(3.xvi.24) If bills of exchange were always drawn for so much weight of gold, the casewould be simple. Suppose a bill in London drawn upon Paris for 100 ounces of gold, no man would payfor that bill more gold beyond the 100 ounces than the cost of sending the 100 ounces. He mightpurchase the 100 ounces at one time with 390 l. of currency, at another with 410 l. of currency,but that would be entirely owing to changes in the relative value of the currency and the gold.
These changes, it is said, may in certain circumstances, take place from a rise in the value of thegold, the currency remaining of the same value. This implies that gold can become morevaluable in one country than in the neighbouring countries; in England, for example, than on theContinent. But this it cannot do without increasing the exports in England, and diminishing,almost to nothing, the imports. Suppose the rise in the value of gold to be 1 per cent., 2 per cent.,or to amount to 10 per cent.; at this last rate the goods which could be sent abroad with theordinary profit, could be now sent abroad with 10 per cent. more than the ordinary profit, whileall the other kinds of goods, those 1 per cent., those 2 per cent., those 3 per cent., 4 per cent. 5per cent., and so on, too dear to have been sent before, would now all be sent; at the same timethat the counter operation would be equally strong to prevent foreign goods from beingimported. These are the necessary effects of a high value of gold in one country as comparedwith other countries; and they are evidently such as to render it impossible that a high value ofthe precious metal in one country, compared with the neighbouring countries, can ever in a stateof freedom be of long duration.
Section XVII. Bounties and Prohibitions (3.xvii.1) Under this title I include all encouragements and discouragements, of whatsoeversort, the object of which is, to make more or less of production or exchange to flow in certainchannels, than would go into them of its own accord.
(3.xvii.2) The argument, on this subject, I trust, will be clear and conclusive, without amultiplicity of words.
(3.xvii.3) If it should appear, that production and exchange fall into the most profitablechannels, when they are left free to themselves; it will necessarily follow that, as often as they are divertedfrom those channels, by external interpositions of any sort, so often the industry of the country ismade to employ itself less advantageously (3.xvii.4) That production and exchange do, when left to themselves, fall into the mostprofitable channels, is clear by a very short demonstration.
(3.xvii.5) The cases of production and of exchange require to be considered separately; for,in the case of production, there is hardly any difference of opinion. If a country had no commercialintercourse with other countries, and employed the whole of its productive powers exclusivelyfor the supply of its own consumption, nothing could be more obviously absurd, than to givepremiums for the production of one set of commodities, and oppose obstructions of any sort tothe production of another; I mean, in the view of Political Economy, or, on account ofproduction : for if any country opposes obstructions to certain commodities, as spirituousliquors, because the use of them is hurtful; this regards morality, and has, for its end, to regulatenot production, but consumption. Wherever it is not intended to limit consumption, it seemsadmitted, even in practice, that the demand will always regulate the supply, in the manner inwhich the benefit of the community is best consulted. The most stupid governments have notthought of giving a premium for the making of shoes, or imposing a preventive tax upon theproduction of stockings, in order to enrich the country by making a greater quantity of shoes, anda less quantity of stockings. With a view to the internal supply, it seems to be understood thatjust as many shoes, and just as many stockings, should be made, as there is a demand for. If adifferent policy were pursued; if a premium were bestowed upon the production of shoes, a taxor other burthen imposed upon the production of stockings, the effect would only be, that shoeswould be afforded to the people cheaper, and stockings dearer, than they otherwise would be: that the people would be better supplied with shoes, worse supplied with stockings, than theywould have been, if things had been left to their natural course, that is, if the people had beenleft to consult freely their own convenience, in other words, if the greatest quantity of benefit,from their labour, had been allowed to be obtained.
(3.xvii.6) All that regulation of industry, therefore, the object of which has been, to increasethe quantity of one sort of commodities, lessen the quantity of another, has been directed to thepurpose of regulating the exchange of commodities with foreign countries; of increasing, ordiminishing, most commonly diminishing, the quantity of certain commodities, which would bereceived from abroad.
