In a given neighborhood, labor and stock tend toward equalibrium. Page 138: “The whole of the advantages and disadvantages of the different employments of labor and stock must, in the same neighborhood, be either perfectly equal or continually tending to equality.”
He then discusses what he considers to be the five things that made up for differences in wages and profit in different trades: 1. The agreeableness of the employment 2. the easiness and cheapness of learning them 3. the constancy of employment 4. the degree of trust reposed in those who exercise them and 5. the likelihood of success in them.
Concerning the agreeableness of the employment he includes how easy it is, how clean it is, how honorable it is. Page 140: “The most despicable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever.”
Page 141: “Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of labor.” He mentions the keeping of an inn as being horrible work, requiring one to put up with all manner of discomforts. “But there is scarce any common trade in which a small stock yields so great a profit.” Times have changed, I think.
“When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it, with at least the ordinary profits.” This is an important observation because implicit in it is the observation that just as a machine can transfer energy, or work, but not create it; so it can transfer value, but not create it.
Page 143: “All the different ways in which stock is commonly employed in great towns seem, in reality, to be almost equally easy and equally difficult to learn.”
Page 145: “The constancy or inconstancy of employment cannt affect the ordinary profits of stock in any particular trade. Whether the stock is or is not constantly employed depends, not upon the trade, but upon the trader.” I’m not sure what he means here, but I thinkby the trader he may mean the consumer. If not, I’m lost.
In this section, he is making no distinction between the wages of those who create value and those who do not. The weaver is lumped in with the lawyer, &c. And, for the purpose of considering the factors that go to determine the worth of an individuals time, I think he is right to ignore that distinction. He is also ignoring social pressures (I’m thinking above all of unions), but it seems clear that, in his days, these had little or no effect.
On page 149 he speaks how players (actors), opera-singers, opera-dancers, and so on receive high pay because of: “the rarity and beauty of the talents, and the discredit of employing them in this manner.” He goes on to speculate that “Should the public opinion or prejudice ever alter with regard to such occupations, their pecuniary recompence would quickly diminish.” In this, history seems to have proven him correct.
He then makes observations about lotteries, which he uses as an example of people’s tendency to over-estimate their expected good fortune, which he says accounts for people’s willingness to engage in occupations in which the expected reward is not worth the risk. I like his observation on page 150: “Adventure upon all the tickets in the lottery, and you lose for certain; and the greater the number of your tickets the nearer you approach to this certainty.”
Page 153: “The ordinary rate of profit [return on investment] always rises more or less with the risk…the most hazardous of all trades, that of a smuggler, though when the adventure succeeds it is likewise the most profitable, is the infallible road to bankruptcy.”
Page 154: “The difference between the earnings of a common laborer and those of a well emplo9yed lawyer or physician, is evidently much greater than that between the ordinary profits in any two different branches of trade.”
On page 155: In discussing the markup made by apothecary, “The greater part of the apparent profit is real wages digused in the garb of profit.” Very astute! And a little later when he talks about retail and wholesale on page 156 he makes the same point: “The greater part of the apparent profit is, in this case too, real wages.” What he is talking about (to put it into terms from a later age) is: the middle class, the petit bourgiousie–those who both own and work at the means of production, and his argument is that the money comes, above all, from the value his work adds to the raw materials.
“When any expensive machine is erected, the extraordinary work to be performed by it before it is worn out, it must be expected, will replace the capital laid out upon it, with at least the ordinary profits.” This is an important observation because implicit in it is the observation that just as a machine can transfer energy, or work, but not create it; so it can transfer value, but not create it.
Doesn’t that line “at least the ordinary profits” go against the claim that “a machine… can transfer value but not create it”? Am I missing something?
Page 145: “The constancy or inconstancy of employment cannt affect the ordinary profits of stock in any particular trade. Whether the stock is or is not constantly employed depends, not upon the trade, but upon the trader.” I’m not sure what he means here, but I thinkby the trader he may mean the consumer. If not, I’m lost.
I may be lost too, but I took him by “the trader” to mean the one engaged in a particular trade, discussing, then, trades that are for one reason or another not constant endeavors. But then, I’m not entirely clear about the rest of it. “Stock” in which sense? The investment made in the particular work? That which is created by the particular profession? Got me.
“Doesn’t that line “at least the ordinary profits” go against the claim that “a machine… can transfer value but not create it”? Am I missing something?”
You may be right; I had taken his use of ordinary profits there to mean, “factoring in the usual return on investment.” Remember that, for Smith, profit is a separate entity–a “component” of value.
The machine isn’t creating value; building the machine and using it is just an easier way to produce the end product, and therefore the correct way to do that.
Seth: That’s how I read it, too.
“Whether the stock is or is not constantly employed depends, not upon the trade, but upon the trader.”
I, too, took ‘trader’ to be the one practicing the trade, with the idea that some individuals are better at moving their merchandise than are others. Or have more effective sales strategies, despite the stock being essentially similar.