As to the different employments of capital, the quantity of pro ductive labour put in motion by an equal amount varies extremely according as that amount is employed—(r) in the improvement of lands, mines or fisheries, (2) in manufactures, (3) in whole sale or (4) retail trade. In agriculture "Nature labours along with man," and not only the capital of the farmer is reproduced with his profits, but also the rent of the landlord. It is therefore the employment of a given capital which is most advantageous to society. Next in order come manufactures; then wholesale trade —first the home trade, secondly the foreign trade of consumption, last the carrying trade. All these employments of capital, how ever, are not only advantageous, but necessary, and will introduce themselves in the due degree if left to individual enterprise.
These first two books contain Smith's general economic scheme; and we have stated it as fully as was consistent with the brevity here necessary, because from this formulation of doctrine the English classical school set out, and round it the discussions of more modern times in different countries have in a great measure revolved.
The longest and most elaborate of the masterly historical sketches given by Smith occupies the third book; it is an account of the course followed by the nations of modern Europe in the successive development of the several forms of industry. It affords a curious example of the effect of doctrinal prepossessions in obscuring the results of historical inquiry. Whilst he correctly describes the European movement of industry, and explains it as arising out of adequate social causes, he yet, in accordance with the absolute principles which tainted his philosophy, protests against it as involving an entire inversion of the "natural order of things." First agriculture, then manufactures, lastly foreign commerce; any other order than this he considers "unnatural and retrograde." Freedom of Trade.—The fourth book is principally devoted to the elaborate and exhaustive polemic against the mercantile system which has exercised a powerful influence on economic legislation. When protection is now advocated, it is commonly on different grounds from those which were in current use before the time of Smith. Though regarding the eventual establishment of free trade in England as unlikely, he is nevertheless in favour of it, but, believing in the necessity of adequate defence, he com mends the navigation acts. Whilst objecting to the prevention of the export of wool, he proposes a tax on that export as somewhat less injurious to the interest of growers than the prohibition, whilst it would "afford a sufficient advantage" to the domestic over the foreign manufacturer. This is, perhaps, his most marked
deviation from the rigour of principle. The wisdom of retaliation in order to procure the repeal of high duties or prohibitions imposed by foreign governments depends, he says, altogether on the likelihood of its success in effecting the object aimed at, but he does not conceal his contempt for the practice of such ex pedients. The restoration of freedom in any manufacture, when it has grown to considerable dimensions by means of high duties, should, he thinks, from motives of humanity, be brought about only by degrees and with circumspection—though the amount of evil which would be caused by the immediate abolition of the duties is, in his opinion, commonly exaggerated. The case of in fant industries on which J. S. Mill justified protection, is referred to by Smith; but he is opposed to the admission of this exception for reasons which do not appear to be conclusive. He is perhaps scarcely consistent in approving the concession of temporary monopolies to joint-stock companies undertaking risky enterprises "of which the public is afterwards to reap the benefit." He is less absolute in his doctrine of governmental non-inter ference when he comes to consider in his fifth book the "expenses of the sovereign or the commonwealth." He recognizes as coming within the functions of the state the erection and maintenance of those public institutions and public works which, though ad vantageous to the society, could not repay, and therefore must not be thrown upon, individuals or small groups of individuals. He remarks in a just historical spirit that the performance of these functions requires very different degrees of expense in the different periods of society. Besides the institutions and works intended for public defence and the administration of justice, and those required for facilitating the commerce of the society, he considers those necessary for promoting the instruction of the people. He thinks the public at large may with propriety not only facilitate and encourage, but even impose upon almost the whole body of the people, the acquisition in youth of the most essential elements of education. The expense of the institutions for religious instruc tion as well as for general education, he holds, may without injustice be defrayed out of the funds of the whole society, though he would apparently prefer that it should be met by the voluntary contributions of those who think they have occasion for such education or instruction.