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Hutcheson, Smith, and the Division of Labour

Peter C. DooleyDepartment of Economics

University of Saskatchewan

9 Campus Drive, Saskatoon, SK S7N 5A5 Canada

Phone: (306) 966-5225

Fax: (306) 966-5232

Email: dooley@sask.usask.ca

Discussion Paper 2003-1ISSN 0831-439X

September 2003

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Hutcheson, Smith, and the Division of Labour

Peter C. Dooley

Abstract

The originality of Adam Smith has often been questioned. J.A. Schumpeter that the Wealth ofNations does not contain a single analytic idea, principle or method that was entirely new

in1886 W.R. Scott went further when he observed That the order of topics discussed in the

economic portions of Hutchesons System is repeated in Smiths Glasgow Lectures and again in

the Wealth of Nations. This paper will show how the ideas on the division of labour discussedby Hutcheson reappear more fully developed the Wealth of Nations: how the division of labour

increases output due to the invention of machines, to the increased dexterity of labour, and to less

time being wasted between tasks; how the division of labour gives rise to the buying and selling,which leads to the invention of money; how the accumulation of capital relates to the division of

labour; and how the existence of capital presupposes the institution of private property, which

Hutcheson justified on the Lockean grounds that each one should have the free use and disposalof what he has acquired by his own labour.

University of Saskatchewan. Mailing address: P. Dooley, Department of Economics. University

of Saskatchewan. 9 Campus Drive. Saskatoon SK S7N 5A5. dooley@sask.usask.ca.. An earlierdraft of this paper was presented at the History of Economics Society Conference at Duke

University in Durham, North Carolina, on 5 July 2003 and at the Third Annual Economics

Research Symposium at the University of Saskatchewan in Saskatoon, Saskatchewan, on 20September 2003.

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1.0 Introduction.

Adam Smith first learned his economics from Francis Hutcheson, his professor of moral

philosophy at the University of Glasgow.

i

Hutchesons lectures were publishedposthumously asA System of Moral Philosophyin 1755, by which time Smith hadbecome professor of moral philosophy. W.R. Scott (1966 [1900]: 231) reported that themanuscript of the Systemwas used by Hutcheson for his class lectures about 1737.Smith attended these lectures in 1738-39. William Leechman (2000 [1755], xxxiii), whowrote the Preface to Hutchesons System, mentioned that he lectured on the samematerial year after year, so the System probably reflects what Smith heard in class.Hutcheson published much of the same material in his text for undergraduates, iiA ShortIntroduction to Moral Philosophy(1747). Even though the Short Introduction waspublished before the System, it appears to have been written later, according to theevidence presented by Scott (1966 [1900]: 244-9). Hutchesons (2002 [1726]) first and

most original book,

iii

An Inquiry into the Originals of Our Ideas of Beauty and Virtue, waspublished over two decades earlier. His Inquirycontains the aesthetic, ethical andeconomic ideas that he refined in his later books.

Smith had available to him the Inquiry, the Short Introduction and his recollectionof the lectures ofthe never-to-be-forgotten Francis Hutcheson when he gave his firstlectures on moral philosophy in the 1752-3 session.

ivScott (1966 [1900]: 234) has

presented a table showing that the order of topics discussed in the economic portionsof Hutchesons System is repeated by Smith in his Glasgow Lectures and again in theWealth of Nations.

vW.L. Taylor (1965) has filled in many informative details of Scotts

table. He showed that Hutcheson influenced the substance of Smiths analysis,

especially on the division of labor and the origin of money.

vi

As Smith followed Hutcheson, so Hutcheson followed those who went beforehim. In the foreword to his Short Introduction, Hutcheson (1747, i) declared with allcandor that

The learned will at once discern how much of this commend is taken from thewritings of others, from Cicero and Aristotle; and to name no other moderns, fromPuffendorfs smaller work, de officio hominis et civis, which that worthy andingenious man the late Professor Gershom Carmichael of Glasgow, by far thebest commentator on that book, has so supplied and corrected that the notes areof much more value than the text.

Gershom Carmichael had been Francis Hutchesons professor of moral philosophy. Ontheological questions he was more directly influenced by John Samson, his hereticalprofessor of divinity, who sought a new light for the clergy of Scotland. Carmichaelintroduced Hutcheson to the treatment of natural law and economics by Samuel vonPufendorf (1927 [1673])in his De officio. In his turn, Pufendorf followed De jure belli ac

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pacis by Hugo Grotius (1925 [1625]). Like many other professors, Hutcheson and Smithbegan by teaching what they had been taught and modified their material as their ideasmatured. The charge of plagiarism cannot very well be sustained against either of them,however, because they inherited a common tradition in the history of economic ideas.This paper will show that the opening chapters ofWealth of Nations follow the logic and

contain the substance of Hutchesons economic analysis, though in a modified andmore elaborate form.

2.0l Hutchesons philosophical origins.

Hutchesons moral philosophy was in the natural law tradition of Grotius, Pufendorf,Hobbes and Locke. He was also strongly influenced by Shaftesbury. He believed thatthe order of nature was established by a benevolent Deity and that mankind coulddiscover the laws of nature by careful observation and by right reason without resortingto supernatural revelation. This is similar to the natural law philosophy of Quesnay andthe Physiocrats, whose ideas shared a similar line of descent. The first sentence of his

System states that the intention of moral philosophy is to direct men to that course ofaction which tends most effectually to promote their greatest happiness and perfection.Hutcheson (2002 [1726]: 177) put the matter rather more famously in his Inquiry: that

Action is best, which procures the greatest Happiness for the greatest Numbers.Utilitarian principles appear repeatedly throughout Hutchesons writings. No doubt thisinfluenced Adam Smith. It clearly leads to the utilitarian philosophy of Jeremy Bentham.

His Inquirywas written to promote and defend the doctrine of the moral sensepresented by Anthony Ashley Cooper, Third Earl of Shaftesbury (1995[1711]: I, 262),who apparently first introduced the notion of a natural moral sense.vii Hutchesonsbelief in the inherent benevolence of mankind prompted him to criticize the antithetical

views expressed by Bernard Mandeville (1924 [1714]) in The Fable of the Bees: or,Private Vices, Publick Benefits, originally published in 1705 under the title ofTheGrumbling Hive: or Knave Turnd Honest. Hutcheson was offended by the notion thatselfish motives lie behind virtuous actions - that, for example, vanity inflated by a love ofpraise prompts men to act benevolently.viii He believed that people perceive moralexcellence with an instinctive moral sense, like the sense of touch or taste. Hutchesonalso criticized Mandeville in his Observations on The Fable of the Bees, published in1726.

ixHutcheson (2002 [1726]: 114) recognized that self-interest leads people to

desire natural goods because our senses show that meats, drink, harmony, fineprospects, painting, statutes are immediately good and because our reason shows thatriches and power are a means to improve our well-being, but he maintained thatselfish motives should be subordinate to generous and social principles.x

3.0 The Idea of the Division of Labor.

Mandeville (1924 [1714]: II, 284) may have been the first to use the metaphor ofdividing labour in reference to the specialization of work: No number of Men, whenonce they enjoy Quiet, and no Man needs to fear his Neighbour, will be long without

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learning to divide and subdivide their Labour. He then continued with a passage thatsounds like Adam Smith:

if one will wholly apply himself to the making of Bows and Arrows, whilst anotherprovides Food, a third builds Huts, a fourth makes Garments, and a fifth Utensils,

they not only become useful to one another, but the Callings and Employmentsthemselves will in the same Number of Years receive much greaterImprovements, than if all had been promiscuously follow'd by every one of theFive. (Mandeville, 1924 [1714]: II, 284).

He also mentioned Watch-making on the same page. Since, a few decades earlier,Sir William Petty (1964 [1682]: 473) illustrated the advantages of the division of laborwith the empirical example of manufacturing a watch, a separate part being made byeach laborer, Mandeville may have derived his ideas from Petty. However new themetaphor may have been, the concept can be traced back to antiquity. In his Republic,Plato (1941: 52-9) related how the desire for a variety of different things and the

superior productivity of specialized labor gave rise to buying and selling, the invention ofmoney, and the origin of the City of Pigs. In his System, Hutcheson (2000 [1755]: I, 289-90) paraphrased and recommended to his readers the discussion of the division of laborin De officiis by Cicero (1967:103-4), who had argued that the co-operation of manyskilled laborers not only gives rise to the economic benefits of food, clothing, housing,health and security but also the customs, laws, rules of justice and conventions of civilsociety. Later, David Hume (1964 [1739-40]: II, 259) gave a metaphysical explanation ofhow the partition of employments allowed mankind to rise above the cruel andnecessitous state of nature. Like Cicero and Hutcheson, Hume traced the origin of

justice, private property, and the state back to the division of labor.

Hutcheson treated the division of labor in his Inquiryand in his Observations,both of which were written in Dublin where, in the early 1720s, he established anacademy for dissenters and nonconformists. His ideas were more fully developed afterhe became professor of moral philosophy at Glasgow, where he wrote both his Systemand his Short Introduction. In all these publications, he began his economic analysis in astate of nature that preceded the establishment of civil society. In the rudest state ofnature people lived in caves and dressed in animal skins, but they wanted a variety ofmany different things. The utilitarian desire to better their economic condition led to thedivision of labor, which produced of a surplus of goods in the hands of each laborer.These separate surpluses made barter immediately necessary, which led to theinvention of money. By this line of reasoning, the division of labor leads to theestablishment of civil society.

4.0 The State of Nature.

Like Thomas Hobbes, Adam Smith and many other natural law philosophers,Hutcheson began his hypothetical history of man in a state of nature, but his view of the

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state of nature was remarkably different from the famous conditions depicted by Hobbesand by Smith. Hobbes (1968 [1651]: 186) believed that the original condition of manwas war, where every man is Enemy to every man. According to the economicanalysis of Hobbes, progress is not possible under such conditions:

there is no place for Industry; because the fruit thereof is uncertain: andconsequently no Culture of the Earth; no Navigation, nor use of the commoditiesthat may be imported by Sea; no commodious Building; no Instruments ofmoving, and removing such things as require much force; no Knowledge of theface of the Earth; no account of Time; no Arts; no Letters; no Society; and whichis worst of all, continual feare, and danger of violent death; And the life of man,solitary, poor, nasty, brutish, and short.

Hutcheson criticized Hobbes. He claimed that our moral faculty naturally binds allmankind together with benevolence and humanity. This first state founded by nature isso far from being that of war and enmity, Hutcheson (2000 [1755]: I, 281) claimed,

that it is a state where we are all obliged by the natural feelings of our hearts, and bymany tender affections, to innocence and beneficence to all. He called this a state ofnatural liberty. It prevails where the members of society have no superior or magistrate.They are subject only to God and the law of nature.

The tradition of Plato, Cicero, Hutcheson, Hume and many others suggests thatSmith began the Wealth of Nations with his chapter Of the Division of Labour, becauseit lies at the economic foundation of civil society. Adam Smith called his state of naturethe early and rude state of society, which he defined as that society which precedesthe accumulation of stock and the appropriation of land. He thought that the condition ofmankind in the earliest ages of society would be miserably poor. Thus, in the last

sentence of his first chapter Smith (1976 [1776]: 24) remarked that

the accommodation of a European prince does not always so much exceed thatof an industrious and frugal peasant, as the accommodation of the latter exceedsthat of many an African king, the absolute master of the lives and liberties of tenthousand naked savages.

Hutcheson thought, to the contrary, that in the earliest ages of mankind society wouldbe based on the family and that families would join together in small communities fortheir mutual protection and to benefit from the advantages of the division of labor.

In his System, Hutcheson (2000 [1755]: I, 287) agreed with Smith and othernatural law philosophers that a solitary individual could scarcely survive in a state ofnature:

'tis plain that a man in absolute solitude, tho' he were of mature strength, andfully instructed in all our arts of life, could scarcely procure to himself the barenecessaries of life, even in the best soils or climates; much less could he procure

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any grateful conveniencies. One uninstructed in the arts of life, tho' he had fullstrength, would be still more incapable of subsisting in solitude: and it would beabsolutely impossible, without a miracle, that one could subsist in this conditionfrom his infancy.

Earlier he had written in his Observations on The Fable of the Bees that, even if aman could survive on a minimum subsistence, he would gladly endure the toils of laborto obtain some of the pleasures of life. He rejected the notion of a bygone Golden Ageof idleness, abundance, and wealth. Hutcheson thought that laborers would willinglytrade their leisure for a great variety of conveniences, even beyond the necessities oflife.

What man, who had only the absolute necessaries of meat and drink, and a caveor a beast's skin to cover him, would not, when he had leisure, labour for fartherconveniences, or more grateful food? Would not every mortal do so, exceptsome few pretended gentlemen inured to sloth from their infancy, of weak bodies

and weaker minds, who imagine the lower employments below their dignity?Does not the universal choice of mankind, in preferring to bear labour for theconveniences and elegancies of life, shew that their pleasures are greater thanthose of sloth, and that industry, notwithstanding its toils, does really increase thehappiness of mankind? Hence it is that in every nation great numbers supportthemselves by mechanic arts not absolutely necessary since the husbandman isalways ready to purchase their manufactures by the fruits of his labours, withoutany constraint; which they would not do if the pleasures or happiness of idlenesswere greater. (Hutcheson, 1989 [1758]: 71-2)

People employ the principle of opportunity cost when they compare one alternative toanother. The utilitarian principle of self-gratification leads them to trade their leisure timefor the material pleasures of life. Thus, individual choice drives the economic progressof mankind. Prosperity requires self-interest, though Hutcheson believed that mennaturally temper their self-love with altruism.

5.0 Division of Labor

In the Wealth of Nations, Adam Smith (1937 [1776]: 7) gave three reasons why thedivision of labor increases the volume of output that any group of laborers can produce.It is due

first, to the increase of dexterity in every particular workman; secondly, to thesaving of the time which is commonly lost in passing from one species of work toanother; and lastly, to the invention of a great number of machines whichfacilitate and abridge labour, and enable one man to do the work of many.

Hutcheson (2000 [1755]: I, 287) gave three analogous reasons in his System. Heobserved that

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'tis well known that the produce of the labours of any given number, twenty, forinstance, in providing the necessaries or conveniences of life, shall be muchgreater by assigning to one, a certain sort of work of one kind, in which he willsoon acquire skill and dexterity, and to another assigning work of a different kind,

than if each one of the twenty were obliged to employ himself, by turns, in all thedifferent sorts of labour requisite for his subsistence, without sufficient dexterity inany.

Smith treated the time saved by specialization as an independent source of improvedproductivity, because a little time is generally wasted when a worker puts down one tooland picks up another. Hutcheson attributed the improvement in dexterity to staying at asingle task and not changing jobs, so their accounts are analogous, but not quite thesame. Hutcheson (2000 [1755]: I, 289) also made Smiths third point that the division oflabor gives rise to inventions: The inventions, experience, and arts of multitudes arecommunicated; knowledge is increased, and social affections more diffused.xil Among

the ancients, Lucretius (1951) emphasized inventions and discoveries above all else.

Following Cicero, Hutcheson (2000 [1755]: I, 289) went beyond the scope ofSmiths analysis where he noted that larger associations may further enlarge ourmeans of enjoyment, and give more extensive and delightful exercise to our powers ofevery kind. The joint effort of many individuals can execute greater designs of morepermanent and extensive benefit to society.

Some works of the highest use to multitudes can be effectually executed by thejoint labours of many, which the separate labours of the same number couldnever have executed. The joint force of many can repel dangers arising from

savage beasts or bands of robbers, which might have been fatal to manyindividuals were they separately to encounter them. The joint labours of twentymen will cultivate forests, or drain marshes, for farms to each one, and providehouses for habitation, and inclosures for their flocks, much sooner than theseparate labours of the same number. By concert, and alternate relief, they cankeep a perpetual watch, which without concert they could not accomplish.(Hutcheson, 2000 [1755]: I, 289)

Thus, the benefits of the division of labor extends beyond the production of necessariesand conveniences. Mankind can have some of the finer pleasures and social joys of lifeas well as defense against the violence of man and beast.

6.0 The Necessity of Barter.

When laborers specialize in the production of a single commodity, they can produce notonly a much greater quantity of things than if each became a jack-of-all-trades and triedto produce a little of everything, they will also produce a surplus of a single commoditythat is far beyond their needs. As Hutcheson (2002 [1726]: 287) put it in his Inquiry:

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The Labourof each Man cannot furnish him with all Necessarys, tho it mayfurnish him with needless Plenty of one sort; Hence the RightofCommerce, andalienatingour Goods; and also the Rights from Contracts and Promises, either toGoods acquird by others, or to theirLabours.

The division of labor, therefore, requires a means of exchanging individual surpluses,otherwise the surplus product of each laborer would stale in abundance. Exchange,whether by barter or by gift, requires in its turn the institutions of property and contract,which Hutcheson thought would arise naturally prior to the establishment of civil society.

In his System, he elaborated on the relation between the division of labor andbarter. With the extension of the division of labor, Hutcheson (2000 [1755]: I, 288-9)thought

each procures a great quantity of goods of one kind, and can exchange a part of

it: for such goods obtained by the labours of others as he shall stand in need of.One grows expert in tillage, another in pasture and breeding cattle, a third inmasonry, a fourth in the chace, a fifth in iron-works, a sixth in the arts of theloom, and so on throughout the rest. Thus all are supplied by means of barterwith the works of complete artists.

Without the division of labor, Hutcheson (2000 [1755]: I, 289) emphasized scarce anyone could be dextrous and skilful in any one sort of labour.

Adam Smith (1976 [1776]: 25-6 ) repeated a similar story in his second chapter,Of the Principle which gives occasion to the Division of Labour. He began by attributingthe division of labor to a certain propensity in human nature which has in view no suchextensive utility; the propensity to truck, barter and exchange one thing for another.Later, however, he echoed Hutchesons words where he wrote that:

man has almost constant occasion for the help of his brethren, and it is in vain forhim to expect it from their benevolence only. He will be more likely to prevail if hecan interest their self-love in their favour, and show them that it is for theiradvantage to do for him what he requires of them.

Hutcheson made the same distinction in his Inquiry. Edwin Cannan (1937 [1776]: lii-liv)argued that Mandeville made Smith see that it is not from the benevolence of thebutcher, the brewer or the baker that we expect our dinner, but from a regard to theirown self-interest. However, Smiths language closely follows the words of Hutcheson(2002 [1726]: 284): Benevolence alone is not a Motive strong enough to Industry, tobearLabourand toil. ... Self-love is really as necessary to the Goodof the Whole, asBenevolence.xiil Hutcheson and Smith both claimed that benevolence was too weak amotive to promote trade.xiii Both held that self-love induces people to barter.

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In the early stages of society, Hutcheson and Smith viewed each laborer as anindependent entrepreneur, who undertakes to specialize in the production of a singlecommodity. They each produce a surplus that is beyond their own needs. This leads tobarter. Once a system of exchanging their individual surpluses is established, peoplesatisfy most of their needs from the produce of other laborers:

the certainty of being able to exchange all that surplus part of the produce of hisown labour, which is over and above his own consumption, for the surplusproduce of other mens labour as he may have occasion for, encourages everyman to apply himself to a particular occupation, and to cultivate and bring toperfection whatever talent or genius he may posses for that particular species ofbusiness. (Smith,1976 [1776]: 28)

Thus, Smith followed the analysis of Hutcheson for the early stages of civil society. Thelaborer appears as an independent business man as well as a productive craftsman orfarmer. When more capital has accumulated, laborers are employed by masters who

advance them their wages and provided them with the tools and materials of their work,as in Smiths famous example of the pin factory.

Hutcheson traced both the origin of private property and the accumulation ofwealth to the division of labor. Each separate laborer produces a surplus of his ownproduct. These surpluses are, on the one hand, an accumulation of wealth or capital;and, on the other hand, they are private property. Without a claim to the surplus, laborwould not specialize in production and produce a surplus. In his Inquiry, Hutcheson(2002 [1726]: 285-6) explained that

Depriving any person of the Fruits of his own innocent Labour, takes away allmotives to Industryfrom Self-love, or nearer ties; and leaves us no other motivethan generalBenevolence: nay, it exposes the Industrious as a constant Prey tothe Slothful, and sets Self-love against Industry. This is the Ground of ourRightofDominion and Propertyin the Fruits of ourLabours; without which Right, wecould scarce hope for any Industry, or any thing beyond the Product ofuncultivated Nature. Industrywill be confind to our present Necessitys, andcease when they are provided for; at least it will only continue from the weakMotive ofgeneralBenevolence, if we are not allowd to store up beyond presentNecessity, and dispose of what is above our Necessitys, either in Barter for otherkinds of Necessarys, or for the service of our Friends and Familys.

Hutcheson justified private property by the right of first occupancy and by the right to thefruits of labor. Both of these ideas came from Locke and were emphasized byCarmichael (2002 [1724]: 92-94) in his notes on Pufendorf. Occupancy may, of course,be considered a prelude to labor. Hutcheson (2000 [1755]: 319-220) reconciled theutilitarian principle of the greatest good for the greatest number with the Lockean right tothe fruits of labor by arguing that property is an incentive to work, while the produce oflabor is a benefit to society.xiv In a similar manner, Smith (1976 [1776]: 428) invoked

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utilitarian ethics when he defined political economy as proposing to enrich both thepeople and the sovereign, while he also endorsed the Lockean theory of propertyrights: The property which every man has in his own labour, as it is the originalfoundation of all other property, so it is the most sacred and inviolable (Smith, 1976[1776]: 138).

Hutcheson gave a different account of the accumulation of things from AdamSmith (1976 [1776]: 277), who claimed that the accumulation of stock must, in thenature of things, be previous to the division of labour. Smith does not address thequestion of who produced the original stocks of things that supplied the weaver with histools, his materials and his maintenance. His theory of accumulation apparently takesplace in the advanced state of civil society. Hutcheson thought that surpluses ofdifferent things accumulate in the hands of individual laborers as soon as theyspecialize in production. In his System, Hutcheson (2000 [1755]: I, 328-9) declared

tis plain that our acquisition by labour in any one sort of goods may extend far

beyond our own present consumption and that of our families; and they may bestored up for the future: nay it may extend beyond all present and futureconsumption; as we may employ the surplus as a matter of beneficence, or ofbarter for goods of different kinds which we may need. Otherways each onewould be obliged to practice all sorts of mechanick arts by turns, without attainingdexterity in any; which would be a publick detriment.

Goods accumulated beyond consumption are, by definition, saved as capital. Theaccumulation of capital arises simultaneously with the division of labor. They are part ofthe same process. The division of labor produces a surplus of the product of eachlaborer that is beyond the needs in present consumption. Thus, barter becomes a

necessity.

7.0 The Invention of Money.

The difficulty of barter leads to the invention money, as Aristotle (1912:16) said longago: barter introduced the use of money. Barter requires a double coincidence: aperson who wants to buy one product must find a seller who wants to buy an equalvalue of his product. This condition is not easily satisfied, as Hutcheson (2000 [1755]: II,56) explained by way of example: The man who wants a small quantity of my corn willnot give me a work-beast for it, and his beast does not admit division. I want perhaps apair of shoes, but my ox is of far greater value, and the other may not need him. Manyauthorities discussed this problem before Hutcheson, so it was not original with him.Pufendorf (1927 [1673]: 72) wrote, for example:

But after we began to desire such a variety of things for convenience or pleasure,it was certainly not easy for every man to possess the things which anotherwould wish to exchange for his own, or which were equal in value to the othersthings.

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Money allows laborers to sell their surplus produce for money and buy the products ofother laborers with money. For a commodity to serve as money, Hutcheson (2000[1755]: II, 55) argued it must be generally desired so that men are generally willing totake it in exchange. Thus, money is a general claim on commodities that everyone will

accept, which is Aristotles definition of money.

xv

Gold and silver satisfy this conditionbetter that other commodities, according to Hutcheson (2000 [1755]: II, 55-6), becausethey are portable, scarce, divisible and durable. Here, he was also probably followingPufendorf (1927 [1673]: 73), who made the same points about gold and silver.

In his fourth chapter, Of the Origin and Use of Money, Adam Smith presented thesame theory of the origin of money as Hutcheson, Pufendorf, and Aristotle. In order toavoid the inconvenience of barter, Smith (1976 [1776]: 37-8) described how

every prudent man in every period of society, after the first establishment of thedivision of labour, must naturally have endeavoured to manage his affairs is such

a manner, as to have at all times by him, besides the peculiar produce of his ownindustry, a certain quantity of some one commodity or other, such as heimagined few people would be likely to refuse in exchange for the produce oftheir industry.

After the division of labor is well established, laborers exchange their surpluses formoney rather than by barter. Money becomes a general claim on commodities thateveryone accepts. It can serve as a store of value as well as a medium of exchange.Hutcheson also presented a brief history of money. Smith gave a more detailed accountof the history and origin of money from Homeric to modern times.

8.0 The Measure of Value.

Money is a measure of value as well as a medium of exchange and a store of value.Smiths fourth chapter on the origin of money, therefore, logically leads to his fifthchapter on the measure of value: Of the real and nominal price of Commodities, or oftheir price in Labour and their Price in Money. Since gold and silver vary in their valuelike every other commodity, Smith (1976 [1776]: 50-1) adopted labor sacrifice as his realprice of commodities on the assumption that the sacrifice of the laborer is the same atall times and places.

Equal quantities of labour, at all times and places, may be said to be of equalvalue to the labourer. In his ordinary state of health, strength and spirits; in theordinary degree of his skill and dexterity, he must always lay down the sameportion of his ease, his liberty, and his happiness. The price which he pays mustalways be the same, whatever may be the quantity of goods which he receives inreturn for it. Of these, indeed, it may sometimes purchase a greater andsometimes a smaller quantity; but it is their value which varies, not that of thelabour which purchases them.

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Thus, since labor sacrifice never varies in value, labor is his ultimate, real, or universalmeasure of value. It is his real price of commodities. Money measures their nominalvalue only. In contrast, the real price of labor is the wages or subsistence of labor, whichvaries with the wealth of the nation. The real price of commodities (measured by the

sacrifice of labor) and the real price of labor (equal to the wages or subsistence of labor)are distinct and different measures of value.

In his System, Hutcheson (2000 [1755]: II, 58) presented a measure of value thathinted at Smiths real price of commodities:

But a days digging or ploughing was as uneasy to a man a thousand years agoas it is now, tho' he could not then get so much silver for it: and a barrel of wheat,or beef, was then of the same use to support the human body, as it is now whenit is exchanged for four times as much silver. Properly, the value of labour, grain,and cattle, are always pretty much the same, as they afford the same uses in life,

where no new inventions of tillage, or, pasturage, cause a greater quantity inproportion to the demand. 'Tis the metal chiefly that has undergone the greatchange of value, since there metals have been in greater plenty, the value of thecoin is altered tho' it keeps the old names.

Hutcheson was a long way from stating that labor sacrifice is a universal measure ofvalue. He restricted his examples to agriculture. Grain and beef, however, were hismeasures of value precisely because they require a constant sacrifice of labor toproduce them, assuming technology does not change. A few pages later Hutcheson(2000 [1755]: II, 62-3) equated so many days labour with a fixed quantity of goods:The most invariable salary would be so many days labour, or a fixed quantity of goodsproduced by plain inartificial labourers, such goods as answer the ordinary purposes oflife. Quantities of grain come nearest to such a standard. Smith (1976 [1776]: 53)supported the notion that rents payable in grain tend to be more stable than rentspayable in money, because the real value of a corn rent ... varies much less fromcentury to century than that of a money rent. For this reason, a landlord wouldpreserve the real value of his rental income better on a long term lease by stipulatingpayment in kind rather than payment in money. Grain had been recommended earlierby John Locke (1991 [1691]: 263): Wheat here, Rice in Turkey, &c. is the fittest thing toreserve a Rent in.

9.0 The Origin and Regulation of Value.

How values are measured is conceptually distinct from two related questions: (1) themetaphysical question of what is the origin, cause or essence of value, and (2) theempirical question of what regulates or determines relative values in the market place.Hutcheson did not influence Smith much on either the origin or regulation of value.Smith (1976 [1776]: 47) began chapter five on the component parts of price with hisfamous example of the beaver and the deer: If among an nation of hunters, for

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example, it usually costs twice the labour to kill a beaver as it does to kill a deer, onebeaver should naturally exchange for or be worth two deer. This is a pure labor theoryof value. The labor necessary to produce things explains why they have value, whatthey are worth, and the rule for exchanging them. Labor accounts for the origin,measure and regulation of value.

Hutcheson (1747: 209) had a metaphysical theory of the origin of value based onutility: The ground of all price must be some fitness in the things to yield some use orpleasure in life; without this, they can have no value. He followed Pufendorf (1927[1673]: 78), who wrote that things have value in so far as they bring men somepleasure or use. This was in the Aristotlean tradition of the schools. The origin of valueis metaphysical concept because it traces value to a first essence or a cause of causes.

Adam Smith, in contrast to Hutcheson, was closer to the labor theory presented by JohnLocke (1967 [1690]: 296), who thought it would be but a very modest Computation tosay, that of the Products of the Earth useful to the Life of Man 9/10 are the effects ofLabour. Smith (1976 [1776]: 10) went further than Locke in the first sentence of the

Wealth of Nations:

The annual labour of every nation is the fund which originally supplies it with allthe necessaries and conveniences of life which it annually consumes, and whichconsist always, either in the immediate produce of that labour, or in what ispurchased with that produce from other nations.

This is a labor theory of the origin of value. Labor makes all products that have value athome and that are exported in exchange for imports from abroad. In his Inquiry,Hutcheson (2002 [1726]: 284) did paraphrased the labor theory of Locke: probablynine Tenths, at least, of things which are useful to Mankind, are owing to their Labour

and Industry. This was, however, in a discussion of property rights. In his chapter onthe values of goods in his System, Hutcheson (2000 [1755]:II, 53) made it clear that heheld a utility theory of the origin of value: The natural ground of all value or price issome sort of use which goods afford in life; this is prerequisite to all estimation.xvi

For civil society, Smith explained the regulation of value in terms of the marketprice and the natural price in both the Wealth of Nations and his Glasgow Lectures,LJ(A) and LJ(B). The market price is determined in a Marshallian temporary or marketperiod, when supply comes from a previously produced stock of things. On any marketday, the price of any commodity that is brought to market depends upon the higglingand bargaining of the buyers and sellers. The natural price corresponds to theMarshallian long run competitive equilibrium price, which tends to equal the cost ofproduction. All of the inputs necessary for production must be paid at least as much asthey can earn elsewhere; otherwise, production will not be forthcoming. If the marketprice exceeds the natural price, production will tend to expand; when it falls below it,production declines.

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Hutcheson, in contrast, did not go much beyond the analysis of Pufendorf (1927[1673]: 71), who explained prices in term of demand and the difficulty of acquiring orproducing different articles.xvii Hutcheson (2000 [1755]: II, 54) explained that we shallfind that the prices of goods depend on these two jointly, the demandon account ofsome use or other which many desire, and the difficultyof acquiring, or cultivating for

human use. Demand arose from any customary, fanciful, or natural use of things. Thedifficulty of acquiring things included the toil of labor, the skill of the laborer, thecustomary dignity or station of the laborer,xviii the scarcity of the materials, and thebounty of the harvest. He does not explain Smiths dynamic adjustment of prices to theirequilibrium values.

Smith may, however, have followed either Hutcheson or Pufendorf when hestated his famous paradox of value. Hutcheson (1747: 210) apparently followedPufendorf:

Some goods of the highest use, yet have either no price or but a small one. Ifthere's such a plenty in nature that they are acquired almost without any Labour,

they have no price; if they may be acquired by easy common labour, they are ofsmall price. Such is the goodness of God to us, that the most useful andnecessary things are generally very plentiful and, easily acquired.

Smith (1976 [1776]: 44-5) presented a double paradox: not only are some of the mostuseful goods cheap, but some useless ones are dear.

Nothing is more useful than water: but it will purchase scarce anything; scarceanything can be had in exchange for. A diamond, on the contrary, has scarce anyvalue in use; but a very great quantity of other goods many frequently be had in

exchange for it.

This statement by Smith is similar to statements by Hutcheson and Pufendorf in so faras he treats value in use as a matter of conventional taste. Whether diamonds have anyvalue in use depends on the subjective preferences of the individuals. In Smithspersonal opinion diamonds are of scarce any use.

Francis Hutcheson influenced Adam Smith on other topics, such as: thetendency of the rate of profits to fall as society progresses, his maxims on taxation, and,most of all, the simple and obvious system of natural liberty. These topics, however, gobeyond the logical consequences of the division of labor.

10.0 Conclusion.

Francis Hutcheson approached economics from the tradition of moral philosophy. Hetraced the human condition back to a hypothetical state of nature in order to explain theorigin of civil society, private property, justice, and the state. This conjectural history ofmankind began with the division of labor, the necessity of barter, and the invention ofmoney. Plato, Aristotle, Cicero, Grotius, Hobbes, Pufendorf, Locke, Mandeville, and

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many others had previously discussed these individual topics. This was the receivedtradition in western economic thought.

W.R. Scott showed that the economic topics in the Glasgow Lectures and theWealth of Nations follow the same order as the System of Moral Philosophy. This papershows that the early chapters ofWealth of Nations follow the hypothetical history ofmankind advanced by Hutcheson. Without the division of labour, mankind would live ina necessitous state of nature. With the division of labour, production increases greatlyfor three reasons: improved dexterity, not changing tasks, and inventions. Smithpresented an analogous thesis in Chapter One. Labourers produce surpluses of theirown commodities that are beyond their own needs. Self-love prompts them to exchangeone surplus for another so that everyone can enjoy a great variety of differentcommodities, as in Smiths Chapter Two. The inconvenience of barter leads to theinvention of money, which is Chapter Four. Money is a variable standard of value overlong periods of time. Hutcheson hinted that labor sacrifice is an invariable measure ofvalue, which Smith developed in Chapter Five. The origin of value and the regulation ofvalue, which Smith discussed in Chapters Six and Seven, go beyond the influence of

Hutcheson. With the exception of the extent of the market in Chapter Three, Smithsanalysis in the earlier chapters of the Wealth of Nations follows the logic and containsthe substance the ideas presented by Hutcheson.

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ENDNOTES

* The author thanks Warren J. Samuels for his helpful comments on this paper atthe 2003 Conference of the History of Economics Society at Duke University.

Any remaining faults are the authors.

i. The life and times of Francis Hutcheson are treated by W. Leechman (2000[1755]), J. McCosh (1875), T. Fowler (1882), W.R. Scott (1966 [1900]), H. Jones(1906), W.L. Taylor (1965), and R.S. Downie (1994). For Adam Smith, see JohnRae (1977 [1895]), William Robert Scott (1965 [1937]); and Ian Simpson Ross(1995).

ii. Hutcheson (1747, iv) began hisA Short Introduction to Moral Philosophy inThree Books; containing the Elements of Ethicks and the Law of Nature with anote To the Students in Universities, in which he wrote These elementarybooks are for your use who study at Universities, and not for the learned. Whenyou have considered them well, go on to greater and more important works. Itwas originally published in Latin in 1742. The Advertisement by the Translatorstates that Hutcheson did not want it translated because he wanted students tolearn their Latin. The prospect of a translation being published in London ledHutcheson to have it translated and published in Glasgow by Robert Foulis,printer to the University.

iii. Hutchesons Inquiryestablished his reputation as a philosopher. He wasamong the first moderns to treat aesthetics.

iv. H. Mizuta (1967: 106) lists the Inquiry, Illustrations of the Moral Sense, theShort Introduction, and the System among the works by Hutcheson in AdamSmiths library. Smith subscribed to two sets of the System when it was firstpublished.

v. The Glasgow Lectures refer to by Scott were given in 1763-64. They werepublished by Edwin Cannan (1964 [1896]). Now they are identified as LJ(B) todifferentiate them from the lectures of 1762-63, called LJ(A). The more polishedform of LJ(B) suggests that it was prepared by a copyist, while LJ(A) appears tobe student notes. R.L. Meek et al(1978: 7) believe that LJ(B) is probably notmuch inferior to LJ(A) as a record of what may be assumed actually to have beensaid in the lectures.

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vi. Taylor focused on the System and Short Introduction by Hutcheson, but didnot treat the economical sections of his Inquiry.

vii. Adam Smith (1976 [1759]: 321-24) did not accept Hutchesons notion of a

moral sense. He believed that Hutcheson put too much emphasize on the innatebenevolence of mankind and did not sufficiently appreciate the importance ofself-love. In his Theory of Moral Sentiments Smith addresses the questionHutcheson asked: how do men make moral judgements? The very phrasemoral sentiments appears in Hutchesons Inquiry(2002 [1726]: 243). R.F.Teichgraeber (1986) gives an informative and persuasive account of theinfluence of Hutcheson on the moral philosophy of David Hume and Adam Smith.

viii. Mandeville (1924 [1714]: II, 345-6) returned criticism by ridiculingHutchesons mathematical metaphysics. Hutcheson (2002 [1726]: 183-188)

presented equations that, for example, measured quantities of Benevolence,Moments of Good and Abilities.

ix. The Observations on The Fable of the Bees was originally published in1726 as three letters to a journal in Dublin. In 1725, Hutcheson published hisThoughts on Laughteras three letters to the same journal. They were reprintedtogether in 1758 as Thoughts on Laughter and Observations on The Fable ofthe Bees in Six Letters by Robert and Andrew Foulis.

x. Smith thought Mandeville erred in the opposite direction and classified histheory as a licentious system, though he admitted that in some respects the

Fable of the Beesbordered on the truth. Smith (1976 [1759]: 312-13)concluded that it was the great fallacy of Dr. Mandevilles book to representevery passion as wholly vicious, which is so in any degree and in any direction.

xi. Taylor (1965: 60) noted that these same three reasons appeared in theFrench Encyclopdie of 1751. He quotes the passages by Hutcheson that refer tothem in his System, but he does not explain their importance.

xii. While Mandeville certainly emphasized the role of self-love in the affairs ofsociety, Hutcheson (2000 [1755]: I, 286) did not underestimate it; on the contrary,he argued that the vehemence of our selfish appetites and passions were thechief dangers to the public interest unless our moral sense restrained us frominjuring others.

xiii. See J.T. Young (1997: 58-62) for a useful analysis of the role of benevolenceand self-love in the Wealth of Nations.

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xiv. M.N. Rothbard (1996: 423) argues with some justice that Hutchesonsutilitarian philosophy weakens his position in favor of natural liberty and naturalrights. The poor are many, while the rich are few, so that, on the principle of the

greatest happiness for the greatest number, the poor may feel entitled to theproperty of the rich. Hutcheson (2000 [1755]: I, 257) believed, to the contrary, theright to private property that was obtained by honest industry was a perfect right.The interest of society requires that perfect rights be maintained by force ifnecessary. See also P. Bowles (1985).

xv. Aristotle (1955: 153) explained that what money does for us is to act as asort of pledge or guarantee that a prospective exchange of commodities will infact take place if the necessity arises, though in the meantime the necessity isnot immediate.

xvi. Terrence Hutchison (1988: 399) also contended that Francis Hutcheson,though maintaining a labour theory ofproperty, upheld a scarcity-and-utilitytheory of value. Compare E. Pesciarelli (1999), however, who finds elements ofa labour theory of value in Hutchesons System.

xvii. Andrew Skinner (1999) compares Pufendorf, Hutcheson and Adam Smith.While he stated that Hutchesons utility and scarcity theory of value does not

differ significantly from the theory of Pufendorf, like Pesciarelli, he notes thatHutcheson occasionally appears to hold a labor theory of value. Hutchesonclearly used labour as a measure of value.

xviii. Smith (1976 [1776]: 122) may be echoing Hutcheson where he argued in hischapter on the inequality of wages and profits that workmen in positions of trustneed to paid a premium, because their reward must be such ... as may givethem that rank in society which so important a trust requires.

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