French prizes..............    £690,449: 18: 9
   Composition for French prisoners.........      670,000:  0: 0

   What has been received from the sale
   of the ceded islands.........................   95,500:  0: 0

   Total, .....................................£1,455,949: 18: 9



      If we add to this sum the balance of the earl of Chatham’s and Mr
      Calcraft’s accounts, and other army savings of the same kind, together
      with what has been received from the bank, the East-India company, and the
      additional shilling in the pound land tax, the whole must be a good deal
      more than five millions. The debt, therefore, which, since the peace, has
      been paid out of the savings from the ordinary revenue of the state, has
      not, one year with another, amounted to half a million a-year. The sinking
      fund has, no doubt, been considerably augmented since the peace, by the
      debt which had been paid off, by the reduction of the redeemable four per
      cents to three per cents, and by the annuities for lives which have fallen
      in; and, if peace were to continue, a million, perhaps, might now be
      annually spared out of it towards the discharge of the debt. Another
      million, accordingly, was paid in the course of last year; but at the same
      time, a large civil-list debt was left unpaid, and we are now involved in
      a new war, which, in its progress, may prove as expensive as any of our
      former wars. {It has proved more expensive than any one of our former
      wars, and has involved us in an additional debt of more than one hundred
      millions. During a profound peace of eleven years, little more than ten
      millions of debt was paid; during a war of seven years, more than one
      hundred millions was contracted.} The new debt which will probably be
      contracted before the end of the next campaign, may, perhaps, be nearly
      equal to all the old debt which has been paid off from the savings out of
      the ordinary revenue of the state. It would be altogether chimerical,
      therefore, to expect that the public debt should ever be completely
      discharged, by any savings which are likely to be made from that ordinary
      revenue as it stands at present.

      The public funds of the different indebted nations of Europe, particularly
      those of England, have, by one author, been represented as the
      accumulation of a great capital, superadded to the other capital of the
      country, by means of which its trade is extended, its manufactures are
      multiplied, and its lands cultivated and improved, much beyond what they
      could have been by means of that other capital only. He does not consider
      that the capital which the first creditors of the public advanced to
      government, was, from the moment in which he advanced it, a certain
      portion of the annual produce, turned away from serving in the function of
      a capital, to serve in that of a revenue; from maintaining productive
      labourers, to maintain unproductive ones, and to be spent and wasted,
      generally in the course of the year, without even the hope of any future
      reproduction. In return for the capital which they advanced, they
      obtained, indeed, an annuity of the public funds, in most cases, of more
      than equal value. This annuity, no doubt, replaced to them their capital,
      and enabled them to carry on their trade and business to the same, or,
      perhaps, to a greater extent than before; that is, they were enabled,
      either to borrow of other people a new capital, upon the credit of this
      annuity or, by selling it, to get from other people a new capital of their
      own, equal, or superior, to that which they had advanced to government.
      This new capital, however, which they in this manner either bought or
      borrowed of other people, must have existed in the country before, and
      must have been employed, as all capitals are, in maintaining productive
      labour. When it came into the hands of those who had advanced their money
      to government, though it was, in some respects, a new capital to them, it
      was not so to the country, but was only a capital withdrawn from certain
      employments, in order to be turned towards others. Though it replaced to
      them what they had advanced to government, it did not replace it to the
      country. Had they not advanced this capital to government, there would
      have been in the country two capitals, two portions of the annual produce,
      instead of one, employed in maintaining productive labour.

      When, for defraying the expense of government, a revenue is raised within
      the year, from the produce of free or unmortgaged taxes, a certain portion
      of the revenue of private people is only turned away from maintaining one
      species of unproductive labour, towards maintaining another. Some part of
      what they pay in those taxes, might, no doubt, have been accumulated into
      capital, and consequently employed in maintaining productive labour; but
      the greater part would probably have been spent, and consequently employed
      in maintaining unproductive labour. The public expense, however, when
      defrayed in this manner, no doubt hinders, more or less, the further
      accumulation of new capital; but it does not necessarily occasion the
      destruction of any actually-existing capital.

      When the public expense is defrayed by funding, it is defrayed by the
      annual destruction of some capital which had before existed in the
      country; by the perversion of some portion of the annual produce which had
      before been destined for the maintenance of productive labour, towards
      that of unproductive labour. As in this case, however, the taxes are
      lighter than they would have been, had a revenue sufficient for defraying
      the same expense been raised within the year; the private revenue of
      individuals is necessarily less burdened, and consequently their ability
      to save and accumulate some part of that revenue into capital, is a good
      deal less impaired. If the method of funding destroys more old capital,
      it, at the same time, hinders less the accumulation or acquisition of new
      capital, than that of defraying the public expense by a revenue raised
      within the year. Under the system of funding, the frugality and industry
      of private people can more easily repair the breaches which the waste and
      extravagance of government may occasionally make in the general capital of
      the society.

      It is only during the continuance of war, however, that the system of
      funding has this advantage over the other system. Were the expense of war
      to be defrayed always by a revenue raised within the year, the taxes from
      which that extraordinary revenue was drawn would last no longer than the
      war. The ability of private people to accumulate, though less during the
      war, would have been greater during the peace, than under the system of
      funding. War would not necessarily have occasioned the destruction of any
      old capitals, and peace would have occasioned the accumulation of many
      more new. Wars would, in general, be more speedily concluded, and less
      wantonly undertaken. The people feeling, during continuance of war, the
      complete burden of it, would soon grow weary of it; and government, in
      order to humour them, would not be under the necessity of carrying it on
      longer than it was necessary to do so. The foresight of the heavy and
      unavoidable burdens of war would hinder the people from wantonly calling
      for it when there was no real or solid interest to fight for. The seasons
      during which the ability of private people to accumulate was somewhat
      impaired, would occur more rarely, and be of shorter continuance. Those,
      on the contrary, during which that ability was in the highest vigour would
      be of much longer duration than they can well be under the system of
      funding.

      When funding, besides, has made a certain progress, the multiplication of
      taxes which it brings along with it, sometimes impairs as much the ability
      of private people to accumulate, even in time of peace, as the other
      system would in time of war. The peace revenue of Great Britain amounts at
      present to more than ten millions a-year. If free and unmortgaged, it
      might be sufficient, with proper management, and without contracting a
      shilling of new debt, to carry on the most vigorous war. The private
      revenue of the inhabitants of Great Britain is at present as much
      incumbered in time of peace, their ability to accumulate is as much
      impaired, as it would have been in the time of the most expensive war, had
      the pernicious system of funding never been adopted.

      In the payment of the interest of the public debt, it has been said, it is
      the right hand which pays the left. The money does not go out of the
      country. It is only a part of the revenue of one set of the inhabitants
      which is transferred to another; and the nation is not a farthing the
      poorer. This apology is founded altogether in the sophistry of the
      mercantile system; and, after the long examination which I have already
      bestowed upon that system, it may, perhaps, be unnecessary to say anything
      further about it. It supposes, besides, that the whole public debt is
      owing to the inhabitants of the country, which happens not to be true; the
      Dutch, as well as several other foreign nations, having a very
      considerable share in our public funds. But though the whole debt were
      owing to the inhabitants of the country, it would not, upon that account,
      be less pernicious.

      Land and capital stock are the two original sources of all revenue, both
      private and public. Capital stock pays the wages of productive labour,
      whether employed in agriculture, manufactures, or commerce. The management
      of those two original sources of revenue belongs to two different sets of
      people; the proprietors of land, and the owners or employers of capital
      stock.

      The proprietor of land is interested, for the sake of his own revenue, to
      keep his estate in as good condition as he can, by building and repairing
      his tenants houses, by making and maintaining the necessary drains and
      inclosures, and all those other expensive improvements which it properly
      belongs to the landlord to make and maintain. But, by different land
      taxes, the revenue of the landlord may be so much diminished, and, by
      different duties upon the necessaries and conveniencies of life, that
      diminished revenue may be rendered of so little real value, that he may
      find himself altogether unable to make or maintain those expensive
      improvements. When the landlord, however, ceases to do his part, it is
      altogether impossible that the tenant should continue to do his. As the
      distress of the landlord increases, the agriculture of the country must
      necessarily decline.

      When, by different taxes upon the necessaries and conveniencies of life,
      the owners and employers of capital stock find, that whatever revenue they
      derive from it, will not, in a particular country, purchase the same
      quantity of those necessaries and conveniencies which an equal revenue
      would in almost any other, they will be disposed to remove to some other.
      And when, in order to raise those taxes, all or the greater part of
      merchants and manufacturers, that is, all or the greater part of the
      employers of great capitals, come to be continually exposed to the
      mortifying and vexatious visits of the tax-gatherers, this disposition to
      remove will soon be changed into an actual removing. The industry of the
      country will necessarily fall with the removal of the capital which
      supported it, and the ruin of trade and manufactures will follow the
      declension of agriculture.

      To transfer from the owners of those two great sources of revenue, land,
      and capital stock, from the persons immediately interested in the good
      condition of every particular portion of land, and in the good management
      of every particular portion of capital stock, to another set of persons
      (the creditors of the public, who have no such particular interest), the
      greater part of the revenue arising from either, must, in the long-run,
      occasion both the neglect of land, and the waste or removal of capital
      stock. A creditor of the public has, no doubt, a general interest in the
      prosperity of the agriculture, manufactures, and commerce of the country;
      and consequently in the good condition of its land, and in the good
      management of its capital stock. Should there be any general failure or
      declension in any of these things, the produce of the different taxes
      might no longer be sufficient to pay him the annuity or interest which is
      due to him. But a creditor of the public, considered merely as such, has
      no interest in the good condition of any particular portion of land, or in
      the good management of any particular portion of capital stock. As a
      creditor of the public, he has no knowledge of any such particular
      portion. He has no inspection of it. He can have no care about it. Its
      ruin may in some cases be unknown to him, and cannot directly affect him.

      The practice of funding has gradually enfeebled every state which has
      adopted it. The Italian republics seem to have begun it. Genoa and Venice,
      the only two remaining which can pretend to an independent existence, have
      both been enfeebled by it. Spain seems to have learned the practice from
      the Italian republics, and (its taxes being probably less judicious than
      theirs) it has, in proportion to its natural strength, been-still more
      enfeebled. The debts of Spain are of very old standing. It was deeply in
      debt before the end of the sixteenth century, about a hundred years before
      England owed a shilling. France, notwithstanding all its natural
      resources, languishes under an oppressive load of the same kind. The
      republic of the United Provinces is as much enfeebled by its debts as
      either Genoa or Venice. Is it likely that, in Great Britain alone, a
      practice, which has brought either weakness or dissolution into every
      other country, should prove altogether innocent?

      The system of taxation established in those different countries, it may be
      said, is inferior to that of England. I believe it is so. But it ought to
      be remembered, that when the wisest government has exhausted all the
      proper subjects of taxation, it must, in cases of urgent necessity, have
      recourse to improper ones. The wise republic of Holland has, upon some
      occasions, been obliged to have recourse to taxes as inconvenient as the
      greater part of those of Spain. Another war, begun before any considerable
      liberation of the public revenue had been brought about, and growing in
      its progress as expensive as the last war, may, from irresistible
      necessity, render the British system of taxation as oppressive as that of
      Holland, or even as that of Spain. To the honour of our present system of
      taxation, indeed, it has hitherto given so little embarrassment to
      industry, that, during the course even of the most expensive wars, the
      frugality and good conduct of individuals seem to have been able, by
      saving and accumulation, to repair all the breaches which the waste and
      extravagance of government had made in the general capital of the society.
      At the conclusion of the late war, the most expensive that Great Britain
      ever waged, her agriculture was as flourishing, her manufacturers as
      numerous and as fully employed, and her commerce as extensive, as they had
      ever been before. The capital, therefore, which supported all those
      different branches of industry, must have been equal to what it had ever
      been before. Since the peace, agriculture has been still further improved;
      the rents of houses have risen in every town and village of the country, a
      proof of the increasing wealth and revenue of the people; and the annual
      amount of the greater part of the old taxes, of the principal branches of
      the excise and customs, in particular, has been continually increasing, an
      equally clear proof of an increasing consumption, and consequently of an
      increasing produce, which could alone support that consumption. Great
      Britain seems to support with ease, a burden which, half a century ago,
      nobody believed her capable of supporting, Let us not, however, upon this
      account, rashly conclude that she is capable of supporting any burden; nor
      even be too confident that she could support, without great distress, a
      burden a little greater than what has already been laid upon her.

      When national debts have once been accumulated to a certain degree, there
      is scarce, I believe, a single instance of their having been fairly and
      completely paid. The liberation of the public revenue, if it has ever been
      brought about at all, has always been brought about by a bankruptcy;
      sometimes by an avowed one, though frequently by a pretended payment.

      The raising of the denomination of the coin has been the most usual
      expedient by which a real public bankruptcy has been disguised under the
      appearance of a pretended payment. If a sixpence, for example, should,
      either by act of parliament or royal proclamation, be raised to the
      denomination of a shilling, and twenty sixpences to that of a pound
      sterling; the person who, under the old denomination, had borrowed twenty
      shillings, or near four ounces of silver, would, under the new, pay with
      twenty sixpences, or with something less than two ounces. A national debt
      of about a hundred and twenty-eight millions, near the capital of the
      funded and unfunded debt of Great Britain, might, in this manner, be paid
      with about sixty-four millions of our present money. It would, indeed, be
      a pretended payment only, and the creditors of the public would really be
      defrauded of ten shillings in the pound of what was due to them. The
      calamity, too, would extend much further than to the creditors of the
      public, and those of every private person would suffer a proportionable
      loss; and this without any advantage, but in most cases with a great
      additional loss, to the creditors of the public. If the creditors of the
      public, indeed, were generally much in debt to other people, they might in
      some measure compensate their loss by paying their creditors in the same
      coin in which the public had paid them. But in most countries, the
      creditors of the public are, the greater part of them, wealthy people, who
      stand more in the relation of creditors than in that of debtors, towards
      the rest of their fellow citizens. A pretended payment of this kind,
      therefore, instead of alleviating, aggravates, in most cases, the loss of
      the creditors of the public; and, without any advantage to the public,
      extends the calamity to a great number of other innocent people. It
      occasions a general and most pernicious subversion of the fortunes of
      private people; enriching, in most cases, the idle and profuse debtor, at
      the expense of the industrious and frugal creditor; and transporting a
      great part of the national capital from the hands which were likely to
      increase and improve it, to those who are likely to dissipate and destroy
      it. When it becomes necessary for a state to declare itself bankrupt, in
      the same manner as when it becomes necessary for an individual to do so, a
      fair, open, and avowed bankruptcy, is always the measure which is both
      least dishonourable to the debtor, and least hurtful to the creditor. The
      honour of a state is surely very poorly provided for, when, in order to
      cover the disgrace of a real bankruptcy, it has recourse to a juggling
      trick of this kind, so easily seen through, and at the same time so
      extremely pernicious.

      Almost all states, however, ancient as well as modern, when reduced to
      this necessity, have, upon some occasions, played this very juggling
      trick. The Romans, at the end of the first Punic war, reduced the As, the
      coin or denomination by which they computed the value of all their other
      coins, from containing twelve ounces of copper, to contain only two
      ounces; that is, they raised two ounces of copper to a denomination which
      had always before expressed the value of twelve ounces. The republic was,
      in this manner, enabled to pay the great debts which it had contracted
      with the sixth part of what it really owed. So sudden and so great a
      bankruptcy, we should in the present times be apt to imagine, must have
      occasioned a very violent popular clamour. It does not appear to have
      occasioned any. The law which enacted it was, like all other laws relating
      to the coin, introduced and carried through the assembly of the people by
      a tribune, and was probably a very popular law. In Rome, as in all other
      ancient republics, the poor people were constantly in debt to the rich and
      the great, who, in order to secure their votes at the annual elections,
      used to lend them money at exorbitant interest, which, being never paid,
      soon accumulated into a sum too great either for the debtor to pay, or for
      any body else to pay for him. The debtor, for fear of a very severe
      execution, was obliged, without any further gratuity, to vote for the
      candidate whom the creditor recommended. In spite of all the laws against
      bribery and corruption, the bounty of the candidates, together with the
      occasional distributions of coin which were ordered by the senate, were
      the principal funds from which, during the latter times of the Roman
      republic, the poorer citizens derived their subsistence. To deliver
      themselves from this subjection to their creditors, the poorer citizens
      were continually calling out, either for an entire abolition of debts, or
      for what they called new tables; that is, for a law which should entitle
      them to a complete acquittance, upon paying only a certain proportion of
      their accumulated debts. The law which reduced the coin of all
      denominations to a sixth part of its former value, as it enabled them to
      pay their debts with a sixth part of what they really owed, was equivalent
      to the most advantageous new tables. In order to satisfy the people, the
      rich and the great were, upon several different occasions, obliged to
      consent to laws, both for abolishing debts, and for introducing new
      tables; and they probably were induced to consent to this law, partly for
      the same reason, and partly that, by liberating the public revenue, they
      might restore vigour to that government, of which they themselves had the
      principal direction. An operation of this kind would at once reduce a debt
      of £128,000,000 to £21,333,333:6:8. In the course of the second Punic war,
      the As was still further reduced, first, from two ounces of copper to one
      ounce, and afterwards from one ounce to half an ounce; that is, to the
      twenty-fourth part of its original value. By combining the three Roman
      operations into one, a debt of a hundred and twenty-eight millions of our
      present money, might in this manner be reduced all at once to a debt of
      £5,333,333:6:8. Even the enormous debt of Great Britain might in this
      manner soon be paid.

      By means of such expedients, the coin of, I believe, all nations, has been
      gradually reduced more and more below its original value, and the same
      nominal sum has been gradually brought to contain a smaller and a smaller
      quantity of silver.

      Nations have sometimes, for the same purpose, adulterated the standard of
      their coin; that is, have mixed a greater quantity of alloy in it. If in
      the pound weight of our silver coin, for example, instead of eighteen
      penny-weight, according to the present standard, there were mixed eight
      ounces of alloy; a pound sterling, or twenty shillings of such coin, would
      be worth little more than six shillings and eightpence of our present
      money. The quantity of silver contained in six shillings and eightpence of
      our present money, would thus be raised very nearly to the denomination of
      a pound sterling. The adulteration of the standard has exactly the same
      effect with what the French call an augmentation, or a direct raising of
      the denomination of the coin.

      An augmentation, or a direct raising of the denomination of the coin,
      always is, and from its nature must be, an open and avowed operation. By
      means of it, pieces of a smaller weight and bulk are called by the same
      name, which had before been given to pieces of a greater weight and bulk.
      The adulteration of the standard, on the contrary, has generally been a
      concealed operation. By means of it, pieces are issued from the mint, of
      the same denomination, and, as nearly as could be contrived, of the same
      weight, bulk, and appearance, with pieces which had been current before of
      much greater value. When king John of France, {See Du Cange Glossary, voce
      Moneta; the Benedictine Edition.} in order to pay his debts, adulterated
      his coin, all the officers of his mint were sworn to secrecy. Both
      operations are unjust. But a simple augmentation is an injustice of open
      violence; whereas an adulteration is an injustice of treacherous fraud.
      This latter operation, therefore, as soon as it has been discovered, and
      it could never be concealed very long, has always excited much greater
      indignation than the former. The coin, after any considerable
      augmentation, has very seldom been brought back to its former weight; but
      after the greatest adulterations, it has almost always been brought back
      to its former fineness. It has scarce ever happened, that the fury and
      indignation of the people could otherwise be appeased.

      In the end of the reign of Henry VIII., and in the beginning of that of
      Edward VI., the English coin was not only raised in its denomination, but
      adulterated in its standard. The like frauds were practised in Scotland
      during the minority of James VI. They have occasionally been practised in
      most other countries.

      That the public revenue of Great Britain can never be completely
      liberated, or even that any considerable progress can ever be made towards
      that liberation, while the surplus of that revenue, or what is over and
      above defraying the annual expense of the peace establishment, is so very
      small, it seems altogether in vain to expect. That liberation, it is
      evident, can never be brought about, without either some very considerable
      augmentation of the public revenue, or some equally considerable reduction
      of the public expense.

      A more equal land tax, a more equal tax upon the rent of houses, and such
      alterations in the present system of customs and excise as those which
      have been mentioned in the foregoing chapter, might, perhaps, without
      increasing the burden of the greater part of the people, but only
      distributing the weight of it more equally upon the whole, produce a
      considerable augmentation of revenue. The most sanguine projector,
      however, could scarce flatter himself, that any augmentation of this kind
      would be such as could give any reasonable hopes, either of liberating the
      public revenue altogether, or even of making such progress towards that
      liberation in time of peace, as either to prevent or to compensate the
      further accumulation of the public debt in the next war.

      By extending the British system of taxation to all the different provinces
      of the empire, inhabited by people either of British or European
      extraction, a much greater augmentation of revenue might be expected.
      This, however, could scarce, perhaps, be done, consistently with the
      principles of the British constitution, without admitting into the British
      parliament, or, if you will, into the states-general of the British
      empire, a fair and equal representation of all those different provinces;
      that of each province bearing the same proportion to the produce of its
      taxes, as the representation of Great Britain might bear to the produce of
      the taxes levied upon Great Britain. The private interest of many powerful
      individuals, the confirmed prejudices of great bodies of people, seem,
      indeed, at present, to oppose to so great a change, such obstacles as it
      may be very difficult, perhaps altogether impossible, to surmount.
      Without, however, pretending to determine whether such a union be
      practicable or impracticable, it may not, perhaps, be improper, in a
      speculative work of this kind, to consider how far the British system of
      taxation might be applicable to all the different provinces of the empire;
      what revenue might be expected from it, if so applied; and in what manner
      a general union of this kind might be likely to affect the happiness and
      prosperity of the different provinces comprehended within it. Such a
      speculation, can, at worst, be regarded but as a new Utopia, less amusing,
      certainly, but no more useless and chimerical than the old one.

      The land-tax, the stamp duties, and the different duties of customs and
      excise, constitute the four principal branches of the British taxes.

      Ireland is certainly as able, and our American and West India plantations
      more able, to pay a land tax, than Great Britain. Where the landlord is
      subject neither to tythe nor poor’s rate, he must certainly be more able
      to pay such a tax, than where he is subject to both those other burdens.
      The tythe, where there is no modus, and where it is levied in kind,
      diminishes more what would otherwise be the rent of the landlord, than a
      land tax which really amounted to five shillings in the pound. Such a
      tythe will be found, in most cases, to amount to more than a fourth part
      of the real rent of the land, or of what remains after replacing
      completely the capital of the farmer, together with his reasonable profit.
      If all moduses and all impropriations were taken away, the complete church
      tythe of Great Britain and Ireland could not well be estimated at less
      than six or seven millions. If there was no tythe either in Great Britain
      or Ireland, the landlords could afford to pay six or seven millions
      additional land tax, without being more burdened than a very great part of
      them are at present. America pays no tythe, and could, therefore, very
      well afford to pay a land tax. The lands in America and the West Indies,
      indeed, are, in general, not tenanted nor leased out to farmers. They
      could not, therefore, be assessed according to any rent roll. But neither
      were the lands of Great Britain, in the 4th of William and Mary, assessed
      according to any rent roll, but according to a very loose and inaccurate
      estimation. The lands in America might be assessed either in the same
      manner, or according to an equitable valuation, in consequence of an
      accurate survey, like that which was lately made in the Milanese, and in
      the dominions of Austria, Prussia, and Sardinia.

      Stamp duties, it is evident, might be levied without any variation, in all
      countries where the forms of law process, and the deeds by which property,
      both real and personal, is transferred, are the same, or nearly the same.

      The extension of the custom-house laws of Great Britain to Ireland and the
      plantations, provided it was accompanied, as in justice it ought to be,
      with an extension of the freedom of trade, would be in the highest degree
      advantageous to both. All the invidious restraints which at present
      oppress the trade of Ireland, the distinction between the enumerated and
      non-enumerated commodities of America, would be entirely at an end. The
      countries north of Cape Finisterre would be as open to every part of the
      produce of America, as those south of that cape are to some parts of that
      produce at present. The trade between all the different parts of the
      British empire would, in consequence of this uniformity in the
      custom-house laws, be as free as the coasting trade of Great Britain is at
      present. The British empire would thus afford, within itself, an immense
      internal market for every part of the produce of all its different
      provinces. So great an extension of market would soon compensate, both to
      Ireland and the plantations, all that they could suffer from the increase
      of the duties of customs.

      The excise is the only part of the British system of taxation, which would
      require to be varied in any respect, according as it was applied to the
      different provinces of the empire. It might be applied to Ireland without
      any variation; the produce and consumption of that kingdom being exactly
      of the same nature with those of Great Britain. In its application to
      America and the West Indies, of which the produce and consumption are so
      very different from those of Great Britain, some modification might be
      necessary, in the same manner as in its application to the cyder and beer
      counties of England.

      A fermented liquor, for example, which is called beer, but which, as it is
      made of molasses, bears very little resemblance to our beer, makes a
      considerable part of the common drink of the people in America. This
      liquor, as it can be kept only for a few days, cannot, like our beer, be
      prepared and stored up for sale in great breweries; but every private
      family must brew it for their own use, in the same manner as they cook
      their victuals. But to subject every private family to the odious visits
      and examination of the tax-gatherers, in the same manner as we subject the
      keepers of ale-houses and the brewers for public sale, would be altogether
      inconsistent with liberty. If, for the sake of equality, it was thought
      necessary to lay a tax upon this liquor, it might be taxed by taxing the
      material of which it is made, either at the place of manufacture, or, if
      the circumstances of the trade rendered such an excise improper, by laying
      a duty upon its importation into the colony in which it was to be
      consumed. Besides the duty of one penny a-gallon imposed by the British
      parliament upon the importation of molasses into America, there is a
      provincial tax of this kind upon their importation into Massachusetts Bay,
      in ships belonging to any other colony, of eight-pence the hogshead; and
      another upon their importation from the northern colonies into South
      Carolina, of five-pence the gallon. Or, if neither of these methods was
      found convenient, each family might compound for its consumption of this
      liquor, either according to the number of persons of which it consisted,
      in the same manner as private families compound for the malt tax in
      England; or according to the different ages and sexes of those persons, in
      the same manner as several different taxes are levied in Holland; or,
      nearly as Sir Matthew Decker proposes, that all taxes upon consumable
      commodities should be levied in England. This mode of taxation, it has
      already been observed, when applied to objects of a speedy consumption, is
      not a very convenient one. It might be adopted, however, in cases where no
      better could be done.

      Sugar, rum, and tobacco, are commodities which are nowhere necessaries of
      life, which are become objects of almost universal consumption, and which
      are, therefore, extremely proper subjects of taxation. If a union with the
      colonies were to take place, those commodities might be taxed, either
      before they go out of the hands of the manufacturer or grower; or, if this
      mode of taxation did not suit the circumstances of those persons, they
      might be deposited in public warehouses, both at the place of manufacture,
      and at all the different ports of the empire, to which they might
      afterwards be transported, to remain there, under the joint custody of the
      owner and the revenue officer, till such time as they should be delivered
      out, either to the consumer, to the merchant-retailer for home
      consumption, or to the merchant-exporter; the tax not to be advanced till
      such delivery. When delivered out for exportation, to go duty-free, upon
      proper security being given, that they should really be exported out of
      the empire. These are, perhaps, the principal commodities, with regard to
      which the union with the colonies might require some considerable change
      in the present system of British taxation.

      What might be the amount of the revenue which this system of taxation,
      extended to all the different provinces of the empire, might produce, it
      must, no doubt, be altogether impossible to ascertain with tolerable
      exactness. By means of this system, there is annually levied in Great
      Britain, upon less than eight millions of people, more than ten millions
      of revenue. Ireland contains more than two millions of people, and,
      according to the accounts laid before the congress, the twelve associated
      provinces of America contain more than three. Those accounts, however, may
      have been exaggerated, in order, perhaps, either to encourage their own
      people, or to intimidate those of this country; and we shall suppose,
      therefore, that our North American and West Indian colonies, taken
      together, contain no more than three millions; or that the whole British
      empire, in Europe and America, contains no more than thirteen millions of
      inhabitants. If, upon less than eight millions of inhabitants, this system
      of taxation raises a revenue of more than ten millions sterling; it ought,
      upon thirteen millions of inhabitants, to raise a revenue of more than
      sixteen millions two hundred and fifty thousand pounds sterling. From this
      revenue, supposing that this system could produce it, must be deducted the
      revenue usually raised in Ireland and the plantations, for defraying the
      expense of the respective civil governments. The expense of the civil and
      military establishment of Ireland, together with the interest of the
      public debt, amounts, at a medium of the two years which ended March 1775,
      to something less than seven hundred and fifty thousand pounds a year. By
      a very exact account of the revenue of the principal colonies of America
      and the West Indies, it amounted, before the commencement of the present
      disturbances, to a hundred and forty-one thousand eight hundred pounds. In
      this account, however, the revenue of Maryland, of North Carolina, and of
      all our late acquisitions, both upon the continent, and in the islands, is
      omitted; which may, perhaps, make a difference of thirty or forty thousand
      pounds. For the sake of even numbers, therefore, let us suppose that the
      revenue necessary for supporting the civil government of Ireland and the
      plantations may amount to a million. There would remain, consequently, a
      revenue of fifteen millions two hundred and fifty thousand pounds, to be
      applied towards defraying the general expense of the empire, and towards
      paying the public debt. But if, from the present revenue of Great Britain,
      a million could, in peaceable times, be spared towards the payment of that
      debt, six millions two hundred and fifty thousand pounds could very well
      be spared from this improved revenue. This great sinking fund, too, might
      be augmented every year by the interest of the debt which had been
      discharged the year before; and might, in this manner, increase so very
      rapidly, as to be sufficient in a few years to discharge the whole debt,
      and thus to restore completely the at-present debilitated and languishing
      vigour of the empire. In the meantime, the people might be relieved from
      some of the most burdensome taxes; from those which are imposed either
      upon the necessaries of life, or upon the materials of manufacture. The
      labouring poor would thus be enabled to live better, to work cheaper, and
      to send their goods cheaper to market. The cheapness of their goods would
      increase the demand for them, and consequently for the labour of those who
      produced them. This increase in the demand for labour would both increase
      the numbers, and improve the circumstances of the labouring poor. Their
      consumption would increase, and, together with it, the revenue arising
      from all those articles of their consumption upon which the taxes might be
      allowed to remain.

      The revenue arising from this system of taxation, however, might not
      immediately increase in proportion to the number of people who were
      subjected to it. Great indulgence would for some time be due to those
      provinces of the empire which were thus subjected to burdens to which they
      had not before been accustomed; and even when the same taxes came to be
      levied everywhere as exactly as possible, they would not everywhere
      produce a revenue proportioned to the numbers of the people. In a poor
      country, the consumption of the principal commodities subject to the
      duties of customs and excise, is very small; and in a thinly inhabited
      country, the opportunities of smuggling are very great. The consumption of
      malt liquors among the inferior ranks of people in Scotland is very small;
      and the excise upon malt, beer, and ale, produces less there than in
      England, in proportion to the numbers of the people and the rate of the
      duties, which upon malt is different, on account of a supposed difference
      of quality. In these particular branches of the excise, there is not, I
      apprehend, much more smuggling in the one country than in the other. The
      duties upon the distillery, and the greater part of the duties of customs,
      in proportion to the numbers of people in the respective countries,
      produce less in Scotland than in England, not only on account of the
      smaller consumption of the taxed commodities, but of the much greater
      facility of smuggling. In Ireland, the inferior ranks of people are still
      poorer than in Scotland, and many parts of the country are almost as
      thinly inhabited. In Ireland, therefore, the consumption of the taxed
      commodities might, in proportion to the number of the people, be still
      less than in Scotland, and the facility of smuggling nearly the same. In
      America and the West Indies, the white people, even of the lowest rank,
      are in much better circumstances than those of the same rank in England;
      and their consumption of all the luxuries in which they usually indulge
      themselves, is probably much greater. The blacks, indeed, who make the
      greater part of the inhabitants, both of the southern colonies upon the
      continent and of the West India islands, as they are in a state of
      slavery, are, no doubt, in a worse condition than the poorest people
      either in Scotland or Ireland. We must not, however, upon that account,
      imagine that they are worse fed, or that their consumption of articles
      which might be subjected to moderate duties, is less than that even of the
      lower ranks of people in England. In order that they may work well, it is
      the interest of their master that they should be fed well, and kept in
      good heart, in the same manner as it is his interest that his working
      cattle should be so. The blacks, accordingly, have almost everywhere their
      allowance of rum, and of molasses or spruce-beer, in the same manner as
      the white servants; and this allowance would not probably be withdrawn,
      though those articles should be subjected to moderate duties. The
      consumption of the taxed commodities, therefore, in proportion to the
      number of inhabitants, would probably be as great in America and the West
      Indies as in any part of the British empire. The opportunities of
      smuggling, indeed, would be much greater; America, in proportion to the
      extent of the country, being much more thinly inhabited than either
      Scotland or Ireland. If the revenue, however, which is at present raised
      by the different duties upon malt and malt liquors, were to be levied by a
      single duty upon malt, the opportunity of smuggling in the most important
      branch of the excise would be almost entirely taken away; and if the
      duties of customs, instead of being imposed upon almost all the different
      articles of importation, were confined to a few of the most general use
      and consumption, and if the levying of those duties were subjected to the
      excise laws, the opportunity of smuggling, though not so entirely taken
      away, would be very much diminished. In consequence of those two
      apparently very simple and easy alterations, the duties of customs and
      excise might probably produce a revenue as great, in proportion to the
      consumption of the most thinly inhabited province, as they do at present,
      in proportion to that of the most populous.

      The Americans, it has been said, indeed, have no gold or silver money, the
      interior commerce of the country being carried on by a paper currency; and
      the gold and silver, which occasionally come among them, being all sent to
      Great Britain, in return for the commodities which they receive from us.
      But without gold and silver, it is added, there is no possibility of
      paying taxes. We already get all the gold and silver which they have. How
      is it possible to draw from them what they have not?

      The present scarcity of gold and silver money in America, is not the
      effect of the poverty of that country, or of the inability of the people
      there to purchase those metals. In a country where the wages of labour are
      so much higher, and the price of provisions so much lower than in England,
      the greater part of the people must surely have wherewithal to purchase a
      greater quantity, if it were either necessary or convenient for them to do
      so. The scarcity of those metals, therefore, must be the effect of choice,
      and not of necessity.

      It is for transacting either domestic or foreign business, that gold or
      silver money is either necessary or convenient.

      The domestic business of every country, it has been shewn in the second
      book of this Inquiry, may, at least in peaceable times, be transacted by
      means of a paper currency, with nearly the same degree of conveniency as
      by gold and silver money. It is convenient for the Americans, who could
      always employ with profit, in the improvement of their lands, a greater
      stock than they can easily get, to save as much as possible the expense of
      so costly an instrument of commerce as gold and silver; and rather to
      employ that part of their surplus produce which would be necessary for
      purchasing those metals, in purchasing the instruments of trade, the
      materials of clothing, several parts of household furniture, and the iron
      work necessary for building and extending their settlements and
      plantations; in purchasing not dead stock, but active and productive
      stock. The colony governments find it for their interest to supply the
      people with such a quantity of paper money as is fully sufficient, and
      generally more than sufficient, for transacting their domestic business.
      Some of those governments, that of Pennsylvania, particularly, derive a
      revenue from lending this paper money to their subjects, at an interest of
      so much per cent. Others, like that of Massachusetts Bay, advance, upon
      extraordinary emergencies, a paper money of this kind for defraying the
      public expense; and afterwards, when it suits the conveniency of the
      colony, redeem it at the depreciated value to which it gradually falls. In
      1747, {See Hutchinson’s History of Massachusetts Bay vol. ii. page 436 et
      seq.} that colony paid in this manner the greater part of its public
      debts, with the tenth part of the money for which its bills had been
      granted. It suits the conveniency of the planters, to save the expense of
      employing gold and silver money in their domestic transactions; and it
      suits the conveniency of the colony governments, to supply them with a
      medium, which, though attended with some very considerable disadvantages,
      enables them to save that expense. The redundancy of paper money
      necessarily banishes gold and silver from the domestic transactions of the
      colonies, for the same reason that it has banished those metals from the
      greater part of the domestic transactions in Scotland; and in both
      countries, it is not the poverty, but the enterprizing and projecting
      spirit of the people, their desire of employing all the stock which they
      can get, as active and productive stock, which has occasioned this
      redundancy of paper money.

      In the exterior commerce which the different colonies carry on with Great
      Britain, gold and silver are more or less employed, exactly in proportion
      as they are more or less necessary. Where those metals are not necessary,
      they seldom appear. Where they are necessary, they are generally found.

      In the commerce between Great Britain and the tobacco colonies, the
      British goods are generally advanced to the colonists at a pretty long
      credit, and are afterwards paid for in tobacco, rated at a certain price.
      It is more convenient for the colonists to pay in tobacco than in gold and
      silver. It would be more convenient for any merchant to pay for the goods
      which his correspondents had sold to him, in some other sort of goods
      which he might happen to deal in, than in money. Such a merchant would
      have no occasion to keep any part of his stock by him unemployed, and in
      ready money, for answering occasional demands. He could have, at all
      times, a larger quantity of goods in his shop or warehouse, and he could
      deal to a greater extent. But it seldom happens to be convenient for all
      the correspondents of a merchant to receive payment for the goods which
      they sell to him, in goods of some other kind which he happens to deal in.
      The British merchants who trade to Virginia and Maryland, happen to be a
      particular set of correspondents, to whom it is more convenient to receive
      payment for the goods which they sell to those colonies in tobacco, than
      in gold and silver. They expect to make a profit by the sale of the
      tobacco; they could make none by that of the gold and silver. Gold and
      silver, therefore, very seldom appear in the commerce between Great
      Britain and the tobacco colonies. Maryland and Virginia have as little
      occasion for those metals in their foreign, as in their domestic commerce.
      They are said, accordingly, to have less gold and silver money than any
      other colonies in America. They are reckoned, however, as thriving, and
      consequently as rich, as any of their neighbours.

      In the northern colonies, Pennsylvania, New York, New Jersey, the four
      governments of New England, etc. the value of their own produce which they
      export to Great Britain is not equal to that of the manufactures which
      they import for their own use, and for that of some of the other colonies,
      to which they are the carriers. A balance, therefore, must be paid to the
      mother-country in gold and silver and this balance they generally find.

      In the sugar colonies, the value of the produce annually exported to Great
      Britain is much greater than that of all the goods imported from thence.
      If the sugar and rum annually sent to the mother-country were paid for in
      those colonies, Great Britain would be obliged to send out, every year, a
      very large balance in money; and the trade to the West Indies would, by a
      certain species of politicians, be considered as extremely
      disadvantageous. But it so happens, that many of the principal proprietors
      of the sugar plantations reside in Great Britain. Their rents are remitted
      to them in sugar and rum, the produce of their estates. The sugar and rum
      which the West India merchants purchase in those colonies upon their own
      account, are not equal in value to the goods which they annually sell
      there. A balance, therefore, must necessarily be paid to them in gold and
      silver, and this balance, too, is generally found.

      The difficulty and irregularity of payment from the different colonies to
      Great Britain, have not been at all in proportion to the greatness or
      smallness of the balances which were respectively due from them. Payments
      have, in general, been more regular from the northern than from the
      tobacco colonies, though the former have generally paid a pretty large
      balance in money, while the latter have either paid no balance, or a much
      smaller one. The difficulty of getting payment from our different sugar
      colonies has been greater or less in proportion, not so much to the extent
      of the balances respectively due from them, as to the quantity of
      uncultivated land which they contained; that is, to the greater or smaller
      temptation which the planters have been under of over-trading, or of
      undertaking the settlement and plantation of greater quantities of waste
      land than suited the extent of their capitals. The returns from the great
      island of Jamaica, where there is still much uncultivated land, have, upon
      this account, been, in general, more irregular and uncertain than those
      from the smaller islands of Barbadoes, Antigua, and St. Christopher’s,
      which have, for these many years, been completely cultivated, and have,
      upon that account, afforded less field for the speculations of the
      planter. The new acquisitions of Grenada, Tobago, St. Vincent’s, and
      Dominica, have opened a new field for speculations of this kind; and the
      returns from those islands have of late been as irregular and uncertain
      as those from the great island of Jamaica.

      It is not, therefore, the poverty of the colonies which occasions, in the
      greater part of them, the present scarcity of gold and silver money. Their
      great demand for active and productive stock makes it convenient for them
      to have as little dead stock as possible, and disposes them, upon that
      account, to content themselves with a cheaper, though less commodious
      instrument of commerce, than gold and silver. They are thereby enabled to
      convert the value of that gold and silver into the instruments of trade,
      into the materials of clothing, into household furniture, and into the
      iron work necessary for building and extending their settlements and
      plantations. In those branches of business which cannot be transacted
      without gold and silver money, it appears, that they can always find the
      necessary quantity of those metals; and if they frequently do not find it,
      their failure is generally the effect, not of their necessary poverty, but
      of their unnecessary and excessive enterprise. It is not because they are
      poor that their payments are irregular and uncertain, but because they are
      too eager to become excessively rich. Though all that part of the produce
      of the colony taxes, which was over and above what was necessary for
      defraying the expense of their own civil and military establishments, were
      to be remitted to Great Britain in gold and silver, the colonies have
      abundantly wherewithal to purchase the requisite quantity of those metals.
      They would in this case be obliged, indeed, to exchange a part of their
      surplus produce, with which they now purchase active and productive stock,
      for dead stock. In transacting their domestic business, they would be
      obliged to employ a costly, instead of a cheap instrument of commerce; and
      the expense of purchasing this costly instrument might damp somewhat the
      vivacity and ardour of their excessive enterprise in the improvement of
      land. It might not, however, be necessary to remit any part of the
      American revenue in gold and silver. It might be remitted in bills drawn
      upon, and accepted by, particular merchants or companies in Great Britain,
      to whom a part of the surplus produce of America had been consigned, who
      would pay into the treasury the American revenue in money, after having
      themselves received the value of it in goods; and the whole business might
      frequently be transacted without exporting a single ounce of gold or
      silver from America.

      It is not contrary to justice, that both Ireland and America should
      contribute towards the discharge of the public debt of Great Britain. That
      debt has been contracted in support of the government established by the
      Revolution; a government to which the protestants of Ireland owe, not only
      the whole authority which they at present enjoy in their own country, but
      every security which they possess for their liberty, their property, and
      their religion; a government to which several of the colonies of America
      owe their present charters, and consequently their present constitution;
      and to which all the colonies of America owe the liberty, security, and
      property, which they have ever since enjoyed. That public debt has been
      contracted in the defence, not of Great Britain alone, but of all the
      different provinces of the empire. The immense debt contracted in the late
      war in particular, and a great part of that contracted in the war before,
      were both properly contracted in defence of America.

      By a union with Great Britain, Ireland would gain, besides the freedom of
      trade, other advantages much more important, and which would much more
      than compensate any increase of taxes that might accompany that union. By
      the union with England, the middling and inferior ranks of people in
      Scotland gained a complete deliverance from the power of an aristocracy,
      which had always before oppressed them. By a union with Great Britain, the
      greater part of people of all ranks in Ireland would gain an equally
      complete deliverance from a much more oppressive aristocracy; an
      aristocracy not founded, like that of Scotland, in the natural and
      respectable distinctions of birth and fortune, but in the most odious of
      all distinctions, those of religious and political prejudices;
      distinctions which, more than any other, animate both the insolence of the
      oppressors, and the hatred and indignation of the oppressed, and which
      commonly render the inhabitants of the same country more hostile to one
      another than those of different countries ever are. Without a union with
      Great Britain, the inhabitants of Ireland are not likely, for many ages,
      to consider themselves as one people.

      No oppressive aristocracy has ever prevailed in the colonies. Even they,
      however, would, in point of happiness and tranquillity, gain considerably
      by a union with Great Britain. It would, at least, deliver them from those
      rancourous and virulent factions which are inseparable from small
      democracies, and which have so frequently divided the affections of their
      people, and disturbed the tranquillity of their governments, in their form
      so nearly democratical. In the case of a total separation from Great
      Britain, which, unless prevented by a union of this kind, seems very
      likely to take place, those factions would be ten times more virulent than
      ever. Before the commencement of the present disturbances, the coercive
      power of the mother-country had always been able to restrain those
      factions from breaking out into any thing worse than gross brutality and
      insult. If that coercive power were entirely taken away, they would
      probably soon break out into open violence and bloodshed. In all great
      countries which are united under one uniform government, the spirit of
      party commonly prevails less in the remote provinces than in the centre of
      the empire. The distance of those provinces from the capital, from the
      principal seat of the great scramble of faction and ambition, makes them
      enter less into the views of any of the contending parties, and renders
      them more indifferent and impartial spectators of the conduct of all. The
      spirit of party prevails less in Scotland than in England. In the case of
      a union, it would probably prevail less in Ireland than in Scotland; and
      the colonies would probably soon enjoy a degree of concord and unanimity,
      at present unknown in any part of the British empire. Both Ireland and the
      colonies, indeed, would be subjected to heavier taxes than any which they
      at present pay. In consequence, however, of a diligent and faithful
      application of the public revenue towards the discharge of the national
      debt, the greater part of those taxes might not be of long continuance,
      and the public revenue of Great Britain might soon be reduced to what was
      necessary for maintaining a moderate peace-establishment.

      The territorial acquisitions of the East India Company, the undoubted
      right of the Crown, that is, of the state and people of Great Britain,
      might be rendered another source of revenue, more abundant, perhaps, than
      all those already mentioned. Those countries are represented as more
      fertile, more extensive, and, in proportion to their extent, much richer
      and more populous than Great Britain. In order to draw a great revenue
      from them, it would not probably be necessary to introduce any new system
      of taxation into countries which are already sufficiently, and more than
      sufficiently, taxed. It might, perhaps, be more proper to lighten than to
      aggravate the burden of those unfortunate countries, and to endeavour to
      draw a revenue from them, not by imposing new taxes, but by preventing the
      embezzlement and misapplication of the greater part of those which they
      already pay.

      If it should be found impracticable for Great Britain to draw any
      considerable augmentation of revenue from any of the resources above
      mentioned, the only resource which can remain to her, is a diminution of
      her expense. In the mode of collecting and in that of expending the public
      revenue, though in both there may be still room for improvement, Great
      Britain seems to be at least as economical as any of her neighbours. The
      military establishment which she maintains for her own defence in time of
      peace, is more moderate than that of any European state, which can pretend
      to rival her either in wealth or in power. None of these articles,
      therefore, seem to admit of any considerable reduction of expense. The
      expense of the peace-establishment of the colonies was, before the
      commencement of the present disturbances, very considerable, and is an
      expense which may, and, if no revenue can be drawn from them, ought
      certainly to be saved altogether. This constant expense in time of peace,
      though very great, is insignificant in comparison with what the defence of
      the colonies has cost us in time of war. The last war, which was
      undertaken altogether on account of the colonies, cost Great Britain, it
      has already been observed, upwards of ninety millions. The Spanish war of
      1739 was principally undertaken on their account; in which, and in the
      French war that was the consequence of it, Great Britain, spent upwards of
      forty millions; a great part of which ought justly to be charged to the
      colonies. In those two wars, the colonies cost Great Britain much more
      than double the sum which the national debt amounted to before the
      commencement of the first of them. Had it not been for those wars, that
      debt might, and probably would by this time, have been completely paid;
      and had it not been for the colonies, the former of those wars might not,
      and the latter certainly would not, have been undertaken. It was because
      the colonies were supposed to be provinces of the British Empire, that
      this expense was laid out upon them. But countries which contribute
      neither revenue nor military force towards the support of the empire,
      cannot be considered as provinces. They may, perhaps, be considered as
      appendages, as a sort of splendid and shewy equipage of the empire. But if
      the empire can no longer support the expense of keeping up this equipage,
      it ought certainly to lay it down; and if it cannot raise its revenue in
      proportion to its expense, it ought at least to accommodate its expense to
      its revenue. If the colonies, notwithstanding their refusal to submit to
      British taxes, are still to be considered as provinces of the British
      empire, their defence, in some future war, may cost Great Britain as great
      an expense as it ever has done in any former war. The rulers of Great
      Britain have, for more than a century past, amused the people with the
      imagination that they possessed a great empire on the west side of the
      Atlantic. This empire, however, has hitherto existed in imagination only.
      It has hitherto been, not an empire, but the project of an empire; not a
      gold mine, but the project of a gold mine; a project which has cost, which
      continues to cost, and which, if pursued in the same way as it has been
      hitherto, is likely to cost, immense expense, without being likely to
      bring any profit; for the effects of the monopoly of the colony trade, it
      has been shewn, are to the great body of the people, mere loss instead of
      profit. It is surely now time that our rulers should either realize this
      golden dream, in which they have been indulging themselves, perhaps, as
      well as the people; or that they should awake from it themselves, and
      endeavour to awaken the people. If the project cannot be completed, it
      ought to be given up. If any of the provinces of the British empire cannot
      be made to contribute towards the support of the whole empire, it is
      surely time that Great Britain should free herself from the expense of
      defending those provinces in time of war, and of supporting any part of
      their civil or military establishment in time of peace; and endeavour to
      accommodate her future views and designs to the real mediocrity of her
      circumstances.


## 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
- agio-of-bank-money
- agricultural-capital
- agricultural-capital-structure
- agricultural-comparative-advantage
- agricultural-cultivation
- agricultural-cultivation-at-farmer-expense
- agricultural-cultivation-at-proprietor-expense
- agricultural-demand
- agricultural-development-constraints
- agricultural-development-sequence
- agricultural-economic-potential
- agricultural-efficiency
- agricultural-improvement
- agricultural-improvement-discouragement
- agricultural-improvement-foundation
- agricultural-labour
- agricultural-market-access-cost-structure
- agricultural-market-access-development-prerequisites
- agricultural-market-access-development-sequence
- agricultural-market-access-gradient
- agricultural-market-access-inequality
- agricultural-market-access-opportunity-cost
- agricultural-market-communication-channels
- agricultural-market-integration
- agricultural-market-size-threshold
- agricultural-opportunity-cost
- 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-productivity-limits
- agricultural-security-gradient
- agricultural-spatial-inequality
- agricultural-specialization
- agricultural-stock
- agricultural-supply
- agricultural-surplus
- agricultural-surplus-determination
- agricultural-systems-of-political-economy
- agricultural-technology
- agricultural-technology-adoption
- agricultural-trade
- alien-merchant-duties
- ancient-system-of-political-economy
- annual-coinage-expense-justification
- annual-consumption-of-goods
- annual-consumption-of-metals
- annual-importation-of-gold-and-silver-purposes
- annual-industry-employed-in-production
- annual-plate-addition-estimation
- annual-produce-of-land-and-labour
- annual-surplus-of-gold-in-portugal
- apprenticeships
- artificer-neighbourhood-settlement
- artificer-planter-independence
- artificer-planter-transition
- artificer-servant-status
- artificers-and-retailers
- artificial-direction-of-industry
- artificial-grasses
- artificial-market-creation
- artisan-specialisation
- assaying
- assize-of-bread
- assize-of-bread-and-ale
- aulnagers
- average-price-of-corn
- balance-of-produce-and-consumption
- balance-of-trade
- balance-of-trade-doctrine
- 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-money
- bank-notes
- bank-of-england-coinage-burden
- 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
- barren-or-unproductive-class
- barter-and-exchange
- benevolence
- bills-of-exchange
- bleacher
- boat-fishery
- bounties-on-exportation
- bounty
- bullion
- bullion-market-price-mechanism
- bullion-transportation-cost-advantage
- buss-fishery
- butcher-trade
- bye-laws
- canal-communication
- capital
- capital-accumulation
- capital-accumulation-through-frugality
- capital-decay-through-excessive-consumption
- capital-employed
- capital-employment-advantages
- capital-employment-effects
- capital-employment-security-gradient
- capital-of-the-farmer
- capital-replacement
- capital-security-preference
- capital-security-visibility
- capitation-tax
- carriage-value-savings
- carrying-trade
- cash-accounts
- certainty-in-taxation
- certificates
- cheap-years
- circulating-capital
- circulating-capital-components
- circulating-money
- circulation-of-money
- civil-government-expense-in-colonies
- coal-heaver
- coal-price
- coarser-and-finer-materials
- coin-degradation-measurement
- coined-money
- collier
- colonial-administrative-efficiency
- colonial-dependency-structure
- colonial-economic-adaptation
- colonial-economic-autonomy
- colonial-economic-autonomy-benefits
- colonial-economic-comparative-advantage
- colonial-economic-development-constraints
- colonial-economic-development-sequence
- colonial-economic-diversification
- colonial-economic-efficiency-analysis
- colonial-economic-freedom
- colonial-economic-growth-patterns
- colonial-economic-integration
- colonial-economic-interdependence
- colonial-economic-justice
- colonial-economic-opportunity-costs
- colonial-economic-policy-alternatives
- colonial-economic-policy-effectiveness
- colonial-economic-potential
- colonial-economic-specialization
- colonial-economic-stability
- colonial-economic-system
- colonial-economic-system-adaptation-mechanisms
- colonial-economic-system-balance
- colonial-economic-system-comparison
- colonial-economic-system-coordination
- colonial-economic-system-design
- colonial-economic-system-dynamics
- colonial-economic-system-equilibrium
- colonial-economic-system-evaluation
- colonial-economic-system-evolution
- colonial-economic-system-feedback-loops
- colonial-economic-system-governance
- colonial-economic-system-implementation
- colonial-economic-system-innovation
- colonial-economic-system-learning
- colonial-economic-system-objectives
- colonial-economic-system-outcomes
- colonial-economic-system-performance
- colonial-economic-system-principles
- colonial-economic-system-resilience
- colonial-economic-system-stability-mechanisms
- colonial-economic-system-sustainability
- colonial-economic-system-transformation
- colonial-labor-market-dynamics
- colonial-land-abundance-effects
- colonial-market-access-costs
- colonial-market-expansion
- colonial-military-burden
- colonial-population-growth-factors
- colonial-prosperity-mechanisms
- colonial-revenue-potential
- colonial-trade-monopoly
- colonial-trade-pattern-distortion
- colonial-wine-duty-drawback
- colony-assemblies
- colony-prosperity
- colony-trade-monopoly
- combination-of-masters
- combination-of-workmen
- command-over-labour
- commerce-between-town-and-country
- commerce-of-towns
- commercial-country-ruin-predictions
- commercial-development-sequence-inversion
- commercial-discord-source
- commercial-family-duration-pattern
- commercial-hospitality-contrast
- commercial-independence-effect
- commercial-interactions
- commercial-jealousy-mechanism
- commercial-maxims-inversion
- commercial-or-mercantile-system
- commercial-order-and-government-introduction
- commercial-policy-of-england
- commercial-regulations
- commercial-society
- commercial-society-emergence
- commercial-society-formation
- commercial-system-enrichment-mechanism
- commercial-system-principles
- commercial-system-transformation
- commercial-transactions
- common-annual-profits-of-manufacturing-stock
- common-labour-wages
- common-returns-of-stock
- commonalty
- comparative-advantage-principle
- competition-among-buyers
- competition-among-dealers
- competition-among-sellers
- complete-manufacture
- component-parts-of-price
- computed-exchange-rate
- consumption-as-the-end-of-production
- consumption-of-foreign-goods
- contract
- convenience-in-taxation
- conversion-price
- copper-money
- corn-exportation-prohibition
- corn-land
- corn-rent
- corporation-laws
- corporation-privileges-and-market-prices
- corve
- country-gentlemen
- country-gentlemen-versus-merchants
- country-life-charms
- crown-lands-revenue
- cultivation-improvement-priority
- customs-duties
- dead-stock
- dear-years
- debasement-of-currency
- declining-manufacture
- degradation-of-coin
- degradation-of-silver
- demand-for-labour
- demesne
- diamond-buckles-metaphor
- direct-foreign-trade-of-consumption
- disadvantageous-balance-trade-restraints
- discount-of-bills
- distant-country-subsistence
- distant-market-manufacturing
- distant-sale-manufacturing
- division-of-labour
- division-of-labour-advantage
- domestic-industry-protection
- domestic-market-monopoly
- domestic-market-size-effects
- double-coincidence-of-wants
- drawback
- drawbacks
- drawing-and-redrawing
- duties-on-importation
- dwelling-house-distinction
- early-and-rude-state-of-society
- early-navigation-advantages
- economic-accessibility-determinants
- economic-accessibility-gradient
- economic-autonomy
- economic-autonomy-gradient
- economic-backwardness
- economic-connectivity-importance
- economic-development-constraints
- economic-development-geography
- economic-development-geography-theory
- economic-development-sequence
- economic-development-sequencing
- economic-development-spatial-patterns
- economic-geography
- economic-geography-determinism
- economic-geography-impact
- economic-identity
- economic-isolation-effects
- economic-opportunity-cost
- economic-opportunity-geography
- economic-prosperity-symptoms
- economic-spatial-inequality
- economic-spatial-organisation
- economic-spatial-organization
- economic-stagnation-symptoms
- economic-system-actor
- economic-system-adaptability
- economic-system-adaptation
- economic-system-adoption-factor
- economic-system-analysis
- economic-system-application
- economic-system-benchmark
- economic-system-best-practice
- economic-system-best-practices
- economic-system-change-agent
- economic-system-comparison
- economic-system-comprehension
- economic-system-consequence
- economic-system-context
- economic-system-coordination
- economic-system-development
- economic-system-diffusion-mechanism
- economic-system-diffusion-mechanisms
- economic-system-effectiveness
- economic-system-effectiveness-evaluation
- economic-system-efficiency
- economic-system-evaluation
- economic-system-evaluation-criteria
- economic-system-evolution
- economic-system-experience-accumulation
- economic-system-explanation
- economic-system-failure-indicator
- economic-system-framework
- economic-system-function
- economic-system-governance
- economic-system-implementation
- economic-system-implementation-barrier
- economic-system-improvement
- economic-system-influence
- economic-system-innovation
- economic-system-innovation-driver
- economic-system-institution
- economic-system-integration
- economic-system-interaction
- economic-system-knowledge
- economic-system-knowledge-transfer
- economic-system-learning-process
- economic-system-legitimacy
- economic-system-management
- economic-system-mechanism
- economic-system-mechanisms
- economic-system-objectives
- economic-system-operation
- economic-system-outcome-measure
- economic-system-outcomes
- economic-system-performance-indicator
- economic-system-policy
- economic-system-practice
- economic-system-principles
- economic-system-purpose
- economic-system-relationship
- economic-system-resistance-factor
- economic-system-resistance-factors
- economic-system-selection
- economic-system-standard
- economic-system-structure
- economic-system-success-measure
- economic-system-sustainability
- economic-system-theory
- economic-system-transformation
- economic-system-transition-challenge
- economic-system-transition-challenges
- economic-systems-distinction
- economical-table
- economy-in-taxation
- effect-of-prohibition-on-gold-and-silver-export
- effectual-demand
- ejectment-action
- encroachment-upon-capital
- engrossers-and-forestallers
- engrossing
- entail
- enumerated-commodities
- environmental-scanning
- equal-profit-employment-choice
- equality-in-taxation
- exchange
- exchange-rate-mechanism
- exchangeable-value
- exchequer
- excise-duties
- excise-duty-drawback
- exclusive-company
- exclusive-corporation
- expense-of-defence
- expense-of-justice
- expense-of-public-works-and-public-institutions
- export-bounty
- export-of-gold-and-silver-prohibition-effects
- exportation-bounty
- exportation-of-gold-and-silver-as-effect-of-declension
- exportation-trade
- extraordinary-expense
- extraordinary-profits
- extraordinary-profits-analysis
- extraordinary-restraints-on-importation
- fairs-and-markets
- false-coiners-and-seignorage
- farm-rent
- farmer
- farmers-capital
- farmers-profit
- favour
- feudal-anarchy
- feudal-government-effects
- fixed-capital
- flax-grower
- fluctuations-in-value-of-gold-and-silver
- forced-corn-trade
- foreign-capital-exportation
- foreign-commerce-manufactures-birth
- foreign-commodities
- foreign-corn-importation-effects
- foreign-manufacture-prohibitions
- foreign-market
- foreign-market-access
- foreign-sale-encouragement
- foreign-trade
- foreign-trade-enrichment-mechanism
- foreign-trade-of-consumption
- forestalling
- four-maxims-of-taxation
- four-methods-of-employing-capital
- fraud-in-drawback-system
- free-burgh
- free-ports
- free-trade
- freeholder-yeomanry
- french-goods-export-restrictions
- 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-and-silver-as-measure-of-value
- gold-money
- gold-price-variation
- gradual-restoration-of-trade-freedom
- graziers-versus-manufacturers-interests
- gross-revenue
- ground-expenses
- ground-rent-tax
- hanseatic-league
- higgling-and-bargaining-of-the-market
- home-made-commodities
- home-market
- home-market-monopoly
- home-trade
- hop-garden
- house-rent-tax
- human-folly-injustice-exposure
- human-nature
- idle-consumers
- immediate-consumption
- import-restraint
- importation-trade
- improved-farm-advantages
- improved-land
- improvement-of-the-country
- inclosure
- increase-of-money-as-effect-of-prosperity
- inland-corn-dealer
- inland-duty-drawback
- 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-of-money-tax
- interest-or-use-of-money
- invisible-hand-mechanism
- joint-stock-company
- journeymen
- judgment-in-labour-application
- kelp
- kitchen-garden
- labour-of-inspection-and-direction
- labouring-cattle
- labouring-poor
- land-carriage
- land-mines-and-fisheries
- land-monopolization-effects
- land-tax
- landlord
- landlords-share
- law-of-primogeniture
- legal-rate-of-interest
- legal-tender
- licence-to-gather-natural-produce
- lowest-rate-of-wages
- machinery-invention
- madeira-wine-trade-exception
- manufactured-produce
- manufacturer
- manufacturers-monopoly-power
- 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-adjustment-mechanism
- market-price-mechanism
- market-price-mechanism-for-rude-produce
- market-price-mechanism-regulation
- 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-size-threshold-effects
- market-town-economy
- market-town-formation
- masquerade-dress-trade
- master-artificer
- master-manufacturer
- materials-and-subsistence
- measure-of-exchangeable-value
- mediterranean-civilisation-pattern
- melting-pot-effects
- menial-servants
- mercantile-jealousy
- mercantile-stock
- mercantile-system
- mercantile-system-principles
- merchant
- merchant-capital
- merchant-capital-employment-choices
- merchant-carrier
- merchant-country-gentleman-transition
- merchantable-herrings
- metal-currency
- metayer
- military-assistance
- military-defense-expense
- military-discipline
- military-employment
- militia
- mine-fertility
- mine-situation
- mint
- mint-price
- mint-price-versus-market-price-relationship
- modern-states-inversion
- modern-system-of-political-economy
- modes-of-expense-affecting-public-opulence
- money
- money-as-instrument-of-commerce
- money-price-of-corn
- money-price-of-labour
- money-rent
- moneys-worth
- monied-interest
- monopoly-effects-on-market-price
- monopoly-effects-on-prices
- monopoly-in-trade
- monopoly-of-sugar-trade
- monopoly-of-tobacco-trade
- monopoly-of-trade
- monopoly-price-of-land
- mutual-gain-reciprocity
- mutual-good-offices
- mutual-servitude
- national-animosity-in-commerce
- national-animosity-in-trade-policy
- national-capital-composition
- national-economic-identity
- national-enrichment-through-neighbours-wealth
- national-prejudice-and-animosity-in-trade
- national-prejudice-in-trade
- natural-advantages-in-trade
- natural-balance-of-employments
- natural-complement-of-riches
- natural-course-of-capital-employment
- natural-course-of-economic-development
- natural-course-of-things
- natural-development-sequence
- natural-division-of-labour
- natural-employment-of-capital
- natural-inclinations-thwarting
- natural-liberty-in-banking
- natural-liberty-in-colonial-trade
- natural-liberty-in-trade
- natural-liberty-of-trade
- 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
- navigation-acts
- neat-produce
- neat-revenue
- necessity
- nominal-measure-of-value
- nominal-price
- nominal-price-of-commodities
- non-enumerated-commodities
- non-standard-metal
- occasional-and-temporary-market-fluctuations
- old-subsidy-drawback-rules
- ordinary-market-price-of-land
- ordinary-profits-of-stock
- ordinary-rates-of-wages-profit-and-rent
- ordinary-state-of-employments
- original-and-annual-expenses
- original-destination-of-man
- original-government-manners
- overstocked-market-conditions
- packet-boat-gold-import-estimate
- paper-money
- parsimony-and-privation
- pasture-land
- payment-in-kind
- penelopes-web-metaphor
- perfect-liberty-in-trade
- permanent-market-price-enhancements
- permanent-versus-temporary-price-effects
- perpetual-fund-for-maintenance-of-labour
- piece-work-wages
- pin-maker-trade
- planter-independence
- plate-household-silver
- poacher
- policy-closure
- policy-closure-concept
- political-arithmetic
- political-economy
- political-economy-objectives
- poll-tax
- poll-tax-compensation
- post-office-revenue
- potato-cultivation
- precious-metals-consumption
- present-state-of-the-nation-analysis
- price-in-labour
- price-in-money
- price-of-commodities
- prime-cost-of-commodities
- principal-clerk
- principal-employments
- private-interest-monopoly-spirit
- private-misconduct-versus-public-prodigality
- prodigals
- prodigals-and-projectors
- producer-interest-versus-consumer-interest
- productive-abilities
- productive-and-unproductive-labour
- productive-class
- productive-expenses
- productive-labourers
- productive-powers-of-labour
- profits-of-stock
- progress-of-opulence
- progressive-state-of-society
- progressive-wealth-consequentiality
- prohibition-of-exportation
- prohibition-of-importation
- promissory-notes
- proportion-between-metals
- proportion-between-productive-and-unproductive-hands
- prudent-family-maxim
- public-bank-revenue
- public-education-institutions
- public-education-of-professionals
- public-executioner
- public-fiars
- public-generosity-in-coinage
- public-good-versus-private-interest
- public-law-on-coinage
- public-lottery
- public-mourning-effects
- public-registers-of-manufactures
- public-revenue
- public-revenue-sources
- public-services-funding
- public-tranquillity
- public-warehouse-system
- public-works-funding-mechanisms
- purveyance
- quantity-of-labour
- rate-of-interest
- rate-of-profit
- re-exportation-drawback
- real-exchange-rate
- real-measure-of-value
- real-price
- real-price-of-commodities
- real-value-of-corn-rent
- real-value-of-silver
- registration-duties
- regulated-company
- regulated-company-versus-joint-stock-company-comparison
- regulated-proportion
- religious-occupational-restrictions
- rent-of-land
- requisite-variety
- requisite-variety-in-banking
- restraints-upon-importation
- retail-trade
- retailers
- retainers-and-dependents-system
- retaliation-in-trade-policy
- revenue
- revenue-constituting-profit-and-rent
- revenue-destined-for-capital-replacement
- revenue-for-public-services
- revenue-or-subsistence-for-the-people
- revenue-versus-capital-effects
- rice-countries
- river-navigation-infrastructure
- round-about-foreign-trade-of-consumption
- rude-produce
- rural-urban-reciprocity
- scarcity-of-hands
- sea-coast-development
- sea-sticks
- security-preference-capital
- seed-as-fixed-capital
- seed-time-and-harvest-metaphor
- seignorage
- self-love
- servile-condition
- settlement-laws
- silver-money
- silver-price-variation
- skill-and-dexterity
- smuggling
- smuggling-as-principal-import-method
- smuggling-of-precious-metals
- smuggling-trade
- sober-people
- societys-general-stock
- sovereign-dignity-expenses
- sovereign-economic-policy-authority
- sovereign-parsimony
- sovereign-parsimony-principle
- sovereign-revenue-sources
- spare-revenue
- specie
- specie-export-prohibition-effects
- species-of-industry-with-consistent-output
- species-of-industry-with-variable-output
- speculative-trade
- stamp-duties
- stamp-masters
- standard-metal
- standard-weight-of-coin
- standing-army
- state-or-commonwealth-revenue
- stationary-country
- statute-of-labourers
- statutes-of-apprenticeship-effects
- sterling-mark
- stock
- stock-lent-at-interest
- stock-of-the-country
- stock-of-the-farmer
- stock-profit-tax
- strategic-planning
- 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
- system-of-agriculture
- system-of-commerce
- system-of-natural-liberty
- systemic-stability
- systemic-stability-analysis
- taille
- tale
- tale-versus-weight-measurement
- tax-administration-systems
- tax-farming
- tax-on-consumable-commodities
- tax-on-luxuries
- tax-on-necessaries
- temporary-price-of-corn
- temporary-statutes
- temporary-versus-permanent-price-effects
- territorial-cultivation-completeness
- territorial-cultivation-limit
- territorial-improvement-support
- territorial-support-limitation
- three-duties-of-the-sovereign
- three-original-sources-of-revenue
- three-way-employment-of-stock
- thriving-country
- tobacco-colonies
- toil-and-trouble-of-acquiring
- tonnage-bounty
- town-country-dependency
- town-market-function
- town-reproduction-impossibility
- trade-as-union-and-friendship
- trade-balance-mechanism
- trade-capital
- trade-encouragement
- trade-route-dependency
- transportation-cost-differential
- transportation-infrastructure-importance
- transportation-mode-economic-effects
- treasure-accumulation
- treasure-trove
- treaties-of-commerce
- treaty
- truck
- two-branches-of-circulation
- uncultivated-land-availability
- underling-tradesmen-maxims
- unimproved-land
- universal-instruments-of-commerce
- university-of-trades
- unproductive-labourers
- unstamped-bars
- urban-autonomy
- urban-rural-reciprocity
- usury
- value-in-exchange
- value-in-use
- value-of-gold
- value-of-silver
- variety-of-talents
- venison
- victuals
- villeinage
- vineyard
- wages-of-a-journeyman
- wages-of-labour
- waggon-way-through-the-air-metaphor
- warehouse-export-system
- warehouse-rent-for-bullion-deposits
- warehouse-system
- water-carriage
- water-pond-metaphor
- weighing
- whole-produce-of-labour
- wholesale-merchants
- wholesale-trade
- window-tax
- 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

---
```
