* B. 1. th. ii. p. 32). In Adam Smith's time, “La Chine start sa node" (challe, In Punt de Nemours & l'ecole paystocratique, 1888, p. 33). He frequently representa China as enormously rich; see, besides the passage quoted above, Bk. 1. ch. xi. p. 87 2; Bk. 11 ch. v. p. 163b; Bk. v. en. i. p. 2,3 5, and ch. vii. p. 251 Buchanan, in his edition of the Faith of Nations, evidently thinking of average and not aggregate riches, observes in a note to the first of these passages, If Dr. Smith means that China is richer in food than any part of Europe, this is certainly a mistake; as all travellera represent that country to be more fully supplied with people than with food (vol. i. p. 315). But Adam Smith knew the facts: he only attributes a different sense to 'riches."

* Works, vol. iii. p. 36 5, ncte 1, p. $2 d.

annually creates in proportion to the number of her people is great or is small," and Malthus, in his Political Economy, distinguishes between the wealth of a country and that of its people in these terms: 'A country will be rich or poor according to the abundance or scarcity with which' the objects which constitute wealth are supplied compared with the extent of territory; and the people will be rich or poor according to the abundance with which they are supplied compared with the population," but in spite of all this, the early nineteenth century economists generally used the terms an increase of wealth and a decrease of wealth to indicate increases and decreases of the aggregate wealth of a nation irrespective of 'the number of those who are to consume it.' In Malthus, Ricardo, and J. S. Mill the increase or progress' of wealth is always treated as quite compatible with a decreasing productiveness of industry. Now it is scarcely possible for the productiveness of industry to decrease without occasioning a decrease of the average produce, the produce per head, and therefore, according to Adam Smith's second paragraph, of the wealth of the nation. One of the most curious results of the later economists' want of appreciation of Adam Smith's attempt to consider average rather than aggregate wealth is to be found in Malthus's complaint, or, at any rate, allegation, that he occasionally mixes' an 'inquiry into the causes. which affect the happiness and comfort of the lower orders of society' with 'the professed object' of his inquiry, 'the nature and causes of the wealth of nations.' 4

1 P. 105.

2 P. 29.

* See Malthus, Political Economy, pp. 236, note 2, 351, 472; Ricardo, passim; J. S. Mill, Principles, Bk. Iv. ch. i. title, and ch. ii. § 2.

4 'The professed object of Adam Smith's "Inquiry" is "The Nature and Causes of the Wealth of Nations." There is another, however, still more interesting, which he occasionally mixes with it-the causes which affect the happiness and comfort of the lower orders of society, which in every nation form the most numerous class. These two subjects are no doubt nearly connected; but the nature and extent of this connection, and the mode in which increasing wealth operates on the condition of the poor, have not been stated with sufficient correctness and precision.'-Essay, 8th ed. pp. 367, 368, slightly altered from 1st ed. p. 303; 2d, p. 420. A minor writer said in 1821: 'It is a great object that every such increase of wealth, as I have been speaking of, should not be less in proportion than the increase of numbers during the same period. For, in this case, though the world or

§ 6. Capital Wealth and Income Wealth.

At the present time the wealth of an individual may mean either his possessions at a given point of time or his net receipts for a given length of time; it may, in short, be either his capital or his income. When we say that Smith is richer than Jones, we may always be asked to explain whether we mean that Smith has more capital or more income, or more of both. By the 'wealth of the kingdom' Petty evidently understood the capital wealth, and not the income wealth of the nation. His 'computation' is the lineal ancestor of the tables in Sir R. Giffen's Growth of Capital. He speaks of the annual proceed of the stock or wealth of the nation,' which, as we have seen, he reckoned at £250,000,000, yielding but fifteen millions, while the total 'expense' was forty millions, and concludes that 'the labour of the people must furnish the other twenty-five.'1 Thus the incomewealth of the nation is clearly conceived and set out as well as the capital-wealth, and 'the wealth of the nation' is certainly taken to be the capital and not the income. The same identification of the wealth of the nation with its accumulated possessions or capital is obviously made in Gregory King's table of the income and expense of the several families of England,' in which 'temporal lords' appear as 'increasing the wealth of the kingdom' by £10 a year each, and 'labouring people and out-servants' as 'decreasing the wealth of the kingdom' by 2s. a year each.2

6

The importance which the French physiocrats and their forerunners attached to agriculture, which produces commodities of great utility and little durability, had the effect of drawing away their attention from accumulated goods and

nation may be said, if you please, to have more wealth than it had before, yet it would consist of individuals, each of whom, one with another, would have less.'-An Inquiry into those Principles respecting the Nature of Demand and the Necessity of Consumption lately advocated by Mr. Malthus, etc., 1821, p. 4. 1 Verbum Sapienti, p. 7

Gregory King's Natural and Political Observations and Conclusions upon the State and Condition of England, 1696, was first fully printed in 1802 at the end of the second edition of George Chalmers's Estimate of the ComparaFive Strength of Great Britain. The table, however, appeared in Davenant's ce of Trade, 1699, p. 23.

concentrating it on the periodical production of goods. Vauban wrote in 1699:

'Ce n'est pas la grande quantité d'or et d'argent qui font les grandes et veritables richesses d'un état, puisqu'il y a de très grands pays dans le monde qui abondent en or et en argent, et qui n'en sont pas plus à leur aise, ni plus heureux. Tels sont le Pérou et plusieurs Etats de l'Amérique, et des Indes orientales et occidentales, qui abondent en or et en pierreries, et qui manquent de pain. La vraie richesse d'un royaume consiste dans l'abondance des denrées, dont l'usage est si nécessaire au soutien de la vie des hommes, qui ne sauraient s'en passer.'1

Abundance of the commodities which sustain human life, such as bread, is obviously secured, not by accumulation, but by continual production. So Quesnay says:

'L'argent en tant que monnaie, n'est point du genre des richesses que les hommes recherchent pour satisfaire à leurs besoins; celles-ci ne sont qu'un flux de productions continuellement détruites par la consommation, et continuellement renouvelées par les travaux des hommes.' 2

And in his famous economical table he takes the richesses annuelles' of the nation for his subject-matter.

Adam Smith adopted 3 Quesnay's annual riches' as the subject of his inquiry regarding the wealth of nations without seeing very clearly that he was thereby breaking with the traditional meaning of the phrase. He begins his introduction with two paragraphs which imply that the wealth of a nation consists of the annual produce of its labour, which supplies 'the necessaries and conveniences of life which it annually consumes,' and he ends it with a sentence in which 'the real wealth' and 'the annual produce of the land and labour of

1 Dime Royale, Petite Bibliothèque Économique, pp. 21, 22. 2 Euvres, ed. Oncken, p. 289 note.

* That the word 'adopted' may fairly be used here is shown by the fol lowing passage, from Adam Smith's account of the physiocratic system, in Book IV. chapter ix. p. 307 a: 'In representing the wealth of nations as consisting not in the unconsumable riches of money, but in the consumable goods annually reproduced by the labour of the society; and in representing perfect liberty as the only effectual expedient for rendering this annual reproduction the greatest possible, its doctrine seems to be in every respect as just as it is generous and liberal.'

the society' are treated as synonymous. In Book II. chap. iii. he says that 'plain reason seems to dictate' that 'the real wealth and revenue of a country' consists not 'in the quantity of the precious metals which circulate within it as vulgar prejudices suppose,' but 'in the value of the annual produce of its land and labour.'1 In Book 1. chap. xi. he treats 'the increased wealth of the people' as the same thing as 'the increased produce of their annual labour.' 2 But he never mentions the fact that his practice is different from the common one or draws attention to the matter in any way, and sometimes he uses phrases like 'the real wealth of the society,' or 'the wealth of the world,' in the sense of accumulations and not of annual produce. A certain amount of confusion naturally followed. When considered from the statistician's point of view the wealth of the country continued to be identified with its capital or possessions at a point of time. Pulteney, for instance, though he had read and admired Adam Smith,5 says, in his Considerations on the Present State of Public Affairs (1779):

'The total wealth of Great Britain . . . I may safely venture to affirm, now exceeds very much one thousand millions. In this I comprehend the value of the land, the value of the houses, the value of the stock of all kinds, and materials of manufacture, shipping, cash, money in the funds due to inhabitants, and debts due to us by persons out of the kingdom, but deducting the like debts due by us to other countries; in short, I comprehend everything which can be denominated wealth or property.'"

Colquhoun in his Treatise on the Wealth, Power, and Resources of the British Empire (1814), made estimates of the value both of the existing property and the 'new property acquired annually,' and speaks of the first of these, the capital, and not the second, the produce, as 'the wealth of the British Empire.' Even in our own day statisticians seem to regard the wealth of a country as its capital and not its income. But economists, as a rule, at any rate in the greater 1 Pp. 150, 151.

2 P. 86 b. Cp. Bk. II. ch. ii. p. 124 a, ch. iii. p. 150 a; Bk. v. ch. i.

p. 314 b.

3 Bk. Iv. ch. ix. p. 306 a.

5 See p. 21 of the work cited.

4 Bk. I. ch. v. p. 14 a.

6 P. 28.

7 2d ed., 1815, p. 102.