feat(llm): add Gemini adapter and process book-1-chapter-05
Add GeminiAdapter calling Google's Generative Language REST API (default model: gemini-2.5-flash). Register "gemini" as third provider in the factory and CLI. Add rate-limit retry with exponential backoff to the pipeline's _call_llm helper. Increase default max_tokens from 2000 to 4096. Process book-1-chapter-05 via Gemini free tier — 1 new entity extracted (necessaries-conveniencies-and-amusements-of-life), 41 existing entities correctly skipped by dedup. Canonical set now at 42 unique entities. Co-Authored-By: Claude Opus 4.6 <noreply@anthropic.com>
This commit is contained in:
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# Economic Entities — Book I, Chapter 5
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{{ include "necessaries-conveniencies-and-amusements-of-life.md" }}
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# Extract Economic Entities
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You are an analytical economist specializing in classical economic theory.
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Your task is to extract distinct economic entities from a chapter of
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Adam Smith's *The Wealth of Nations*.
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## Source Chapter
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---
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id: book-1-chapter-05
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title: "OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY."
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book: "1"
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chapter: 5
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artifact_type: content
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---
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CHAPTER V.
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OF THE REAL AND NOMINAL PRICE OF
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COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY.
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Every man is rich or poor according to the degree in which he can afford
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to enjoy the necessaries, conveniencies, and amusements of human life. But
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after the division of labour has once thoroughly taken place, it is but a
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very small part of these with which a man’s own labour can supply him. The
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far greater part of them he must derive from the labour of other people,
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and he must be rich or poor according to the quantity of that labour which
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he can command, or which he can afford to purchase. The value of any
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commodity, therefore, to the person who possesses it, and who means not to
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use or consume it himself, but to exchange it for other commodities, is
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equal to the quantity of labour which it enables him to purchase or
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command. Labour therefore, is the real measure of the exchangeable value
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of all commodities.
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The real price of every thing, what every thing really costs to the man
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who wants to acquire it, is the toil and trouble of acquiring it. What
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every thing is really worth to the man who has acquired it and who wants
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to dispose of it, or exchange it for something else, is the toil and
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trouble which it can save to himself, and which it can impose upon other
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people. What is bought with money, or with goods, is purchased by labour,
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as much as what we acquire by the toil of our own body. That money, or
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those goods, indeed, save us this toil. They contain the value of a
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certain quantity of labour, which we exchange for what is supposed at the
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time to contain the value of an equal quantity. Labour was the first
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price, the original purchase money that was paid for all things. It was
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not by gold or by silver, but by labour, that all the wealth of the world
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was originally purchased; and its value, to those who possess it, and who
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want to exchange it for some new productions, is precisely equal to the
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quantity of labour which it can enable them to purchase or command.
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Wealth, as Mr Hobbes says, is power. But the person who either acquires,
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or succeeds to a great fortune, does not necessarily acquire or succeed to
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any political power, either civil or military. His fortune may, perhaps,
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afford him the means of acquiring both; but the mere possession of that
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fortune does not necessarily convey to him either. The power which that
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possession immediately and directly conveys to him, is the power of
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purchasing a certain command over all the labour, or over all the produce
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of labour which is then in the market. His fortune is greater or less,
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precisely in proportion to the extent of this power, or to the quantity
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either of other men’s labour, or, what is the same thing, of the produce
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of other men’s labour, which it enables him to purchase or command. The
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exchangeable value of every thing must always be precisely equal to the
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extent of this power which it conveys to its owner.
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But though labour be the real measure of the exchangeable value of all
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commodities, it is not that by which their value is commonly estimated. It
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is often difficult to ascertain the proportion between two different
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quantities of labour. The time spent in two different sorts of work will
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not always alone determine this proportion. The different degrees of
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hardship endured, and of ingenuity exercised, must likewise be taken into
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account. There may be more labour in an hour’s hard work, than in two
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hours easy business; or in an hour’s application to a trade which it cost
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ten years labour to learn, than in a month’s industry, at an ordinary and
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obvious employment. But it is not easy to find any accurate measure either
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of hardship or ingenuity. In exchanging, indeed, the different productions
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of different sorts of labour for one another, some allowance is commonly
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made for both. It is adjusted, however, not by any accurate measure, but
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by the higgling and bargaining of the market, according to that sort of
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rough equality which, though not exact, is sufficient for carrying on the
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business of common life.
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Every commodity, besides, is more frequently exchanged for, and thereby
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compared with, other commodities, than with labour. It is more natural,
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therefore, to estimate its exchangeable value by the quantity of some
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other commodity, than by that of the labour which it can produce. The
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greater part of people, too, understand better what is meant by a quantity
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of a particular commodity, than by a quantity of labour. The one is a
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plain palpable object; the other an abstract notion, which though it can
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be made sufficiently intelligible, is not altogether so natural and
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obvious.
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But when barter ceases, and money has become the common instrument of
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commerce, every particular commodity is more frequently exchanged for
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money than for any other commodity. The butcher seldom carries his beef or
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his mutton to the baker or the brewer, in order to exchange them for bread
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or for beer; but he carries them to the market, where he exchanges them
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for money, and afterwards exchanges that money for bread and for beer. The
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quantity of money which he gets for them regulates, too, the quantity of
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bread and beer which he can afterwards purchase. It is more natural and
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obvious to him, therefore, to estimate their value by the quantity of
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money, the commodity for which he immediately exchanges them, than by that
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of bread and beer, the commodities for which he can exchange them only by
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the intervention of another commodity; and rather to say that his
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butcher’s meat is worth three-pence or fourpence a-pound, than that it is
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worth three or four pounds of bread, or three or four quarts of small
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beer. Hence it comes to pass, that the exchangeable value of every
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commodity is more frequently estimated by the quantity of money, than by
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the quantity either of labour or of any other commodity which can be had
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in exchange for it.
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Gold and silver, however, like every other commodity, vary in their value;
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are sometimes cheaper and sometimes dearer, sometimes of easier and
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sometimes of more difficult purchase. The quantity of labour which any
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particular quantity of them can purchase or command, or the quantity of
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other goods which it will exchange for, depends always upon the fertility
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or barrenness of the mines which happen to be known about the time when
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such exchanges are made. The discovery of the abundant mines of America,
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reduced, in the sixteenth century, the value of gold and silver in Europe
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to about a third of what it had been before. As it cost less labour to
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bring those metals from the mine to the market, so, when they were brought
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thither, they could purchase or command less labour; and this revolution
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in their value, though perhaps the greatest, is by no means the only one
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of which history gives some account. But as a measure of quantity, such as
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the natural foot, fathom, or handful, which is continually varying in its
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own quantity, can never be an accurate measure of the quantity of other
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things; so a commodity which is itself continually varying in its own
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value, can never be an accurate measure of the value of other commodities.
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Equal quantities of labour, at all times and places, may be said to be of
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equal value to the labourer. In his ordinary state of health, strength,
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and spirits; in the ordinary degree of his skill and dexterity, he must
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always lay down the same portion of his ease, his liberty, and his
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happiness. The price which he pays must always be the same, whatever may
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be the quantity of goods which he receives in return for it. Of these,
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indeed, it may sometimes purchase a greater and sometimes a smaller
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quantity; but it is their value which varies, not that of the labour which
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purchases them. At all times and places, that is dear which it is
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difficult to come at, or which it costs much labour to acquire; and that
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cheap which is to be had easily, or with very little labour. Labour alone,
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therefore, never varying in its own value, is alone the ultimate and real
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standard by which the value of all commodities can at all times and places
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be estimated and compared. It is their real price; money is their nominal
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price only.
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But though equal quantities of labour are always of equal value to the
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labourer, yet to the person who employs him they appear sometimes to be of
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greater, and sometimes of smaller value. He purchases them sometimes with
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a greater, and sometimes with a smaller quantity of goods, and to him the
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price of labour seems to vary like that of all other things. It appears to
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him dear in the one case, and cheap in the other. In reality, however, it
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is the goods which are cheap in the one case, and dear in the other.
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In this popular sense, therefore, labour, like commodities, may be said to
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have a real and a nominal price. Its real price may be said to consist in
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the quantity of the necessaries and conveniencies of life which are given
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for it; its nominal price, in the quantity of money. The labourer is rich
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or poor, is well or ill rewarded, in proportion to the real, not to the
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nominal price of his labour.
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The distinction between the real and the nominal price of commodities and
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labour is not a matter of mere speculation, but may sometimes be of
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considerable use in practice. The same real price is always of the same
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value; but on account of the variations in the value of gold and silver,
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the same nominal price is sometimes of very different values. When a
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landed estate, therefore, is sold with a reservation of a perpetual rent,
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if it is intended that this rent should always be of the same value, it is
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of importance to the family in whose favour it is reserved, that it should
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not consist in a particular sum of money. Its value would in this case be
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liable to variations of two different kinds: first, to those which arise
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from the different quantities of gold and silver which are contained at
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different times in coin of the same denomination; and, secondly, to those
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which arise from the different values of equal quantities of gold and
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silver at different times.
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Princes and sovereign states have frequently fancied that they had a
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temporary interest to diminish the quantity of pure metal contained in
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their coins; but they seldom have fancied that they had any to augment it.
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The quantity of metal contained in the coins, I believe of all nations,
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has accordingly been almost continually diminishing, and hardly ever
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augmenting. Such variations, therefore, tend almost always to diminish the
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value of a money rent.
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The discovery of the mines of America diminished the value of gold and
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silver in Europe. This diminution, it is commonly supposed, though I
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apprehend without any certain proof, is still going on gradually, and is
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likely to continue to do so for a long time. Upon this supposition,
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therefore, such variations are more likely to diminish than to augment the
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value of a money rent, even though it should be stipulated to be paid, not
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in such a quantity of coined money of such a denomination (in so many
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pounds sterling, for example), but in so many ounces, either of pure
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silver, or of silver of a certain standard.
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The rents which have been reserved in corn, have preserved their value
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much better than those which have been reserved in money, even where the
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denomination of the coin has not been altered. By the 18th of Elizabeth,
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it was enacted, that a third of the rent of all college leases should be
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reserved in corn, to be paid either in kind, or according to the current
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prices at the nearest public market. The money arising from this corn
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rent, though originally but a third of the whole, is, in the present
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times, according to Dr Blackstone, commonly near double of what arises
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from the other two-thirds. The old money rents of colleges must, according
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to this account, have sunk almost to a fourth part of their ancient value,
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or are worth little more than a fourth part of the corn which they were
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formerly worth. But since the reign of Philip and Mary, the denomination
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of the English coin has undergone little or no alteration, and the same
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number of pounds, shillings, and pence, have contained very nearly the
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same quantity of pure silver. This degradation, therefore, in the value of
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the money rents of colleges, has arisen altogether from the degradation in
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the price of silver.
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When the degradation in the value of silver is combined with the
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diminution of the quantity of it contained in the coin of the same
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denomination, the loss is frequently still greater. In Scotland, where the
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denomination of the coin has undergone much greater alterations than it
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ever did in England, and in France, where it has undergone still greater
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than it ever did in Scotland, some ancient rents, originally of
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considerable value, have, in this manner, been reduced almost to nothing.
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Equal quantities of labour will, at distant times, be purchased more
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nearly with equal quantities of corn, the subsistence of the labourer,
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than with equal quantities of gold and silver, or, perhaps, of any other
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commodity. Equal quantities of corn, therefore, will, at distant times, be
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more nearly of the same real value, or enable the possessor to purchase or
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command more nearly the same quantity of the labour of other people. They
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will do this, I say, more nearly than equal quantities of almost any other
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commodity; for even equal quantities of corn will not do it exactly. The
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subsistence of the labourer, or the real price of labour, as I shall
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endeavour to shew hereafter, is very different upon different occasions;
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more liberal in a society advancing to opulence, than in one that is
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standing still, and in one that is standing still, than in one that is
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going backwards. Every other commodity, however, will, at any particular
|
||||
time, purchase a greater or smaller quantity of labour, in proportion to
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the quantity of subsistence which it can purchase at that time. A rent,
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therefore, reserved in corn, is liable only to the variations in the
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quantity of labour which a certain quantity of corn can purchase. But a
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rent reserved in any other commodity is liable, not only to the variations
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in the quantity of labour which any particular quantity of corn can
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purchase, but to the variations in the quantity of corn which can be
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purchased by any particular quantity of that commodity.
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|
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Though the real value of a corn rent, it is to be observed, however,
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varies much less from century to century than that of a money rent, it
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varies much more from year to year. The money price of labour, as I shall
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endeavour to shew hereafter, does not fluctuate from year to year with the
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money price of corn, but seems to be everywhere accommodated, not to the
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temporary or occasional, but to the average or ordinary price of that
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necessary of life. The average or ordinary price of corn, again is
|
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regulated, as I shall likewise endeavour to shew hereafter, by the value
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of silver, by the richness or barrenness of the mines which supply the
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market with that metal, or by the quantity of labour which must be
|
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employed, and consequently of corn which must be consumed, in order to
|
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bring any particular quantity of silver from the mine to the market. But
|
||||
the value of silver, though it sometimes varies greatly from century to
|
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century, seldom varies much from year to year, but frequently continues
|
||||
the same, or very nearly the same, for half a century or a century
|
||||
together. The ordinary or average money price of corn, therefore, may,
|
||||
during so long a period, continue the same, or very nearly the same, too,
|
||||
and along with it the money price of labour, provided, at least, the
|
||||
society continues, in other respects, in the same, or nearly in the same,
|
||||
condition. In the mean time, the temporary and occasional price of corn
|
||||
may frequently be double one year of what it had been the year before, or
|
||||
fluctuate, for example, from five-and-twenty to fifty shillings the
|
||||
quarter. But when corn is at the latter price, not only the nominal, but
|
||||
the real value of a corn rent, will be double of what it is when at the
|
||||
former, or will command double the quantity either of labour, or of the
|
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greater part of other commodities; the money price of labour, and along
|
||||
with it that of most other things, continuing the same during all these
|
||||
fluctuations.
|
||||
|
||||
Labour, therefore, it appears evidently, is the only universal, as well as
|
||||
the only accurate, measure of value, or the only standard by which we can
|
||||
compare the values of different commodities, at all times, and at all
|
||||
places. We cannot estimate, it is allowed, the real value of different
|
||||
commodities from century to century by the quantities of silver which were
|
||||
given for them. We cannot estimate it from year to year by the quantities
|
||||
of corn. By the quantities of labour, we can, with the greatest accuracy,
|
||||
estimate it, both from century to century, and from year to year. From
|
||||
century to century, corn is a better measure than silver, because, from
|
||||
century to century, equal quantities of corn will command the same
|
||||
quantity of labour more nearly than equal quantities of silver. From year
|
||||
to year, on the contrary, silver is a better measure than corn, because
|
||||
equal quantities of it will more nearly command the same quantity of
|
||||
labour.
|
||||
|
||||
But though, in establishing perpetual rents, or even in letting very long
|
||||
leases, it may be of use to distinguish between real and nominal price; it
|
||||
is of none in buying and selling, the more common and ordinary
|
||||
transactions of human life.
|
||||
|
||||
At the same time and place, the real and the nominal price of all
|
||||
commodities are exactly in proportion to one another. The more or less
|
||||
money you get for any commodity, in the London market, for example, the
|
||||
more or less labour it will at that time and place enable you to purchase
|
||||
or command. At the same time and place, therefore, money is the exact
|
||||
measure of the real exchangeable value of all commodities. It is so,
|
||||
however, at the same time and place only.
|
||||
|
||||
Though at distant places there is no regular proportion between the real
|
||||
and the money price of commodities, yet the merchant who carries goods
|
||||
from the one to the other, has nothing to consider but the money price, or
|
||||
the difference between the quantity of silver for which he buys them, and
|
||||
that for which he is likely to sell them. Half an ounce of silver at
|
||||
Canton in China may command a greater quantity both of labour and of the
|
||||
necessaries and conveniencies of life, than an ounce at London. A
|
||||
commodity, therefore, which sells for half an ounce of silver at Canton,
|
||||
may there be really dearer, of more real importance to the man who
|
||||
possesses it there, than a commodity which sells for an ounce at London is
|
||||
to the man who possesses it at London. If a London merchant, however, can
|
||||
buy at Canton, for half an ounce of silver, a commodity which he can
|
||||
afterwards sell at London for an ounce, he gains a hundred per cent. by
|
||||
the bargain, just as much as if an ounce of silver was at London exactly
|
||||
of the same value as at Canton. It is of no importance to him that half an
|
||||
ounce of silver at Canton would have given him the command of more labour,
|
||||
and of a greater quantity of the necessaries and conveniencies of life
|
||||
than an ounce can do at London. An ounce at London will always give him
|
||||
the command of double the quantity of all these, which half an ounce could
|
||||
have done there, and this is precisely what he wants.
|
||||
|
||||
As it is the nominal or money price of goods, therefore, which finally
|
||||
determines the prudence or imprudence of all purchases and sales, and
|
||||
thereby regulates almost the whole business of common life in which price
|
||||
is concerned, we cannot wonder that it should have been so much more
|
||||
attended to than the real price.
|
||||
|
||||
In such a work as this, however, it may sometimes be of use to compare the
|
||||
different real values of a particular commodity at different times and
|
||||
places, or the different degrees of power over the labour of other people
|
||||
which it may, upon different occasions, have given to those who possessed
|
||||
it. We must in this case compare, not so much the different quantities of
|
||||
silver for which it was commonly sold, as the different quantities or
|
||||
labour which those different quantities of silver could have purchased.
|
||||
But the current prices of labour, at distant times and places, can scarce
|
||||
ever be known with any degree of exactness. Those of corn, though they
|
||||
have in few places been regularly recorded, are in general better known,
|
||||
and have been more frequently taken notice of by historians and other
|
||||
writers. We must generally, therefore, content ourselves with them, not as
|
||||
being always exactly in the same proportion as the current prices of
|
||||
labour, but as being the nearest approximation which can commonly be had
|
||||
to that proportion. I shall hereafter have occasion to make several
|
||||
comparisons of this kind.
|
||||
|
||||
In the progress of industry, commercial nations have found it convenient
|
||||
to coin several different metals into money; gold for larger payments,
|
||||
silver for purchases of moderate value, and copper, or some other coarse
|
||||
metal, for those of still smaller consideration, They have always,
|
||||
however, considered one of those metals as more peculiarly the measure of
|
||||
value than any of the other two; and this preference seems generally to
|
||||
have been given to the metal which they happen first to make use of as the
|
||||
instrument of commerce. Having once begun to use it as their standard,
|
||||
which they must have done when they had no other money, they have
|
||||
generally continued to do so even when the necessity was not the same.
|
||||
|
||||
The Romans are said to have had nothing but copper money till within five
|
||||
years before the first Punic war (Pliny, lib. xxxiii. cap. 3), when they
|
||||
first began to coin silver. Copper, therefore, appears to have continued
|
||||
always the measure of value in that republic. At Rome all accounts appear
|
||||
to have been kept, and the value of all estates to have been computed,
|
||||
either in asses or in sestertii. The as was always the denomination of a
|
||||
copper coin. The word sestertius signifies two asses and a half. Though
|
||||
the sestertius, therefore, was originally a silver coin, its value was
|
||||
estimated in copper. At Rome, one who owed a great deal of money was said
|
||||
to have a great deal of other people’s copper.
|
||||
|
||||
The northern nations who established themselves upon the ruins of the
|
||||
Roman empire, seem to have had silver money from the first beginning of
|
||||
their settlements, and not to have known either gold or copper coins for
|
||||
several ages thereafter. There were silver coins in England in the time of
|
||||
the Saxons; but there was little gold coined till the time of Edward III
|
||||
nor any copper till that of James I. of Great Britain. In England,
|
||||
therefore, and for the same reason, I believe, in all other modern nations
|
||||
of Europe, all accounts are kept, and the value of all goods and of all
|
||||
estates is generally computed, in silver: and when we mean to express the
|
||||
amount of a person’s fortune, we seldom mention the number of guineas, but
|
||||
the number of pounds sterling which we suppose would be given for it.
|
||||
|
||||
Originally, in all countries, I believe, a legal tender of payment could
|
||||
be made only in the coin of that metal which was peculiarly considered as
|
||||
the standard or measure of value. In England, gold was not considered as a
|
||||
legal tender for a long time after it was coined into money. The
|
||||
proportion between the values of gold and silver money was not fixed by
|
||||
any public law or proclamation, but was left to be settled by the market.
|
||||
If a debtor offered payment in gold, the creditor might either reject such
|
||||
payment altogether, or accept of it at such a valuation of the gold as he
|
||||
and his debtor could agree upon. Copper is not at present a legal tender,
|
||||
except in the change of the smaller silver coins.
|
||||
|
||||
In this state of things, the distinction between the metal which was the
|
||||
standard, and that which was not the standard, was something more than a
|
||||
nominal distinction.
|
||||
|
||||
In process of time, and as people became gradually more familiar with the
|
||||
use of the different metals in coin, and consequently better acquainted
|
||||
with the proportion between their respective values, it has, in most
|
||||
countries, I believe, been found convenient to ascertain this proportion,
|
||||
and to declare by a public law, that a guinea, for example, of such a
|
||||
weight and fineness, should exchange for one-and-twenty shillings, or be a
|
||||
legal tender for a debt of that amount. In this state of things, and
|
||||
during the continuance of any one regulated proportion of this kind, the
|
||||
distinction between the metal, which is the standard, and that which is
|
||||
not the standard, becomes little more than a nominal distinction.
|
||||
|
||||
In consequence of any change, however, in this regulated proportion, this
|
||||
distinction becomes, or at least seems to become, something more than
|
||||
nominal again. If the regulated value of a guinea, for example, was either
|
||||
reduced to twenty, or raised to two-and-twenty shillings, all accounts
|
||||
being kept, and almost all obligations for debt being expressed, in silver
|
||||
money, the greater part of payments could in either case be made with the
|
||||
same quantity of silver money as before; but would require very different
|
||||
quantities of gold money; a greater in the one case, and a smaller in the
|
||||
other. Silver would appear to be more invariable in its value than gold.
|
||||
Silver would appear to measure the value of gold, and gold would not
|
||||
appear to measure the value of silver. The value of gold would seem to
|
||||
depend upon the quantity of silver which it would exchange for, and the
|
||||
value of silver would not seem to depend upon the quantity of gold which
|
||||
it would exchange for. This difference, however, would be altogether owing
|
||||
to the custom of keeping accounts, and of expressing the amount of all
|
||||
great and small sums rather in silver than in gold money. One of Mr
|
||||
Drummond’s notes for five-and-twenty or fifty guineas would, after an
|
||||
alteration of this kind, be still payable with five-and-twenty or fifty
|
||||
guineas, in the same manner as before. It would, after such an alteration,
|
||||
be payable with the same quantity of gold as before, but with very
|
||||
different quantities of silver. In the payment of such a note, gold would
|
||||
appear to be more invariable in its value than silver. Gold would appear
|
||||
to measure the value of silver, and silver would not appear to measure the
|
||||
value of gold. If the custom of keeping accounts, and of expressing
|
||||
promissory-notes and other obligations for money, in this manner should
|
||||
ever become general, gold, and not silver, would be considered as the
|
||||
metal which was peculiarly the standard or measure of value.
|
||||
|
||||
In reality, during the continuance of any one regulated proportion between
|
||||
the respective values of the different metals in coin, the value of the
|
||||
most precious metal regulates the value of the whole coin. Twelve copper
|
||||
pence contain half a pound avoirdupois of copper, of not the best quality,
|
||||
which, before it is coined, is seldom worth seven-pence in silver. But as,
|
||||
by the regulation, twelve such pence are ordered to exchange for a
|
||||
shilling, they are in the market considered as worth a shilling, and a
|
||||
shilling can at any time be had for them. Even before the late reformation
|
||||
of the gold coin of Great Britain, the gold, that part of it at least
|
||||
which circulated in London and its neighbourhood, was in general less
|
||||
degraded below its standard weight than the greater part of the silver.
|
||||
One-and-twenty worn and defaced shillings, however, were considered as
|
||||
equivalent to a guinea, which, perhaps, indeed, was worn and defaced too,
|
||||
but seldom so much so. The late regulations have brought the gold coin as
|
||||
near, perhaps, to its standard weight as it is possible to bring the
|
||||
current coin of any nation; and the order to receive no gold at the public
|
||||
offices but by weight, is likely to preserve it so, as long as that order
|
||||
is enforced. The silver coin still continues in the same worn and degraded
|
||||
state as before the reformation of the cold coin. In the market, however,
|
||||
one-and-twenty shillings of this degraded silver coin are still considered
|
||||
as worth a guinea of this excellent gold coin.
|
||||
|
||||
The reformation of the gold coin has evidently raised the value of the
|
||||
silver coin which can be exchanged for it.
|
||||
|
||||
In the English mint, a pound weight of gold is coined into forty-four
|
||||
guineas and a half, which at one-and-twenty shillings the guinea, is equal
|
||||
to forty-six pounds fourteen shillings and sixpence. An ounce of such gold
|
||||
coin, therefore, is worth £ 3:17:10½ in silver. In England, no duty or
|
||||
seignorage is paid upon the coinage, and he who carries a pound weight or
|
||||
an ounce weight of standard gold bullion to the mint, gets back a pound
|
||||
weight or an ounce weight of gold in coin, without any deduction. Three
|
||||
pounds seventeen shillings and tenpence halfpenny an ounce, therefore, is
|
||||
said to be the mint price of gold in England, or the quantity of gold coin
|
||||
which the mint gives in return for standard gold bullion.
|
||||
|
||||
Before the reformation of the gold coin, the price of standard gold
|
||||
bullion in the market had, for many years, been upwards of £3:18s.
|
||||
sometimes £ 3:19s, and very frequently £4 an ounce; that sum, it is
|
||||
probable, in the worn and degraded gold coin, seldom containing more than
|
||||
an ounce of standard gold. Since the reformation of the gold coin, the
|
||||
market price of standard gold bullion seldom exceeds £ 3:17:7 an ounce.
|
||||
Before the reformation of the gold coin, the market price was always more
|
||||
or less above the mint price. Since that reformation, the market price has
|
||||
been constantly below the mint price. But that market price is the same
|
||||
whether it is paid in gold or in silver coin. The late reformation of the
|
||||
gold coin, therefore, has raised not only the value of the gold coin, but
|
||||
likewise that of the silver coin in proportion to gold bullion, and
|
||||
probably, too, in proportion to all other commodities; though the price of
|
||||
the greater part of other commodities being influenced by so many other
|
||||
causes, the rise in the value of either gold or silver coin in proportion
|
||||
to them may not be so distinct and sensible.
|
||||
|
||||
In the English mint, a pound weight of standard silver bullion is coined
|
||||
into sixty-two shillings, containing, in the same manner, a pound weight
|
||||
of standard silver. Five shillings and twopence an ounce, therefore, is
|
||||
said to be the mint price of silver in England, or the quantity of silver
|
||||
coin which the mint gives in return for standard silver bullion. Before
|
||||
the reformation of the gold coin, the market price of standard silver
|
||||
bullion was, upon different occasions, five shillings and fourpence, five
|
||||
shillings and fivepence, five shillings and sixpence, five shillings and
|
||||
sevenpence, and very often five shillings and eightpence an ounce. Five
|
||||
shillings and sevenpence, however, seems to have been the most common
|
||||
price. Since the reformation of the gold coin, the market price of
|
||||
standard silver bullion has fallen occasionally to five shillings and
|
||||
threepence, five shillings and fourpence, and five shillings and fivepence
|
||||
an ounce, which last price it has scarce ever exceeded. Though the market
|
||||
price of silver bullion has fallen considerably since the reformation of
|
||||
the gold coin, it has not fallen so low as the mint price.
|
||||
|
||||
In the proportion between the different metals in the English coin, as
|
||||
copper is rated very much above its real value, so silver is rated
|
||||
somewhat below it. In the market of Europe, in the French coin and in the
|
||||
Dutch coin, an ounce of fine gold exchanges for about fourteen ounces of
|
||||
fine silver. In the English coin, it exchanges for about fifteen ounces,
|
||||
that is, for more silver than it is worth, according to the common
|
||||
estimation of Europe. But as the price of copper in bars is not, even in
|
||||
England, raised by the high price of copper in English coin, so the price
|
||||
of silver in bullion is not sunk by the low rate of silver in English
|
||||
coin. Silver in bullion still preserves its proper proportion to gold, for
|
||||
the same reason that copper in bars preserves its proper proportion to
|
||||
silver.
|
||||
|
||||
Upon the reformation of the silver coin, in the reign of William III., the
|
||||
price of silver bullion still continued to be somewhat above the mint
|
||||
price. Mr Locke imputed this high price to the permission of exporting
|
||||
silver bullion, and to the prohibition of exporting silver coin. This
|
||||
permission of exporting, he said, rendered the demand for silver bullion
|
||||
greater than the demand for silver coin. But the number of people who want
|
||||
silver coin for the common uses of buying and selling at home, is surely
|
||||
much greater than that of those who want silver bullion either for the use
|
||||
of exportation or for any other use. There subsists at present a like
|
||||
permission of exporting gold bullion, and a like prohibition of exporting
|
||||
gold coin; and yet the price of gold bullion has fallen below the mint
|
||||
price. But in the English coin, silver was then, in the same manner as
|
||||
now, under-rated in proportion to gold; and the gold coin (which at that
|
||||
time, too, was not supposed to require any reformation) regulated then, as
|
||||
well as now, the real value of the whole coin. As the reformation of the
|
||||
silver coin did not then reduce the price of silver bullion to the mint
|
||||
price, it is not very probable that a like reformation will do so now.
|
||||
|
||||
Were the silver coin brought back as near to its standard weight as the
|
||||
gold, a guinea, it is probable, would, according to the present
|
||||
proportion, exchange for more silver in coin than it would purchase in
|
||||
bullion. The silver coin containing its full standard weight, there would
|
||||
in this case, be a profit in melting it down, in order, first to sell the
|
||||
bullion for gold coin, and afterwards to exchange this gold coin for
|
||||
silver coin, to be melted down in the same manner. Some alteration in the
|
||||
present proportion seems to be the only method of preventing this
|
||||
inconveniency.
|
||||
|
||||
The inconveniency, perhaps, would be less, if silver was rated in the coin
|
||||
as much above its proper proportion to gold as it is at present rated
|
||||
below it, provided it was at the same time enacted, that silver should not
|
||||
be a legal tender for more than the change of a guinea, in the same manner
|
||||
as copper is not a legal tender for more than the change of a shilling. No
|
||||
creditor could, in this case, be cheated in consequence of the high
|
||||
valuation of silver in coin; as no creditor can at present be cheated in
|
||||
consequence of the high valuation of copper. The bankers only would suffer
|
||||
by this regulation. When a run comes upon them, they sometimes endeavour
|
||||
to gain time, by paying in sixpences, and they would be precluded by this
|
||||
regulation from this discreditable method of evading immediate payment.
|
||||
They would be obliged, in consequence, to keep at all times in their
|
||||
coffers a greater quantity of cash than at present; and though this might,
|
||||
no doubt, be a considerable inconveniency to them, it would, at the same
|
||||
time, be a considerable security to their creditors.
|
||||
|
||||
Three pounds seventeen shillings and tenpence halfpenny (the mint price of
|
||||
gold) certainly does not contain, even in our present excellent gold coin,
|
||||
more than an ounce of standard gold, and it may be thought, therefore,
|
||||
should not purchase more standard bullion. But gold in coin is more
|
||||
convenient than gold in bullion; and though, in England, the coinage is
|
||||
free, yet the gold which is carried in bullion to the mint, can seldom be
|
||||
returned in coin to the owner till after a delay of several weeks. In the
|
||||
present hurry of the mint, it could not be returned till after a delay of
|
||||
several months. This delay is equivalent to a small duty, and renders gold
|
||||
in coin somewhat more valuable than an equal quantity of gold in bullion.
|
||||
If, in the English coin, silver was rated according to its proper
|
||||
proportion to gold, the price of silver bullion would probably fall below
|
||||
the mint price, even without any reformation of the silver coin; the value
|
||||
even of the present worn and defaced silver coin being regulated by the
|
||||
value of the excellent gold coin for which it can be changed.
|
||||
|
||||
A small seignorage or duty upon the coinage of both gold and silver, would
|
||||
probably increase still more the superiority of those metals in coin above
|
||||
an equal quantity of either of them in bullion. The coinage would, in this
|
||||
case, increase the value of the metal coined in proportion to the extent
|
||||
of this small duty, for the same reason that the fashion increases the
|
||||
value of plate in proportion to the price of that fashion. The superiority
|
||||
of coin above bullion would prevent the melting down of the coin, and
|
||||
would discourage its exportation. If, upon any public exigency, it should
|
||||
become necessary to export the coin, the greater part of it would soon
|
||||
return again, of its own accord. Abroad, it could sell only for its weight
|
||||
in bullion. At home, it would buy more than that weight. There would be a
|
||||
profit, therefore, in bringing it home again. In France, a seignorage of
|
||||
about eight per cent. is imposed upon the coinage, and the French coin,
|
||||
when exported, is said to return home again, of its own accord.
|
||||
|
||||
The occasional fluctuations in the market price of gold and silver bullion
|
||||
arise from the same causes as the like fluctuations in that of all other
|
||||
commodities. The frequent loss of those metals from various accidents by
|
||||
sea and by land, the continual waste of them in gilding and plating, in
|
||||
lace and embroidery, in the wear and tear of coin, and in that of plate,
|
||||
require, in all countries which possess no mines of their own, a continual
|
||||
importation, in order to repair this loss and this waste. The merchant
|
||||
importers, like all other merchants, we may believe, endeavour, as well as
|
||||
they can, to suit their occasional importations to what they judge is
|
||||
likely to be the immediate demand. With all their attention, however, they
|
||||
sometimes overdo the business, and sometimes underdo it. When they import
|
||||
more bullion than is wanted, rather than incur the risk and trouble of
|
||||
exporting it again, they are sometimes willing to sell a part of it for
|
||||
something less than the ordinary or average price. When, on the other
|
||||
hand, they import less than is wanted, they get something more than this
|
||||
price. But when, under all those occasional fluctuations, the market price
|
||||
either of gold or silver bullion continues for several years together
|
||||
steadily and constantly, either more or less above, or more or less below
|
||||
the mint price, we may be assured that this steady and constant, either
|
||||
superiority or inferiority of price, is the effect of something in the
|
||||
state of the coin, which, at that time, renders a certain quantity of coin
|
||||
either of more value or of less value than the precise quantity of bullion
|
||||
which it ought to contain. The constancy and steadiness of the effect
|
||||
supposes a proportionable constancy and steadiness in the cause.
|
||||
|
||||
The money of any particular country is, at any particular time and place,
|
||||
more or less an accurate measure or value, according as the current coin
|
||||
is more or less exactly agreeable to its standard, or contains more or
|
||||
less exactly the precise quantity of pure gold or pure silver which it
|
||||
ought to contain. If in England, for example, forty-four guineas and a
|
||||
half contained exactly a pound weight of standard gold, or eleven ounces
|
||||
of fine gold, and one ounce of alloy, the gold coin of England would be as
|
||||
accurate a measure of the actual value of goods at any particular time and
|
||||
place as the nature of the thing would admit. But if, by rubbing and
|
||||
wearing, forty-four guineas and a half generally contain less than a pound
|
||||
weight of standard gold, the diminution, however, being greater in some
|
||||
pieces than in others, the measure of value comes to be liable to the same
|
||||
sort of uncertainty to which all other weights and measures are commonly
|
||||
exposed. As it rarely happens that these are exactly agreeable to their
|
||||
standard, the merchant adjusts the price of his goods as well as he can,
|
||||
not to what those weights and measures ought to be, but to what, upon an
|
||||
average, he finds, by experience, they actually are. In consequence of a
|
||||
like disorder in the coin, the price of goods comes, in the same manner,
|
||||
to be adjusted, not to the quantity of pure gold or silver which the coin
|
||||
ought to contain, but to that which, upon an average, it is found, by
|
||||
experience, it actually does contain.
|
||||
|
||||
By the money price of goods, it is to be observed, I understand always the
|
||||
quantity of pure gold or silver for which they are sold, without any
|
||||
regard to the denomination of the coin. Six shillings and eight pence, for
|
||||
example, in the time of Edward I., I consider as the same money price with
|
||||
a pound sterling in the present times, because it contained, as nearly as
|
||||
we can judge, the same quantity of pure silver.
|
||||
|
||||
|
||||
## 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 one of: Production, Distribution, Exchange,
|
||||
Consumption, Accumulation, Regulation, or General Theory.
|
||||
|
||||
|
||||
## 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.
|
||||
|
||||
- agriculture
|
||||
- barter
|
||||
- benevolence
|
||||
- co-operation-of-labour
|
||||
- commercial-society
|
||||
- commodity
|
||||
- common-stock
|
||||
- cost-of-transport-relative-to-value
|
||||
- country-workman
|
||||
- dexterity-of-the-workman
|
||||
- difference-of-talents
|
||||
- division-of-labour
|
||||
- encouragement-to-industry
|
||||
- exchange
|
||||
- extent-of-the-market
|
||||
- improvement-of-art-and-industry
|
||||
- inland-navigation
|
||||
- insurance-differential-land-vs-water
|
||||
- invention-of-machinery
|
||||
- land-carriage
|
||||
- manufactures
|
||||
- maritime-commerce
|
||||
- mediterranean-sea-as-economic-geography
|
||||
- money
|
||||
- nailer
|
||||
- north-american-colonial-settlement-pattern
|
||||
- porter
|
||||
- power-of-exchanging
|
||||
- productive-powers-of-labour
|
||||
- propensity-to-truck-barter-and-exchange
|
||||
- saving-of-time
|
||||
- self-interest
|
||||
- self-sufficiency-of-the-farmer
|
||||
- separation-of-trades
|
||||
- surplus-produce
|
||||
- territorial-obstruction-of-trade
|
||||
- the-bargain
|
||||
- the-philosopher
|
||||
- the-workman
|
||||
- universal-opulence
|
||||
- water-carriage
|
||||
|
||||
## 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.
|
||||
@@ -0,0 +1,538 @@
|
||||
# Extract Economic Entities
|
||||
|
||||
You are an analytical economist specializing in classical economic theory.
|
||||
Your task is to extract distinct economic entities from a chapter of
|
||||
Adam Smith's *The Wealth of Nations*.
|
||||
|
||||
## Source Chapter
|
||||
|
||||
---
|
||||
id: book-1-chapter-06
|
||||
title: "OF THE COMPONENT PART OF THE PRICE OF COMMODITIES."
|
||||
book: "1"
|
||||
chapter: 6
|
||||
artifact_type: content
|
||||
---
|
||||
|
||||
CHAPTER VI.
|
||||
OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.
|
||||
|
||||
|
||||
|
||||
In that early and rude state of society which precedes both the
|
||||
accumulation of stock and the appropriation of land, the proportion
|
||||
between the quantities of labour necessary for acquiring different
|
||||
objects, seems to be the only circumstance which can afford any rule for
|
||||
exchanging them for one another. If among a nation of hunters, for
|
||||
example, it usually costs twice the labour to kill a beaver which it does
|
||||
to kill a deer, one beaver should naturally exchange for or be worth two
|
||||
deer. It is natural that what is usually the produce of two days or two
|
||||
hours labour, should be worth double of what is usually the produce of one
|
||||
day’s or one hour’s labour.
|
||||
|
||||
If the one species of labour should be more severe than the other, some
|
||||
allowance will naturally be made for this superior hardship; and the
|
||||
produce of one hour’s labour in the one way may frequently exchange for
|
||||
that of two hour’s labour in the other.
|
||||
|
||||
Or if the one species of labour requires an uncommon degree of dexterity
|
||||
and ingenuity, the esteem which men have for such talents, will naturally
|
||||
give a value to their produce, superior to what would be due to the time
|
||||
employed about it. Such talents can seldom be acquired but in consequence
|
||||
of long application, and the superior value of their produce may
|
||||
frequently be no more than a reasonable compensation for the time and
|
||||
labour which must be spent in acquiring them. In the advanced state of
|
||||
society, allowances of this kind, for superior hardship and superior
|
||||
skill, are commonly made in the wages of labour; and something of the same
|
||||
kind must probably have taken place in its earliest and rudest period.
|
||||
|
||||
In this state of things, the whole produce of labour belongs to the
|
||||
labourer; and the quantity of labour commonly employed in acquiring or
|
||||
producing any commodity, is the only circumstance which can regulate the
|
||||
quantity of labour which it ought commonly to purchase, command, or
|
||||
exchange for.
|
||||
|
||||
As soon as stock has accumulated in the hands of particular persons, some
|
||||
of them will naturally employ it in setting to work industrious people,
|
||||
whom they will supply with materials and subsistence, in order to make a
|
||||
profit by the sale of their work, or by what their labour adds to the
|
||||
value of the materials. In exchanging the complete manufacture either for
|
||||
money, for labour, or for other goods, over and above what may be
|
||||
sufficient to pay the price of the materials, and the wages of the
|
||||
workmen, something must be given for the profits of the undertaker of the
|
||||
work, who hazards his stock in this adventure. The value which the workmen
|
||||
add to the materials, therefore, resolves itself in this case into two
|
||||
parts, of which the one pays their wages, the other the profits of their
|
||||
employer upon the whole stock of materials and wages which he advanced. He
|
||||
could have no interest to employ them, unless he expected from the sale of
|
||||
their work something more than what was sufficient to replace his stock to
|
||||
him; and he could have no interest to employ a great stock rather than a
|
||||
small one, unless his profits were to bear some proportion to the extent
|
||||
of his stock.
|
||||
|
||||
The profits of stock, it may perhaps be thought, are only a different name
|
||||
for the wages of a particular sort of labour, the labour of inspection and
|
||||
direction. They are, however, altogether different, are regulated by quite
|
||||
different principles, and bear no proportion to the quantity, the
|
||||
hardship, or the ingenuity of this supposed labour of inspection and
|
||||
direction. They are regulated altogether by the value of the stock
|
||||
employed, and are greater or smaller in proportion to the extent of this
|
||||
stock. Let us suppose, for example, that in some particular place, where
|
||||
the common annual profits of manufacturing stock are ten per cent. there
|
||||
are two different manufactures, in each of which twenty workmen are
|
||||
employed, at the rate of fifteen pounds a year each, or at the expense of
|
||||
three hundred a-year in each manufactory. Let us suppose, too, that the
|
||||
coarse materials annually wrought up in the one cost only seven hundred
|
||||
pounds, while the finer materials in the other cost seven thousand. The
|
||||
capital annually employed in the one will, in this case, amount only to
|
||||
one thousand pounds; whereas that employed in the other will amount to
|
||||
seven thousand three hundred pounds. At the rate of ten per cent.
|
||||
therefore, the undertaker of the one will expect a yearly profit of about
|
||||
one hundred pounds only; while that of the other will expect about seven
|
||||
hundred and thirty pounds. But though their profits are so very different,
|
||||
their labour of inspection and direction may be either altogether or very
|
||||
nearly the same. In many great works, almost the whole labour of this kind
|
||||
is committed to some principal clerk. His wages properly express the value
|
||||
of this labour of inspection and direction. Though in settling them some
|
||||
regard is had commonly, not only to his labour and skill, but to the trust
|
||||
which is reposed in him, yet they never bear any regular proportion to the
|
||||
capital of which he oversees the management; and the owner of this
|
||||
capital, though he is thus discharged of almost all labour, still expects
|
||||
that his profit should bear a regular proportion to his capital. In the
|
||||
price of commodities, therefore, the profits of stock constitute a
|
||||
component part altogether different from the wages of labour, and
|
||||
regulated by quite different principles.
|
||||
|
||||
In this state of things, the whole produce of labour does not always
|
||||
belong to the labourer. He must in most cases share it with the owner of
|
||||
the stock which employs him. Neither is the quantity of labour commonly
|
||||
employed in acquiring or producing any commodity, the only circumstance
|
||||
which can regulate the quantity which it ought commonly to purchase,
|
||||
command or exchange for. An additional quantity, it is evident, must be
|
||||
due for the profits of the stock which advanced the wages and furnished
|
||||
the materials of that labour.
|
||||
|
||||
As soon as the land of any country has all become private property, the
|
||||
landlords, like all other men, love to reap where they never sowed, and
|
||||
demand a rent even for its natural produce. The wood of the forest, the
|
||||
grass of the field, and all the natural fruits of the earth, which, when
|
||||
land was in common, cost the labourer only the trouble of gathering them,
|
||||
come, even to him, to have an additional price fixed upon them. He must
|
||||
then pay for the licence to gather them, and must give up to the landlord
|
||||
a portion of what his labour either collects or produces. This portion,
|
||||
or, what comes to the same thing, the price of this portion, constitutes
|
||||
the rent of land, and in the price of the greater part of commodities,
|
||||
makes a third component part.
|
||||
|
||||
The real value of all the different component parts of price, it must be
|
||||
observed, is measured by the quantity of labour which they can, each of
|
||||
them, purchase or command. Labour measures the value, not only of that
|
||||
part of price which resolves itself into labour, but of that which
|
||||
resolves itself into rent, and of that which resolves itself into profit.
|
||||
|
||||
In every society, the price of every commodity finally resolves itself
|
||||
into some one or other, or all of those three parts; and in every improved
|
||||
society, all the three enter, more or less, as component parts, into the
|
||||
price of the far greater part of commodities.
|
||||
|
||||
In the price of corn, for example, one part pays the rent of the landlord,
|
||||
another pays the wages or maintenance of the labourers and labouring
|
||||
cattle employed in producing it, and the third pays the profit of the
|
||||
farmer. These three parts seem either immediately or ultimately to make up
|
||||
the whole price of corn. A fourth part, it may perhaps be thought is
|
||||
necessary for replacing the stock of the farmer, or for compensating the
|
||||
wear and tear of his labouring cattle, and other instruments of husbandry.
|
||||
But it must be considered, that the price of any instrument of husbandry,
|
||||
such as a labouring horse, is itself made up of the same time parts; the
|
||||
rent of the land upon which he is reared, the labour of tending and
|
||||
rearing him, and the profits of the farmer, who advances both the rent of
|
||||
this land, and the wages of this labour. Though the price of the corn,
|
||||
therefore, may pay the price as well as the maintenance of the horse, the
|
||||
whole price still resolves itself, either immediately or ultimately, into
|
||||
the same three parts of rent, labour, and profit.
|
||||
|
||||
In the price of flour or meal, we must add to the price of the corn, the
|
||||
profits of the miller, and the wages of his servants; in the price of
|
||||
bread, the profits of the baker, and the wages of his servants; and in the
|
||||
price of both, the labour of transporting the corn from the house of the
|
||||
farmer to that of the miller, and from that of the miller to that of the
|
||||
baker, together with the profits of those who advance the wages of that
|
||||
labour.
|
||||
|
||||
The price of flax resolves itself into the same three parts as that of
|
||||
corn. In the price of linen we must add to this price the wages of the
|
||||
flax-dresser, of the spinner, of the weaver, of the bleacher, etc.
|
||||
together with the profits of their respective employers.
|
||||
|
||||
As any particular commodity comes to be more manufactured, that part of
|
||||
the price which resolves itself into wages and profit, comes to be greater
|
||||
in proportion to that which resolves itself into rent. In the progress of
|
||||
the manufacture, not only the number of profits increase, but every
|
||||
subsequent profit is greater than the foregoing; because the capital from
|
||||
which it is derived must always be greater. The capital which employs the
|
||||
weavers, for example, must be greater than that which employs the
|
||||
spinners; because it not only replaces that capital with its profits, but
|
||||
pays, besides, the wages of the weavers: and the profits must always bear
|
||||
some proportion to the capital.
|
||||
|
||||
In the most improved societies, however, there are always a few
|
||||
commodities of which the price resolves itself into two parts only: the
|
||||
wages of labour, and the profits of stock; and a still smaller number, in
|
||||
which it consists altogether in the wages of labour. In the price of
|
||||
sea-fish, for example, one part pays the labour of the fisherman, and the
|
||||
other the profits of the capital employed in the fishery. Rent very seldom
|
||||
makes any part of it, though it does sometimes, as I shall shew hereafter.
|
||||
It is otherwise, at least through the greater part of Europe, in river
|
||||
fisheries. A salmon fishery pays a rent; and rent, though it cannot well
|
||||
be called the rent of land, makes a part of the price of a salmon, as well
|
||||
as wares and profit. In some parts of Scotland, a few poor people make a
|
||||
trade of gathering, along the sea-shore, those little variegated stones
|
||||
commonly known by the name of Scotch pebbles. The price which is paid to
|
||||
them by the stone-cutter, is altogether the wages of their labour; neither
|
||||
rent nor profit makes any part of it.
|
||||
|
||||
But the whole price of any commodity must still finally resolve itself
|
||||
into some one or other or all of those three parts; as whatever part of it
|
||||
remains after paying the rent of the land, and the price of the whole
|
||||
labour employed in raising, manufacturing, and bringing it to market, must
|
||||
necessarily be profit to somebody.
|
||||
|
||||
As the price or exchangeable value of every particular commodity, taken
|
||||
separately, resolves itself into some one or other, or all of those three
|
||||
parts; so that of all the commodities which compose the whole annual
|
||||
produce of the labour of every country, taken complexly, must resolve
|
||||
itself into the same three parts, and be parcelled out among different
|
||||
inhabitants of the country, either as the wages of their labour, the
|
||||
profits of their stock, or the rent of their land. The whole of what is
|
||||
annually either collected or produced by the labour of every society, or,
|
||||
what comes to the same thing, the whole price of it, is in this manner
|
||||
originally distributed among some of its different members. Wages, profit,
|
||||
and rent, are the three original sources of all revenue, as well as of all
|
||||
exchangeable value. All other revenue is ultimately derived from some one
|
||||
or other of these.
|
||||
|
||||
Whoever derives his revenue from a fund which is his own, must draw it
|
||||
either from his labour, from his stock, or from his land. The revenue
|
||||
derived from labour is called wages; that derived from stock, by the
|
||||
person who manages or employs it, is called profit; that derived from it
|
||||
by the person who does not employ it himself, but lends it to another, is
|
||||
called the interest or the use of money. It is the compensation which the
|
||||
borrower pays to the lender, for the profit which he has an opportunity of
|
||||
making by the use of the money. Part of that profit naturally belongs to
|
||||
the borrower, who runs the risk and takes the trouble of employing it, and
|
||||
part to the lender, who affords him the opportunity of making this profit.
|
||||
The interest of money is always a derivative revenue, which, if it is not
|
||||
paid from the profit which is made by the use of the money, must be paid
|
||||
from some other source of revenue, unless perhaps the borrower is a
|
||||
spendthrift, who contracts a second debt in order to pay the interest of
|
||||
the first. The revenue which proceeds altogether from land, is called
|
||||
rent, and belongs to the landlord. The revenue of the farmer is derived
|
||||
partly from his labour, and partly from his stock. To him, land is only
|
||||
the instrument which enables him to earn the wages of this labour, and to
|
||||
make the profits of this stock. All taxes, and all the revenue which is
|
||||
founded upon them, all salaries, pensions, and annuities of every kind,
|
||||
are ultimately derived from some one or other of those three original
|
||||
sources of revenue, and are paid either immediately or mediately from the
|
||||
wages of labour, the profits of stock, or the rent of land.
|
||||
|
||||
When those three different sorts of revenue belong to different persons,
|
||||
they are readily distinguished; but when they belong to the same, they are
|
||||
sometimes confounded with one another, at least in common language.
|
||||
|
||||
A gentleman who farms a part of his own estate, after paying the expense
|
||||
of cultivation, should gain both the rent of the landlord and the profit
|
||||
of the farmer. He is apt to denominate, however, his whole gain, profit,
|
||||
and thus confounds rent with profit, at least in common language. The
|
||||
greater part of our North American and West Indian planters are in this
|
||||
situation. They farm, the greater part of them, their own estates: and
|
||||
accordingly we seldom hear of the rent of a plantation, but frequently of
|
||||
its profit.
|
||||
|
||||
Common farmers seldom employ any overseer to direct the general operations
|
||||
of the farm. They generally, too, work a good deal with their own hands,
|
||||
as ploughmen, harrowers, etc. What remains of the crop, after paying the
|
||||
rent, therefore, should not only replace to them their stock employed in
|
||||
cultivation, together with its ordinary profits, but pay them the wages
|
||||
which are due to them, both as labourers and overseers. Whatever remains,
|
||||
however, after paying the rent and keeping up the stock, is called profit.
|
||||
But wages evidently make a part of it. The farmer, by saving these wages,
|
||||
must necessarily gain them. Wages, therefore, are in this case confounded
|
||||
with profit.
|
||||
|
||||
An independent manufacturer, who has stock enough both to purchase
|
||||
materials, and to maintain himself till he can carry his work to market,
|
||||
should gain both the wages of a journeyman who works under a master, and
|
||||
the profit which that master makes by the sale of that journeyman’s work.
|
||||
His whole gains, however, are commonly called profit, and wages are, in
|
||||
this case, too, confounded with profit.
|
||||
|
||||
A gardener who cultivates his own garden with his own hands, unites in his
|
||||
own person the three different characters, of landlord, farmer, and
|
||||
labourer. His produce, therefore, should pay him the rent of the first,
|
||||
the profit of the second, and the wages of the third. The whole, however,
|
||||
is commonly considered as the earnings of his labour. Both rent and profit
|
||||
are, in this case, confounded with wages.
|
||||
|
||||
As in a civilized country there are but few commodities of which the
|
||||
exchangeable value arises from labour only, rent and profit contributing
|
||||
largely to that of the far greater part of them, so the annual produce of
|
||||
its labour will always be sufficient to purchase or command a much greater
|
||||
quantity of labour than what was employed in raising, preparing, and
|
||||
bringing that produce to market. If the society were annually to employ
|
||||
all the labour which it can annually purchase, as the quantity of labour
|
||||
would increase greatly every year, so the produce of every succeeding year
|
||||
would be of vastly greater value than that of the foregoing. But there is
|
||||
no country in which the whole annual produce is employed in maintaining
|
||||
the industrious. The idle everywhere consume a great part of it; and,
|
||||
according to the different proportions in which it is annually divided
|
||||
between those two different orders of people, its ordinary or average
|
||||
value must either annually increase or diminish, or continue the same from
|
||||
one year to another.
|
||||
|
||||
|
||||
## 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 one of: Production, Distribution, Exchange,
|
||||
Consumption, Accumulation, Regulation, or General Theory.
|
||||
|
||||
|
||||
## 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.
|
||||
|
||||
|
||||
## Instructions
|
||||
|
||||
1. Read the source chapter carefully.
|
||||
2. Identify all distinct economic concepts, actors, mechanisms, and institutions.
|
||||
3. For each entity, produce a separate markdown document following the
|
||||
Economic Entity Schema v1.0.
|
||||
4. 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
|
||||
5. Optionally include Smith's Original Wording (direct quote) and
|
||||
Modern Interpretation sections.
|
||||
6. Use neutral, analytical language throughout.
|
||||
7. Ensure each entity is distinct and self-contained.
|
||||
|
||||
## Output Format
|
||||
|
||||
Output each entity as a separate markdown document, delimited by
|
||||
`--- ENTITY: <entity-name> ---` markers.
|
||||
@@ -0,0 +1,616 @@
|
||||
# Extract Economic Entities
|
||||
|
||||
You are an analytical economist specializing in classical economic theory.
|
||||
Your task is to extract distinct economic entities from a chapter of
|
||||
Adam Smith's *The Wealth of Nations*.
|
||||
|
||||
## Source Chapter
|
||||
|
||||
---
|
||||
id: book-1-chapter-07
|
||||
title: "OF THE NATURAL AND MARKET PRICE OF COMMODITIES."
|
||||
book: "1"
|
||||
chapter: 7
|
||||
artifact_type: content
|
||||
---
|
||||
|
||||
CHAPTER VII.
|
||||
OF THE NATURAL AND MARKET PRICE OF COMMODITIES.
|
||||
|
||||
|
||||
|
||||
There is in every society or neighbourhood an ordinary or average rate,
|
||||
both of wages and profit, in every different employment of labour and
|
||||
stock. This rate is naturally regulated, as I shall shew hereafter, partly
|
||||
by the general circumstances of the society, their riches or poverty,
|
||||
their advancing, stationary, or declining condition, and partly by the
|
||||
particular nature of each employment.
|
||||
|
||||
There is likewise in every society or neighbourhood an ordinary or average
|
||||
rate of rent, which is regulated, too, as I shall shew hereafter, partly
|
||||
by the general circumstances of the society or neighbourhood in which the
|
||||
land is situated, and partly by the natural or improved fertility of the
|
||||
land.
|
||||
|
||||
These ordinary or average rates may be called the natural rates of wages,
|
||||
profit and rent, at the time and place in which they commonly prevail.
|
||||
|
||||
When the price of any commodity is neither more nor less than what is
|
||||
sufficient to pay the rent of the land, the wages of the labour, and the
|
||||
profits of the stock employed in raising, preparing, and bringing it to
|
||||
market, according to their natural rates, the commodity is then sold for
|
||||
what may be called its natural price.
|
||||
|
||||
The commodity is then sold precisely for what it is worth, or for what it
|
||||
really costs the person who brings it to market; for though, in common
|
||||
language, what is called the prime cost of any commodity does not
|
||||
comprehend the profit of the person who is to sell it again, yet, if he
|
||||
sells it at a price which does not allow him the ordinary rate of profit
|
||||
in his neighbourhood, he is evidently a loser by the trade; since, by
|
||||
employing his stock in some other way, he might have made that profit. His
|
||||
profit, besides, is his revenue, the proper fund of his subsistence. As,
|
||||
while he is preparing and bringing the goods to market, he advances to his
|
||||
workmen their wages, or their subsistence; so he advances to himself, in
|
||||
the same manner, his own subsistence, which is generally suitable to the
|
||||
profit which he may reasonably expect from the sale of his goods. Unless
|
||||
they yield him this profit, therefore, they do not repay him what they may
|
||||
very properly be said to have really cost him.
|
||||
|
||||
Though the price, therefore, which leaves him this profit, is not always
|
||||
the lowest at which a dealer may sometimes sell his goods, it is the
|
||||
lowest at which he is likely to sell them for any considerable time; at
|
||||
least where there is perfect liberty, or where he may change his trade as
|
||||
often as he pleases.
|
||||
|
||||
The actual price at which any commodity is commonly sold, is called its
|
||||
market price. It may either be above, or below, or exactly the same with
|
||||
its natural price.
|
||||
|
||||
The market price of every particular commodity is regulated by the
|
||||
proportion between the quantity which is actually brought to market, and
|
||||
the demand of those who are willing to pay the natural price of the
|
||||
commodity, or the whole value of the rent, labour, and profit, which must
|
||||
be paid in order to bring it thither. Such people may be called the
|
||||
effectual demanders, and their demand the effectual demand; since it maybe
|
||||
sufficient to effectuate the bringing of the commodity to market. It is
|
||||
different from the absolute demand. A very poor man may be said, in some
|
||||
sense, to have a demand for a coach and six; he might like to have it; but
|
||||
his demand is not an effectual demand, as the commodity can never be
|
||||
brought to market in order to satisfy it.
|
||||
|
||||
When the quantity of any commodity which is brought to market falls short
|
||||
of the effectual demand, all those who are willing to pay the whole value
|
||||
of the rent, wages, and profit, which must be paid in order to bring it
|
||||
thither, cannot be supplied with the quantity which they want. Rather than
|
||||
want it altogether, some of them will be willing to give more. A
|
||||
competition will immediately begin among them, and the market price will
|
||||
rise more or less above the natural price, according as either the
|
||||
greatness of the deficiency, or the wealth and wanton luxury of the
|
||||
competitors, happen to animate more or less the eagerness of the
|
||||
competition. Among competitors of equal wealth and luxury, the same
|
||||
deficiency will generally occasion a more or less eager competition,
|
||||
according as the acquisition of the commodity happens to be of more or
|
||||
less importance to them. Hence the exorbitant price of the necessaries of
|
||||
life during the blockade of a town, or in a famine.
|
||||
|
||||
When the quantity brought to market exceeds the effectual demand, it
|
||||
cannot be all sold to those who are willing to pay the whole value of the
|
||||
rent, wages, and profit, which must be paid in order to bring it thither.
|
||||
Some part must be sold to those who are willing to pay less, and the low
|
||||
price which they give for it must reduce the price of the whole. The
|
||||
market price will sink more or less below the natural price, according as
|
||||
the greatness of the excess increases more or less the competition of the
|
||||
sellers, or according as it happens to be more or less important to them
|
||||
to get immediately rid of the commodity. The same excess in the
|
||||
importation of perishable, will occasion a much greater competition than
|
||||
in that of durable commodities; in the importation of oranges, for
|
||||
example, than in that of old iron.
|
||||
|
||||
When the quantity brought to market is just sufficient to supply the
|
||||
effectual demand, and no more, the market price naturally comes to be
|
||||
either exactly, or as nearly as can be judged of, the same with the
|
||||
natural price. The whole quantity upon hand can be disposed of for this
|
||||
price, and can not be disposed of for more. The competition of the
|
||||
different dealers obliges them all to accept of this price, but does not
|
||||
oblige them to accept of less.
|
||||
|
||||
The quantity of every commodity brought to market naturally suits itself
|
||||
to the effectual demand. It is the interest of all those who employ their
|
||||
land, labour, or stock, in bringing any commodity to market, that the
|
||||
quantity never should exceed the effectual demand; and it is the interest
|
||||
of all other people that it never should fall short of that demand.
|
||||
|
||||
If at any time it exceeds the effectual demand, some of the component
|
||||
parts of its price must be paid below their natural rate. If it is rent,
|
||||
the interest of the landlords will immediately prompt them to withdraw a
|
||||
part of their land; and if it is wages or profit, the interest of the
|
||||
labourers in the one case, and of their employers in the other, will
|
||||
prompt them to withdraw a part of their labour or stock, from this
|
||||
employment. The quantity brought to market will soon be no more than
|
||||
sufficient to supply the effectual demand. All the different parts of its
|
||||
price will rise to their natural rate, and the whole price to its natural
|
||||
price.
|
||||
|
||||
If, on the contrary, the quantity brought to market should at any time
|
||||
fall short of the effectual demand, some of the component parts of its
|
||||
price must rise above their natural rate. If it is rent, the interest of
|
||||
all other landlords will naturally prompt them to prepare more land for
|
||||
the raising of this commodity; if it is wages or profit, the interest of
|
||||
all other labourers and dealers will soon prompt them to employ more
|
||||
labour and stock in preparing and bringing it to market. The quantity
|
||||
brought thither will soon be sufficient to supply the effectual demand.
|
||||
All the different parts of its price will soon sink to their natural rate,
|
||||
and the whole price to its natural price.
|
||||
|
||||
The natural price, therefore, is, as it were, the central price, to which
|
||||
the prices of all commodities are continually gravitating. Different
|
||||
accidents may sometimes keep them suspended a good deal above it, and
|
||||
sometimes force them down even somewhat below it. But whatever may be the
|
||||
obstacles which hinder them from settling in this centre of repose and
|
||||
continuance, they are constantly tending towards it.
|
||||
|
||||
The whole quantity of industry annually employed in order to bring any
|
||||
commodity to market, naturally suits itself in this manner to the
|
||||
effectual demand. It naturally aims at bringing always that precise
|
||||
quantity thither which may be sufficient to supply, and no more than
|
||||
supply, that demand.
|
||||
|
||||
But, in some employments, the same quantity of industry will, in different
|
||||
years, produce very different quantities of commodities; while, in others,
|
||||
it will produce always the same, or very nearly the same. The same number
|
||||
of labourers in husbandry will, in different years, produce very different
|
||||
quantities of corn, wine, oil, hops, etc. But the same number of spinners
|
||||
or weavers will every year produce the same, or very nearly the same,
|
||||
quantity of linen and woollen cloth. It is only the average produce of the
|
||||
one species of industry which can be suited, in any respect, to the
|
||||
effectual demand; and as its actual produce is frequently much greater,
|
||||
and frequently much less, than its average produce, the quantity of the
|
||||
commodities brought to market will sometimes exceed a good deal, and
|
||||
sometimes fall short a good deal, of the effectual demand. Even though
|
||||
that demand, therefore, should continue always the same, their market
|
||||
price will be liable to great fluctuations, will sometimes fall a good
|
||||
deal below, and sometimes rise a good deal above, their natural price. In
|
||||
the other species of industry, the produce of equal quantities of labour
|
||||
being always the same, or very nearly the same, it can be more exactly
|
||||
suited to the effectual demand. While that demand continues the same,
|
||||
therefore, the market price of the commodities is likely to do so too, and
|
||||
to be either altogether, or as nearly as can be judged of, the same with
|
||||
the natural price. That the price of linen and woollen cloth is liable
|
||||
neither to such frequent, nor to such great variations, as the price of
|
||||
corn, every man’s experience will inform him. The price of the one species
|
||||
of commodities varies only with the variations in the demand; that of the
|
||||
other varies not only with the variations in the demand, but with the much
|
||||
greater, and more frequent, variations in the quantity of what is brought
|
||||
to market, in order to supply that demand.
|
||||
|
||||
The occasional and temporary fluctuations in the market price of any
|
||||
commodity fall chiefly upon those parts of its price which resolve
|
||||
themselves into wages and profit. That part which resolves itself into
|
||||
rent is less affected by them. A rent certain in money is not in the least
|
||||
affected by them, either in its rate or in its value. A rent which
|
||||
consists either in a certain proportion, or in a certain quantity, of the
|
||||
rude produce, is no doubt affected in its yearly value by all the
|
||||
occasional and temporary fluctuations in the market price of that rude
|
||||
produce; but it is seldom affected by them in its yearly rate. In settling
|
||||
the terms of the lease, the landlord and farmer endeavour, according to
|
||||
their best judgment, to adjust that rate, not to the temporary and
|
||||
occasional, but to the average and ordinary price of the produce.
|
||||
|
||||
Such fluctuations affect both the value and the rate, either of wages or
|
||||
of profit, according as the market happens to be either overstocked or
|
||||
understocked with commodities or with labour, with work done, or with work
|
||||
to be done. A public mourning raises the price of black cloth (with which
|
||||
the market is almost always understocked upon such occasions), and
|
||||
augments the profits of the merchants who possess any considerable
|
||||
quantity of it. It has no effect upon the wages of the weavers. The market
|
||||
is understocked with commodities, not with labour, with work done, not
|
||||
with work to be done. It raises the wages of journeymen tailors. The
|
||||
market is here understocked with labour. There is an effectual demand for
|
||||
more labour, for more work to be done, than can be had. It sinks the price
|
||||
of coloured silks and cloths, and thereby reduces the profits of the
|
||||
merchants who have any considerable quantity of them upon hand. It sinks,
|
||||
too, the wages of the workmen employed in preparing such commodities, for
|
||||
which all demand is stopped for six months, perhaps for a twelvemonth. The
|
||||
market is here overstocked both with commodities and with labour.
|
||||
|
||||
But though the market price of every particular commodity is in this
|
||||
manner continually gravitating, if one may say so, towards the natural
|
||||
price; yet sometimes particular accidents, sometimes natural causes, and
|
||||
sometimes particular regulations of policy, may, in many commodities, keep
|
||||
up the market price, for a long time together, a good deal above the
|
||||
natural price.
|
||||
|
||||
When, by an increase in the effectual demand, the market price of some
|
||||
particular commodity happens to rise a good deal above the natural price,
|
||||
those who employ their stocks in supplying that market, are generally
|
||||
careful to conceal this change. If it was commonly known, their great
|
||||
profit would tempt so many new rivals to employ their stocks in the same
|
||||
way, that, the effectual demand being fully supplied, the market price
|
||||
would soon be reduced to the natural price, and, perhaps, for some time
|
||||
even below it. If the market is at a great distance from the residence of
|
||||
those who supply it, they may sometimes be able to keep the secret for
|
||||
several years together, and may so long enjoy their extraordinary profits
|
||||
without any new rivals. Secrets of this kind, however, it must be
|
||||
acknowledged, can seldom be long kept; and the extraordinary profit can
|
||||
last very little longer than they are kept.
|
||||
|
||||
Secrets in manufactures are capable of being longer kept than secrets in
|
||||
trade. A dyer who has found the means of producing a particular colour
|
||||
with materials which cost only half the price of those commonly made use
|
||||
of, may, with good management, enjoy the advantage of his discovery as
|
||||
long as he lives, and even leave it as a legacy to his posterity. His
|
||||
extraordinary gains arise from the high price which is paid for his
|
||||
private labour. They properly consist in the high wages of that labour.
|
||||
But as they are repeated upon every part of his stock, and as their whole
|
||||
amount bears, upon that account, a regular proportion to it, they are
|
||||
commonly considered as extraordinary profits of stock.
|
||||
|
||||
Such enhancements of the market price are evidently the effects of
|
||||
particular accidents, of which, however, the operation may sometimes last
|
||||
for many years together.
|
||||
|
||||
Some natural productions require such a singularity of soil and situation,
|
||||
that all the land in a great country, which is fit for producing them, may
|
||||
not be sufficient to supply the effectual demand. The whole quantity
|
||||
brought to market, therefore, may be disposed of to those who are willing
|
||||
to give more than what is sufficient to pay the rent of the land which
|
||||
produced them, together with the wages of the labour and the profits of
|
||||
the stock which were employed in preparing and bringing them to market,
|
||||
according to their natural rates. Such commodities may continue for whole
|
||||
centuries together to be sold at this high price; and that part of it
|
||||
which resolves itself into the rent of land, is in this case the part
|
||||
which is generally paid above its natural rate. The rent of the land which
|
||||
affords such singular and esteemed productions, like the rent of some
|
||||
vineyards in France of a peculiarly happy soil and situation, bears no
|
||||
regular proportion to the rent of other equally fertile and equally well
|
||||
cultivated land in its neighbourhood. The wages of the labour, and the
|
||||
profits of the stock employed in bringing such commodities to market, on
|
||||
the contrary, are seldom out of their natural proportion to those of the
|
||||
other employments of labour and stock in their neighbourhood.
|
||||
|
||||
Such enhancements of the market price are evidently the effect of natural
|
||||
causes, which may hinder the effectual demand from ever being fully
|
||||
supplied, and which may continue, therefore, to operate for ever.
|
||||
|
||||
A monopoly granted either to an individual or to a trading company, has
|
||||
the same effect as a secret in trade or manufactures. The monopolists, by
|
||||
keeping the market constantly understocked by never fully supplying the
|
||||
effectual demand, sell their commodities much above the natural price, and
|
||||
raise their emoluments, whether they consist in wages or profit, greatly
|
||||
above their natural rate.
|
||||
|
||||
The price of monopoly is upon every occasion the highest which can be got.
|
||||
The natural price, or the price of free competition, on the contrary, is
|
||||
the lowest which can be taken, not upon every occasion indeed, but for any
|
||||
considerable time together. The one is upon every occasion the highest
|
||||
which can be squeezed out of the buyers, or which it is supposed they will
|
||||
consent to give; the other is the lowest which the sellers can commonly
|
||||
afford to take, and at the same time continue their business.
|
||||
|
||||
The exclusive privileges of corporations, statutes of apprenticeship, and
|
||||
all those laws which restrain in particular employments, the competition
|
||||
to a smaller number than might otherwise go into them, have the same
|
||||
tendency, though in a less degree. They are a sort of enlarged monopolies,
|
||||
and may frequently, for ages together, and in whole classes of
|
||||
employments, keep up the market price of particular commodities above the
|
||||
natural price, and maintain both the wages of the labour and the profits
|
||||
of the stock employed about them somewhat above their natural rate.
|
||||
|
||||
Such enhancements of the market price may last as long as the regulations
|
||||
of policy which give occasion to them.
|
||||
|
||||
The market price of any particular commodity, though it may continue long
|
||||
above, can seldom continue long below, its natural price. Whatever part of
|
||||
it was paid below the natural rate, the persons whose interest it affected
|
||||
would immediately feel the loss, and would immediately withdraw either so
|
||||
much land or so much labour, or so much stock, from being employed about
|
||||
it, that the quantity brought to market would soon be no more than
|
||||
sufficient to supply the effectual demand. Its market price, therefore,
|
||||
would soon rise to the natural price; this at least would be the case
|
||||
where there was perfect liberty.
|
||||
|
||||
The same statutes of apprenticeship and other corporation laws, indeed,
|
||||
which, when a manufacture is in prosperity, enable the workman to raise
|
||||
his wages a good deal above their natural rate, sometimes oblige him, when
|
||||
it decays, to let them down a good deal below it. As in the one case they
|
||||
exclude many people from his employment, so in the other they exclude him
|
||||
from many employments. The effect of such regulations, however, is not
|
||||
near so durable in sinking the workman’s wages below, as in raising them
|
||||
above their natural rate. Their operation in the one way may endure for
|
||||
many centuries, but in the other it can last no longer than the lives of
|
||||
some of the workmen who were bred to the business in the time of its
|
||||
prosperity. When they are gone, the number of those who are afterwards
|
||||
educated to the trade will naturally suit itself to the effectual demand.
|
||||
The policy must be as violent as that of Indostan or ancient Egypt (where
|
||||
every man was bound by a principle of religion to follow the occupation of
|
||||
his father, and was supposed to commit the most horrid sacrilege if he
|
||||
changed it for another), which can in any particular employment, and for
|
||||
several generations together, sink either the wages of labour or the
|
||||
profits of stock below their natural rate.
|
||||
|
||||
This is all that I think necessary to be observed at present concerning
|
||||
the deviations, whether occasional or permanent, of the market price of
|
||||
commodities from the natural price.
|
||||
|
||||
The natural price itself varies with the natural rate of each of its
|
||||
component parts, of wages, profit, and rent; and in every society this
|
||||
rate varies according to their circumstances, according to their riches or
|
||||
poverty, their advancing, stationary, or declining condition. I shall, in
|
||||
the four following chapters, endeavour to explain, as fully and distinctly
|
||||
as I can, the causes of those different variations.
|
||||
|
||||
First, I shall endeavour to explain what are the circumstances which
|
||||
naturally determine the rate of wages, and in what manner those
|
||||
circumstances are affected by the riches or poverty, by the advancing,
|
||||
stationary, or declining state of the society.
|
||||
|
||||
Secondly, I shall endeavour to shew what are the circumstances which
|
||||
naturally determine the rate of profit; and in what manner, too, those
|
||||
circumstances are affected by the like variations in the state of the
|
||||
society.
|
||||
|
||||
Though pecuniary wages and profit are very different in the different
|
||||
employments of labour and stock; yet a certain proportion seems commonly
|
||||
to take place between both the pecuniary wages in all the different
|
||||
employments of labour, and the pecuniary profits in all the different
|
||||
employments of stock. This proportion, it will appear hereafter, depends
|
||||
partly upon the nature of the different employments, and partly upon the
|
||||
different laws and policy of the society in which they are carried on. But
|
||||
though in many respects dependent upon the laws and policy, this
|
||||
proportion seems to be little affected by the riches or poverty of that
|
||||
society, by its advancing, stationary, or declining condition, but to
|
||||
remain the same, or very nearly the same, in all those different states. I
|
||||
shall, in the third place, endeavour to explain all the different
|
||||
circumstances which regulate this proportion.
|
||||
|
||||
In the fourth and last place, I shall endeavour to shew what are the
|
||||
circumstances which regulate the rent of land, and which either raise or
|
||||
lower the real price of all the different substances which it produces.
|
||||
|
||||
|
||||
## 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 one of: Production, Distribution, Exchange,
|
||||
Consumption, Accumulation, Regulation, or General Theory.
|
||||
|
||||
|
||||
## 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.
|
||||
|
||||
|
||||
## Instructions
|
||||
|
||||
1. Read the source chapter carefully.
|
||||
2. Identify all distinct economic concepts, actors, mechanisms, and institutions.
|
||||
3. For each entity, produce a separate markdown document following the
|
||||
Economic Entity Schema v1.0.
|
||||
4. 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
|
||||
5. Optionally include Smith's Original Wording (direct quote) and
|
||||
Modern Interpretation sections.
|
||||
6. Use neutral, analytical language throughout.
|
||||
7. Ensure each entity is distinct and self-contained.
|
||||
|
||||
## Output Format
|
||||
|
||||
Output each entity as a separate markdown document, delimited by
|
||||
`--- ENTITY: <entity-name> ---` markers.
|
||||
File diff suppressed because it is too large
Load Diff
@@ -0,0 +1,652 @@
|
||||
# Extract Economic Entities
|
||||
|
||||
You are an analytical economist specializing in classical economic theory.
|
||||
Your task is to extract distinct economic entities from a chapter of
|
||||
Adam Smith's *The Wealth of Nations*.
|
||||
|
||||
## Source Chapter
|
||||
|
||||
---
|
||||
id: book-1-chapter-09
|
||||
title: "OF THE PROFITS OF STOCK."
|
||||
book: "1"
|
||||
chapter: 9
|
||||
artifact_type: content
|
||||
---
|
||||
|
||||
CHAPTER IX.
|
||||
OF THE PROFITS OF STOCK.
|
||||
|
||||
|
||||
|
||||
The rise and fall in the profits of stock depend upon the same causes with
|
||||
the rise and fall in the wages of labour, the increasing or declining
|
||||
state of the wealth of the society; but those causes affect the one and
|
||||
the other very differently.
|
||||
|
||||
The increase of stock, which raises wages, tends to lower profit. When the
|
||||
stocks of many rich merchants are turned into the same trade, their mutual
|
||||
competition naturally tends to lower its profit; and when there is a like
|
||||
increase of stock in all the different trades carried on in the same
|
||||
society, the same competition must produce the same effect in them all.
|
||||
|
||||
It is not easy, it has already been observed, to ascertain what are the
|
||||
average wages of labour, even in a particular place, and at a particular
|
||||
time. We can, even in this case, seldom determine more than what are the
|
||||
most usual wages. But even this can seldom be done with regard to the
|
||||
profits of stock. Profit is so very fluctuating, that the person who
|
||||
carries on a particular trade, cannot always tell you himself what is the
|
||||
average of his annual profit. It is affected, not only by every variation
|
||||
of price in the commodities which he deals in, but by the good or bad
|
||||
fortune both of his rivals and of his customers, and by a thousand other
|
||||
accidents, to which goods, when carried either by sea or by land, or even
|
||||
when stored in a warehouse, are liable. It varies, therefore, not only
|
||||
from year to year, but from day to day, and almost from hour to hour. To
|
||||
ascertain what is the average profit of all the different trades carried
|
||||
on in a great kingdom, must be much more difficult; and to judge of what
|
||||
it may have been formerly, or in remote periods of time, with any degree
|
||||
of precision, must be altogether impossible.
|
||||
|
||||
But though it may be impossible to determine, with any degree of
|
||||
precision, what are or were the average profits of stock, either in the
|
||||
present or in ancient times, some notion may be formed of them from the
|
||||
interest of money. It may be laid down as a maxim, that wherever a great
|
||||
deal can be made by the use of money, a great deal will commonly be given
|
||||
for the use of it; and that, wherever little can be made by it, less will
|
||||
commonly he given for it. Accordingly, therefore, as the usual market rate
|
||||
of interest varies in any country, we may be assured that the ordinary
|
||||
profits of stock must vary with it, must sink as it sinks, and rise as it
|
||||
rises. The progress of interest, therefore, may lead us to form some
|
||||
notion of the progress of profit.
|
||||
|
||||
By the 37th of Henry VIII. all interest above ten per cent. was declared
|
||||
unlawful. More, it seems, had sometimes been taken before that. In the
|
||||
reign of Edward VI. religious zeal prohibited all interest. This
|
||||
prohibition, however, like all others of the same kind, is said to have
|
||||
produced no effect, and probably rather increased than diminished the evil
|
||||
of usury. The statute of Henry VIII. was revived by the 13th of Elizabeth,
|
||||
cap. 8. and ten per cent. continued to be the legal rate of interest till
|
||||
the 21st of James I. when it was restricted to eight per cent. It was
|
||||
reduced to six per cent. soon after the Restoration, and by the 12th of
|
||||
Queen Anne, to five per cent. All these different statutory regulations
|
||||
seem to have been made with great propriety. They seem to have followed,
|
||||
and not to have gone before, the market rate of interest, or the rate at
|
||||
which people of good credit usually borrowed. Since the time of Queen
|
||||
Anne, five per cent. seems to have been rather above than below the market
|
||||
rate. Before the late war, the government borrowed at three per cent.; and
|
||||
people of good credit in the capital, and in many other parts of the
|
||||
kingdom, at three and a-half, four, and four and a-half per cent.
|
||||
|
||||
Since the time of Henry VIII. the wealth and revenue of the country have
|
||||
been continually advancing, and in the course of their progress, their
|
||||
pace seems rather to have been gradually accelerated than retarded. They
|
||||
seem not only to have been going on, but to have been going on faster and
|
||||
faster. The wages of labour have been continually increasing during the
|
||||
same period, and, in the greater part of the different branches of trade
|
||||
and manufactures, the profits of stock have been diminishing.
|
||||
|
||||
It generally requires a greater stock to carry on any sort of trade in a
|
||||
great town than in a country village. The great stocks employed in every
|
||||
branch of trade, and the number of rich competitors, generally reduce the
|
||||
rate of profit in the former below what it is in the latter. But the wages
|
||||
of labour are generally higher in a great town than in a country village.
|
||||
In a thriving town, the people who have great stocks to employ, frequently
|
||||
cannot get the number of workmen they want, and therefore bid against one
|
||||
another, in order to get as many as they can, which raises the wages of
|
||||
labour, and lowers the profits of stock. In the remote parts of the
|
||||
country, there is frequently not stock sufficient to employ all the
|
||||
people, who therefore bid against one another, in order to get employment,
|
||||
which lowers the wages of labour, and raises the profits of stock.
|
||||
|
||||
In Scotland, though the legal rate of interest is the same as in England,
|
||||
the market rate is rather higher. People of the best credit there seldom
|
||||
borrow under five per cent. Even private bankers in Edinburgh give four
|
||||
per cent. upon their promissory-notes, of which payment, either in whole
|
||||
or in part may be demanded at pleasure. Private bankers in London give no
|
||||
interest for the money which is deposited with them. There are few trades
|
||||
which cannot be carried on with a smaller stock in Scotland than in
|
||||
England. The common rate of profit, therefore, must be somewhat greater.
|
||||
The wages of labour, it has already been observed, are lower in Scotland
|
||||
than in England. The country, too, is not only much poorer, but the steps
|
||||
by which it advances to a better condition, for it is evidently advancing,
|
||||
seem to be much slower and more tardy. The legal rate of interest in
|
||||
France has not during the course of the present century, been always
|
||||
regulated by the market rate {See Denisart, Article Taux des Interests,
|
||||
tom. iii, p.13}. In 1720, interest was reduced from the twentieth to the
|
||||
fiftieth penny, or from five to two per cent. In 1724, it was raised to
|
||||
the thirtieth penny, or to three and a third per cent. In 1725, it was
|
||||
again raised to the twentieth penny, or to five per cent. In 1766, during
|
||||
the administration of Mr Laverdy, it was reduced to the twenty-fifth
|
||||
penny, or to four per cent. The Abbé Terray raised it afterwards to the
|
||||
old rate of five per cent. The supposed purpose of many of those violent
|
||||
reductions of interest was to prepare the way for reducing that of the
|
||||
public debts; a purpose which has sometimes been executed. France is,
|
||||
perhaps, in the present times, not so rich a country as England; and
|
||||
though the legal rate of interest has in France frequently been lower than
|
||||
in England, the market rate has generally been higher; for there, as in
|
||||
other countries, they have several very safe and easy methods of evading
|
||||
the law. The profits of trade, I have been assured by British merchants
|
||||
who had traded in both countries, are higher in France than in England;
|
||||
and it is no doubt upon this account, that many British subjects chuse
|
||||
rather to employ their capitals in a country where trade is in disgrace,
|
||||
than in one where it is highly respected. The wages of labour are lower in
|
||||
France than in England. When you go from Scotland to England, the
|
||||
difference which you may remark between the dress and countenance of the
|
||||
common people in the one country and in the other, sufficiently indicates
|
||||
the difference in their condition. The contrast is still greater when you
|
||||
return from France. France, though no doubt a richer country than
|
||||
Scotland, seems not to be going forward so fast. It is a common and even a
|
||||
popular opinion in the country, that it is going backwards; an opinion
|
||||
which I apprehend, is ill-founded, even with regard to France, but which
|
||||
nobody can possibly entertain with regard to Scotland, who sees the
|
||||
country now, and who saw it twenty or thirty years ago.
|
||||
|
||||
The province of Holland, on the other hand, in proportion to the extent of
|
||||
its territory and the number of its people, is a richer country than
|
||||
England. The government there borrow at two per cent. and private people
|
||||
of good credit at three. The wages of labour are said to be higher in
|
||||
Holland than in England, and the Dutch, it is well known, trade upon lower
|
||||
profits than any people in Europe. The trade of Holland, it has been
|
||||
pretended by some people, is decaying, and it may perhaps be true that
|
||||
some particular branches of it are so; but these symptoms seem to indicate
|
||||
sufficiently that there is no general decay. When profit diminishes,
|
||||
merchants are very apt to complain that trade decays, though the
|
||||
diminution of profit is the natural effect of its prosperity, or of a
|
||||
greater stock being employed in it than before. During the late war, the
|
||||
Dutch gained the whole carrying trade of France, of which they still
|
||||
retain a very large share. The great property which they possess both in
|
||||
French and English funds, about forty millions, it is said in the latter
|
||||
(in which, I suspect, however, there is a considerable exaggeration ), the
|
||||
great sums which they lend to private people, in countries where the rate
|
||||
of interest is higher than in their own, are circumstances which no doubt
|
||||
demonstrate the redundancy of their stock, or that it has increased beyond
|
||||
what they can employ with tolerable profit in the proper business of their
|
||||
own country; but they do not demonstrate that that business has decreased.
|
||||
As the capital of a private man, though acquired by a particular trade,
|
||||
may increase beyond what he can employ in it, and yet that trade continue
|
||||
to increase too, so may likewise the capital of a great nation.
|
||||
|
||||
In our North American and West Indian colonies, not only the wages of
|
||||
labour, but the interest of money, and consequently the profits of stock,
|
||||
are higher than in England. In the different colonies, both the legal and
|
||||
the market rate of interest run from six to eight percent. High wages of
|
||||
labour and high profits of stock, however, are things, perhaps, which
|
||||
scarce ever go together, except in the peculiar circumstances of new
|
||||
colonies. A new colony must always, for some time, be more understocked in
|
||||
proportion to the extent of its territory, and more underpeopled in
|
||||
proportion to the extent of its stock, than the greater part of other
|
||||
countries. They have more land than they have stock to cultivate. What
|
||||
they have, therefore, is applied to the cultivation only of what is most
|
||||
fertile and most favourably situated, the land near the sea-shore, and
|
||||
along the banks of navigable rivers. Such land, too, is frequently
|
||||
purchased at a price below the value even of its natural produce. Stock
|
||||
employed in the purchase and improvement of such lands, must yield a very
|
||||
large profit, and, consequently, afford to pay a very large interest. Its
|
||||
rapid accumulation in so profitable an employment enables the planter to
|
||||
increase the number of his hands faster than he can find them in a new
|
||||
settlement. Those whom he can find, therefore, are very liberally
|
||||
rewarded. As the colony increases, the profits of stock gradually
|
||||
diminish. When the most fertile and best situated lands have been all
|
||||
occupied, less profit can be made by the cultivation of what is inferior
|
||||
both in soil and situation, and less interest can be afforded for the
|
||||
stock which is so employed. In the greater part of our colonies,
|
||||
accordingly, both the legal and the market rate of interest have been
|
||||
considerably reduced during the course of the present century. As riches,
|
||||
improvement, and population, have increased, interest has declined. The
|
||||
wages of labour do not sink with the profits of stock. The demand for
|
||||
labour increases with the increase of stock, whatever be its profits; and
|
||||
after these are diminished, stock may not only continue to increase, but
|
||||
to increase much faster than before. It is with industrious nations, who
|
||||
are advancing in the acquisition of riches, as with industrious
|
||||
individuals. A great stock, though with small profits, generally increases
|
||||
faster than a small stock with great profits. Money, says the proverb,
|
||||
makes money. When you have got a little, it is often easy to get more. The
|
||||
great difficulty is to get that little. The connection between the
|
||||
increase of stock and that of industry, or of the demand for useful
|
||||
labour, has partly been explained already, but will be explained more
|
||||
fully hereafter, in treating of the accumulation of stock.
|
||||
|
||||
The acquisition of new territory, or of new branches of trade, may
|
||||
sometimes raise the profits of stock, and with them the interest of money,
|
||||
even in a country which is fast advancing in the acquisition of riches.
|
||||
The stock of the country, not being sufficient for the whole accession of
|
||||
business which such acquisitions present to the different people among
|
||||
whom it is divided, is applied to those particular branches only which
|
||||
afford the greatest profit. Part of what had before been employed in other
|
||||
trades, is necessarily withdrawn from them, and turned into some of the
|
||||
new and more profitable ones. In all those old trades, therefore, the
|
||||
competition comes to be less than before. The market comes to be less
|
||||
fully supplied with many different sorts of goods. Their price necessarily
|
||||
rises more or less, and yields a greater profit to those who deal in them,
|
||||
who can, therefore, afford to borrow at a higher interest. For some time
|
||||
after the conclusion of the late war, not only private people of the best
|
||||
credit, but some of the greatest companies in London, commonly borrowed at
|
||||
five per cent. who, before that, had not been used to pay more than four,
|
||||
and four and a half per cent. The great accession both of territory and
|
||||
trade by our acquisitions in North America and the West Indies, will
|
||||
sufficiently account for this, without supposing any diminution in the
|
||||
capital stock of the society. So great an accession of new business to be
|
||||
carried on by the old stock, must necessarily have diminished the quantity
|
||||
employed in a great number of particular branches, in which the
|
||||
competition being less, the profits must have been greater. I shall
|
||||
hereafter have occasion to mention the reasons which dispose me to believe
|
||||
that the capital stock of Great Britain was not diminished, even by the
|
||||
enormous expense of the late war.
|
||||
|
||||
The diminution of the capital stock of the society, or of the funds
|
||||
destined for the maintenance of industry, however, as it lowers the wages
|
||||
of labour, so it raises the profits of stock, and consequently the
|
||||
interest of money. By the wages of labour being lowered, the owners of
|
||||
what stock remains in the society can bring their goods at less expense to
|
||||
market than before; and less stock being employed in supplying the market
|
||||
than before, they can sell them dearer. Their goods cost them less, and
|
||||
they get more for them. Their profits, therefore, being augmented at both
|
||||
ends, can well afford a large interest. The great fortunes so suddenly and
|
||||
so easily acquired in Bengal and the other British settlements in the East
|
||||
Indies, may satisfy us, that as the wages of labour are very low, so the
|
||||
profits of stock are very high in those ruined countries. The interest of
|
||||
money is proportionably so. In Bengal, money is frequently lent to the
|
||||
farmers at forty, fifty, and sixty per cent. and the succeeding crop is
|
||||
mortgaged for the payment. As the profits which can afford such an
|
||||
interest must eat up almost the whole rent of the landlord, so such
|
||||
enormous usury must in its turn eat up the greater part of those profits.
|
||||
Before the fall of the Roman republic, a usury of the same kind seems to
|
||||
have been common in the provinces, under the ruinous administration of
|
||||
their proconsuls. The virtuous Brutus lent money in Cyprus at
|
||||
eight-and-forty per cent. as we learn from the letters of Cicero.
|
||||
|
||||
In a country which had acquired that full complement of riches which the
|
||||
nature of its soil and climate, and its situation with respect to other
|
||||
countries, allowed it to acquire, which could, therefore, advance no
|
||||
further, and which was not going backwards, both the wages of labour and
|
||||
the profits of stock would probably be very low. In a country fully
|
||||
peopled in proportion to what either its territory could maintain, or its
|
||||
stock employ, the competition for employment would necessarily be so great
|
||||
as to reduce the wages of labour to what was barely sufficient to keep up
|
||||
the number of labourers, and the country being already fully peopled, that
|
||||
number could never be augmented. In a country fully stocked in proportion
|
||||
to all the business it had to transact, as great a quantity of stock would
|
||||
be employed in every particular branch as the nature and extent of the
|
||||
trade would admit. The competition, therefore, would everywhere be as
|
||||
great, and, consequently, the ordinary profit as low as possible.
|
||||
|
||||
But, perhaps, no country has ever yet arrived at this degree of opulence.
|
||||
China seems to have been long stationary, and had, probably, long ago
|
||||
acquired that full complement of riches which is consistent with the
|
||||
nature of its laws and institutions. But this complement may be much
|
||||
inferior to what, with other laws and institutions, the nature of its
|
||||
soil, climate, and situation, might admit of. A country which neglects or
|
||||
despises foreign commerce, and which admits the vessel of foreign nations
|
||||
into one or two of its ports only, cannot transact the same quantity of
|
||||
business which it might do with different laws and institutions. In a
|
||||
country, too, where, though the rich, or the owners of large capitals,
|
||||
enjoy a good deal of security, the poor, or the owners of small capitals,
|
||||
enjoy scarce any, but are liable, under the pretence of justice, to be
|
||||
pillaged and plundered at any time by the inferior mandarins, the quantity
|
||||
of stock employed in all the different branches of business transacted
|
||||
within it, can never be equal to what the nature and extent of that
|
||||
business might admit. In every different branch, the oppression of the
|
||||
poor must establish the monopoly of the rich, who, by engrossing the whole
|
||||
trade to themselves, will be able to make very large profits. Twelve per
|
||||
cent. accordingly, is said to be the common interest of money in China,
|
||||
and the ordinary profits of stock must be sufficient to afford this large
|
||||
interest.
|
||||
|
||||
A defect in the law may sometimes raise the rate of interest considerably
|
||||
above what the condition of the country, as to wealth or poverty, would
|
||||
require. When the law does not enforce the performance of contracts, it
|
||||
puts all borrowers nearly upon the same footing with bankrupts, or people
|
||||
of doubtful credit, in better regulated countries. The uncertainty of
|
||||
recovering his money makes the lender exact the same usurious interest
|
||||
which is usually required from bankrupts. Among the barbarous nations who
|
||||
overran the western provinces of the Roman empire, the performance of
|
||||
contracts was left for many ages to the faith of the contracting parties.
|
||||
The courts of justice of their kings seldom intermeddled in it. The high
|
||||
rate of interest which took place in those ancient times, may, perhaps, be
|
||||
partly accounted for from this cause.
|
||||
|
||||
When the law prohibits interest altogether, it does not prevent it. Many
|
||||
people must borrow, and nobody will lend without such a consideration for
|
||||
the use of their money as is suitable, not only to what can be made by the
|
||||
use of it, but to the difficulty and danger of evading the law. The high
|
||||
rate of interest among all Mahometan nations is accounted for by M.
|
||||
Montesquieu, not from their poverty, but partly from this, and partly from
|
||||
the difficulty of recovering the money.
|
||||
|
||||
The lowest ordinary rate of profit must always be something more than what
|
||||
is sufficient to compensate the occasional losses to which every
|
||||
employment of stock is exposed. It is this surplus only which is neat or
|
||||
clear profit. What is called gross profit, comprehends frequently not only
|
||||
this surplus, but what is retained for compensating such extraordinary
|
||||
losses. The interest which the borrower can afford to pay is in proportion
|
||||
to the clear profit only. The lowest ordinary rate of interest must, in
|
||||
the same manner, be something more than sufficient to compensate the
|
||||
occasional losses to which lending, even with tolerable prudence, is
|
||||
exposed. Were it not, mere charity or friendship could be the only motives
|
||||
for lending.
|
||||
|
||||
In a country which had acquired its full complement of riches, where, in
|
||||
every particular branch of business, there was the greatest quantity of
|
||||
stock that could be employed in it, as the ordinary rate of clear profit
|
||||
would be very small, so the usual market rate of interest which could be
|
||||
afforded out of it would be so low as to render it impossible for any but
|
||||
the very wealthiest people to live upon the interest of their money. All
|
||||
people of small or middling fortunes would be obliged to superintend
|
||||
themselves the employment of their own stocks. It would be necessary that
|
||||
almost every man should be a man of business, or engage in some sort of
|
||||
trade. The province of Holland seems to be approaching near to this state.
|
||||
It is there unfashionable not to be a man of business. Necessity makes it
|
||||
usual for almost every man to be so, and custom everywhere regulates
|
||||
fashion. As it is ridiculous not to dress, so is it, in some measure, not
|
||||
to be employed like other people. As a man of a civil profession seems
|
||||
awkward in a camp or a garrison, and is even in some danger of being
|
||||
despised there, so does an idle man among men of business.
|
||||
|
||||
The highest ordinary rate of profit may be such as, in the price of the
|
||||
greater part of commodities, eats up the whole of what should go to the
|
||||
rent of the land, and leaves only what is sufficient to pay the labour of
|
||||
preparing and bringing them to market, according to the lowest rate at
|
||||
which labour can anywhere be paid, the bare subsistence of the labourer.
|
||||
The workman must always have been fed in some way or other while he was
|
||||
about the work, but the landlord may not always have been paid. The
|
||||
profits of the trade which the servants of the East India Company carry on
|
||||
in Bengal may not, perhaps, be very far from this rate.
|
||||
|
||||
The proportion which the usual market rate of interest ought to bear to
|
||||
the ordinary rate of clear profit, necessarily varies as profit rises or
|
||||
falls. Double interest is in Great Britain reckoned what the merchants
|
||||
call a good, moderate, reasonable profit; terms which, I apprehend, mean
|
||||
no more than a common and usual profit. In a country where the ordinary
|
||||
rate of clear profit is eight or ten per cent. it may be reasonable that
|
||||
one half of it should go to interest, wherever business is carried on with
|
||||
borrowed money. The stock is at the risk of the borrower, who, as it were,
|
||||
insures it to the lender; and four or five per cent. may, in the greater
|
||||
part of trades, be both a sufficient profit upon the risk of this
|
||||
insurance, and a sufficient recompence for the trouble of employing the
|
||||
stock. But the proportion between interest and clear profit might not be
|
||||
the same in countries where the ordinary rate of profit was either a good
|
||||
deal lower, or a good deal higher. If it were a good deal lower, one half
|
||||
of it, perhaps, could not be afforded for interest; and more might be
|
||||
afforded if it were a good deal higher.
|
||||
|
||||
In countries which are fast advancing to riches, the low rate of profit
|
||||
may, in the price of many commodities, compensate the high wages of
|
||||
labour, and enable those countries to sell as cheap as their less thriving
|
||||
neighbours, among whom the wages of labour may be lower.
|
||||
|
||||
In reality, high profits tend much more to raise the price of work than
|
||||
high wages. If, in the linen manufacture, for example, the wages of the
|
||||
different working people, the flax-dressers, the spinners, the weavers,
|
||||
etc. should all of them be advanced twopence a-day, it would be necessary
|
||||
to heighten the price of a piece of linen only by a number of twopences
|
||||
equal to the number of people that had been employed about it, multiplied
|
||||
by the number of days during which they had been so employed. That part of
|
||||
the price of the commodity which resolved itself into the wages, would,
|
||||
through all the different stages of the manufacture, rise only in
|
||||
arithmetical proportion to this rise of wages. But if the profits of all
|
||||
the different employers of those working people should be raised five per
|
||||
cent. that part of the price of the commodity which resolved itself into
|
||||
profit would, through all the different stages of the manufacture, rise in
|
||||
geometrical proportion to this rise of profit. The employer of the flax
|
||||
dressers would, in selling his flax, require an additional five per cent.
|
||||
upon the whole value of the materials and wages which he advanced to his
|
||||
workmen. The employer of the spinners would require an additional five per
|
||||
cent. both upon the advanced price of the flax, and upon the wages of the
|
||||
spinners. And the employer of the weavers would require alike five per
|
||||
cent. both upon the advanced price of the linen-yarn, and upon the wages
|
||||
of the weavers. In raising the price of commodities, the rise of wages
|
||||
operates in the same manner as simple interest does in the accumulation of
|
||||
debt. The rise of profit operates like compound interest. Our merchants
|
||||
and master manufacturers complain much of the bad effects of high wages in
|
||||
raising the price, and thereby lessening the sale of their goods, both at
|
||||
home and abroad. They say nothing concerning the bad effects of high
|
||||
profits; they are silent with regard to the pernicious effects of their
|
||||
own gains; they complain only of those of other people.
|
||||
|
||||
|
||||
## 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 one of: Production, Distribution, Exchange,
|
||||
Consumption, Accumulation, Regulation, or General Theory.
|
||||
|
||||
|
||||
## 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.
|
||||
|
||||
|
||||
## Instructions
|
||||
|
||||
1. Read the source chapter carefully.
|
||||
2. Identify all distinct economic concepts, actors, mechanisms, and institutions.
|
||||
3. For each entity, produce a separate markdown document following the
|
||||
Economic Entity Schema v1.0.
|
||||
4. 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
|
||||
5. Optionally include Smith's Original Wording (direct quote) and
|
||||
Modern Interpretation sections.
|
||||
6. Use neutral, analytical language throughout.
|
||||
7. Ensure each entity is distinct and self-contained.
|
||||
|
||||
## Output Format
|
||||
|
||||
Output each entity as a separate markdown document, delimited by
|
||||
`--- ENTITY: <entity-name> ---` markers.
|
||||
File diff suppressed because it is too large
Load Diff
File diff suppressed because it is too large
Load Diff
@@ -0,0 +1,10 @@
|
||||
# Necessaries, Conveniencies, and Amusements of Life
|
||||
|
||||
## Definition
|
||||
This collective term refers to the various goods and services that individuals desire and consume to sustain and improve their well-being. Adam Smith uses it to describe the ultimate objects of human enjoyment and, by extension, what wealth enables a person to acquire. The ability to command these items, rather than merely possessing money or commodities, is presented as the true measure of a person's richness or poverty.
|
||||
|
||||
## Source Chapter
|
||||
Book 1, Chapter 5
|
||||
|
||||
## Context
|
||||
Introduced in the opening paragraph, this concept establishes the fundamental purpose of economic activity and the ultimate utility derived from wealth. It frames the subsequent discussion on how different
|
||||
Reference in New Issue
Block a user