AN　INQUIRY　INTO　THE　NATURE　AND　CAUSES　OF　THE　WEALTH　OF　NATIONS
  by　Adam　Smith
  1776
  BOOK　TWO
  OF　THE　NATURE；　ACCUMULATION；　AND　EMPLOYMENT　OF　STOCK
  INTRODUCTION
  IN　that　rude　state　of　society　in　which　there　is　no　division
  of　labour；　in　which　exchanges　are　seldom　made；　and　in　which　every
  man　provides　everything　for　himself；　it　is　not　necessary　that　any
  stock　should　be　accumulated　or　stored　up　beforehand　in　order　to
  carry　on　the　business　of　the　society。　Every　man　endeavours　to
  supply　by　his　own　industry　his　own　occasional　wants　as　they
  occur。　When　he　is　hungry；　he　goes　to　the　forest　to　hunt；　when　his
  coat　is　worn　out；　he　clothes　himself　with　the　skin　of　the　first
  large　animal　he　kills：　and　when　his　hut　begins　to　go　to　ruin；　he
  repairs　it；　as　well　as　he　can；　with　the　trees　and　the　turf　that
  are　nearest　it。
  But　when　the　division　of　labour　has　once　been　thoroughly
  introduced；　the　produce　of　a　man's　own　labour　can　supply　but　a
  very　small　part　of　his　occasional　wants。　The　far　greater　part　of
  them　are　supplied　by　the　produce　of　other　men's　labour；　which　he
  purchases　with　the　produce；　or；　what　is　the　same　thing；　with　the
  price　of　the　produce　of　his　own。　But　this　purchase　cannot　be　made
  till　such　time　as　the　produce　of　his　own　labour　has　not　only　been
  completed；　but　sold。　A　stock　of　goods　of　different　kinds；
  therefore；　must　be　stored　up　somewhere　sufficient　to　maintain
  him；　and　to　supply　him　with　the　materials　and　tools　of　his　work
  till　such　time；　at　least；　as　both　these　events　can　be　brought
  about。　A　weaver　cannot　apply　himself　entirely　to　his　peculiar
  business；　unless　there　is　beforehand　stored　up　somewhere；　either
  in　his　own　possession　or　in　that　of　some　other　person；　a　stock
  sufficient　to　maintain　him；　and　to　supply　him　with　the　materials
  and　tools　of　his　work；　till　he　has　not　only　completed；　but　sold
  his　web。　This　accumulation　must；　evidently；　be　previous　to　his
  applying　his　industry　for　so　long　a　time　to　such　a　peculiar
  business。
  As　the　accumulation　of　stock　must；　in　the　nature　of　things；
  be　previous　to　the　division　of　labour；　so　labour　can　be　more　and
  more　subdivided　in　proportion　only　as　stock　is　previously　more
  and　more　accumulated。　The　quantity　of　materials　which　the　same
  number　of　people　can　work　up；　increases　in　a　great　proportion　as
  labour　comes　to　be　more　and　more　subdivided；　and　as　the
  operations　of　each　workman　are　gradually　reduced　to　a　greater
  degree　of　simplicity；　a　variety　of　new　machines　come　to　be
  invented　for　facilitating　and　abridging　those　operations。　As　the
  division　of　labour　advances；　therefore；　in　order　to　give　constant
  employment　to　an　equal　number　of　workmen；　an　equal　stock　of
  provisions；　and　a　greater　stock　of　materials　and　tools　than　what
  would　have　been　necessary　in　a　ruder　state　of　things；　must　be
  accumulated　beforehand。　But　the　number　of　workmen　in　every　branch
  of　business　generally　increases　with　the　division　of　labour　in
  that　branch；　or　rather　it　is　the　increase　of　their　number　which
  enables　them　to　class　and　subdivide　themselves　in　this　manner。
  As　the　accumulation　of　stock　is　previously　necessary　for
  carrying　on　this　great　improvement　in　the　productive　powers　of
  labour；　so　that　accumulation　naturally　leads　to　this　improvement。
  The　person　who　employs　his　stock　in　maintaining　labour；
  necessarily　wishes　to　employ　it　in　such　a　manner　as　to　produce　as
  great　a　quantity　of　work　as　possible。　He　endeavours；　therefore；
  both　to　make　among　his　workmen　the　most　proper　distribution　of
  employment；　and　to　furnish　them　with　the　best　machines　which　he
  can　either　invent　or　afford　to　purchase。　His　abilities　in　both
  these　respects　are　generally　in　proportion　to　the　extent　of　his
  stock；　or　to　the　number　of　people　whom　it　can　employ。　The
  quantity　of　industry；　therefore；　not　only　increases　in　every
  country　with　the　increase　of　the　stock　which　employs　it；　but；　in
  consequence　of　that　increase；　the　same　quantity　of　industry
  produces　a　much　greater　quantity　of　work。
  Such　are　in　general　the　effects　of　the　increase　of　stock
  upon　industry　and　its　productive　powers。
  In　the　following　book　I　have　endeavoured　to　explain　the
  nature　of　stock；　the　effects　of　its　accumulation　into　capitals　of
  different　kinds；　and　the　effects　of　the　different　employments　of
  those　capitals。　This　book　is　divided　into　five　chapters。　In　the
  first　chapter；　I　have　endeavoured　to　show　what　are　the　different
  parts　or　branches　into　which　the　stock；　either　of　an　individual；
  or　of　a　great　society；　naturally　divides　itself。　In　the　second；　I
  have　endeavoured　to　explain　the　nature　and　operation　of　money
  considered　as　a　particular　branch　of　the　general　stock　of　the
  society。　The　stock　which　is　accumulated　into　a　capital；　may
  either　be　employed　by　the　person　to　whom　it　belongs；　or　it　may　be
  lent　to　some　other　person。　In　the　third　and　fourth　chapters；　I
  have　endeavoured　to　examine　the　manner　in　which　it　operates　in
  both　these　situations。　The　fifth　and　last　chapter　treats　of　the
  different　effects　which　the　different　employments　of　capital
  immediately　produce　upon　the　quantity　both　of　national　industry；
  and　of　the　annual　produce　of　land　and　labour。
  CHAPTER　I
  Of　the　Division　of　Stock
  WHEN　the　stock　which　a　man　possesses　is　no　more　than
  sufficient　to　maintain　him　for　a　few　days　or　a　few　weeks；　he
  seldom　thinks　of　deriving　any　revenue　from　it。　He　consumes　it　as
  sparingly　as　he　can；　and　endeavours　by　his　labour　to　acquire
  something　which　may　supply　its　place　before　it　be　consumed
  altogether。　His　revenue　is；　in　this　case；　derived　from　his　labour
  only。　This　is　the　state　of　the　greater　part　of　the　labouring　poor
  in　all　countries。
  But　when　he　possesses　stock　sufficient　to　maintain　him　for
  months　or　years；　he　naturally　endeavours　to　derive　a　revenue　from
  the　greater　part　of　it；　reserving　only　so　much　for　his　immediate
  consumption　as　may　maintain　him　till　this　revenue　begins　to　come
  in。　His　whole　stock；　therefore；　is　distinguished　into　two　parts。
  That　part　which；　he　expects；　is　to　afford　him　this　revenue；　is
  called　his　capital。　The　other　is　that　which　supplies　his
  immediate　consumption；　and　which　consists　either；　first；　in　that
  portion　of　his　whole　stock　which　was　originally　reserved　for　this
  purpose；　or；　secondly；　in　his　revenue；　from　whatever　source
  derived；　as　it　gradually　comes　in；　or；　thirdly；　in　such　things　as
  had　been　purchased　by　either　of　these　in　former　years；　and　which
  are　not　yet　entirely　consumed；　such　as　a　stock　of　clothes；
  household　furniture；　and　the　like。　In　one；　or　other；　or　all　of
  these　three　articles；　consists　the　stock　which　men　commonly
  reserve　for　their　own　immediate　consumption。
  There　are　two　different　ways　in　which　a　capital　may　be
  employed　so　as　to　yield　a　revenue　or　profit　to　its　employer。
  First；　it　may　be　employed　in　raising；　manufacturing；　or
  purchasing　goods；　and　selling　them　again　with　a　profit。　The
  capital　employed　in　this　manner　yields　no　revenue　or　profit　to
  its　employer；　while　it　either　remains　in　his　possession；　or
  continues　in　the　same　shape。　The　goods　of　the　merchant　yield　him
  no　revenue　or　profit　till　he　sells　them　for　money；　and　the　money
  yields　him　as　little　till　it　is　again　exchanged　for　goods。　His
  capital　is　continually　going　from　him　in　one　shape；　and　returning
  to　him　in　another；　and　it　is　only　by　means　of　such　circulation；
  or　successive　exchanges；　that　it　can　yield　him　any　profit。　Such
  capitals；　therefore；　may　very　properly　be　called　circulating
  capitals。
  Secondly；　it　may　be　employed　in　the　improvement　of　land；　in
  the　purchase　of　useful　machines　and　instruments　of　trade；　or　in
  suchlike　things　as　yield　a　revenue　or　profit　without　changing
  masters；　or　circulating　any　further。　Such　capitals；　therefore；
  may　very　properly　be　called　fixed　capitals。
  Different　occupations　require　very　different　proportions
  between　the　fixed　and　circulating　capitals　employed　in　them。
  The　capital　of　a　merchant；　for　example；　is　altogether　a
  circulating　capital。　He　has　occasion　for　no　machines　or
  instruments　of　trade；　unless　his　shop；　or　warehouse；　be
  considered　as　such。
  Some　part　of　the　capital　of　every　master　artificer　or
  manufacturer　must　be　fixed　in　the　instruments　of　his　trade。　This
  part；　however；　is　very　small　in　some；　and　very　great　in　others。　A
  master　tailor　requires　no　other　instruments　of　trade　but　a　parcel
  of　needles。　Those　of　the　master　shoemaker　are　a　little；　though
  but　a　very　little；　more　expensive。　Those　of　the　weaver　rise　a
  good　deal　above　those　of　the　shoemaker。　The　far　greater　part　of
  the　capital　of　all　such　master　artificers；　however；　is
  circulated；　either　in　the　wages　of　their　workmen；　or　in　the　price
  of　their　materials；　and　repaid　with　a　profit　by　the　price　of　the
  work。
  In　other　works　a　much　greater　fixed　capital　is　required。　In
  a　great　iron…work；　for　example；　the　furnace　for　melting　the　ore；
  the　forge；　the　slitt…mill；　are　instruments　of　trade　w