These two ideas which have played such an important part in the history of economic doctrines must be separately examined.
The conception of spontaneity is the one to which Smith refers most frequently. Il mondo va da se. Here at any rate he and the Physiocrats were entirely at one. There is no need for organisation, no call for the intervention of any general will, however far-seeing or reasonable, and no necessity for any preliminary understanding between men. Such are the reflections that the study of the economic world suggests ever anew to our author. The present aspect of the economic world is the result of the spontaneous action of millions of individuals, each of whom follows his own sweet will, taking no heed of others, but never doubting the ultimate result. The noble outlines of the economic world as we know it have been traced, not by following a plan issuing complete from the brain of an organiser and deliberately carried out by an intelligent society, but by the accumulation of numberless deeds designed by a crowd of individuals in obedience to an instinctive force wholly unconscious of the work which it was encompassing.
This idea of the spontaneous constitution of the economic world is in some aspects analogous to the conception of an “economic law” of a later period. Both ideas suggest the presence of something superior to individual wills, and imposed upon them even despite their resistance. The differences are equally marked, however, the scope of the former being far greater than that of the latter. The words “natural law,” in the first place, suggest regularity and repetition—the constant recurrence of the same phenomena under similar conditions. This is not the aspect that particularly struck Smith. He insists less upon the constancy of economic phenomena and more on their spontaneity, their instinctive and natural character. Say’s delight was to compare the economic and the physical worlds. Smith loves to regard the economic world as a living organism which creates for itself its own indispensable organs. Nowhere is the term “economic law” employed, but his delineation of the chief economic institutions and the account of their functions always results in the same conclusion.
First of all take division of labour, which we have just studied, and which more than any other institution contributes to the increase of wealth.
This marvellous institution is “not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion.” “It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.”[160] This tendency itself is the outcome of personal interest. “Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this: Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.”[161] This gives rise to exchange, and with exchange comes division of labour. “And thus the certainty of being able to exchange all that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he may have occasion for, encourages every man to apply himself to a particular occupation, and to cultivate and bring to perfection whatever talent or genius he may possess for that particular species of business.” Division of labour is the outcome of a tendency common to all men, the tendency to barter; and this tendency itself is spontaneously developed under the influence of personal interest, which acts simultaneously for the benefit of each and all.
Next comes money, and nothing has so facilitated exchange or so greatly increased wealth. Every economic treatise since Smith’s has demonstrated its advantages in terms almost identical with his. But how did money first come to be employed? It was not by the act of a public body, nor was it the outcome of a nation’s reflective judgment. It is simply the result of the operation of a collective instinct. Some men who were keener than others saw the inconveniences of the truck system. And “in order to avoid the inconveniency of such situations, every prudent man in every period of society, after the first establishment of the division of labour, must naturally have endeavoured to manage his affairs in such a manner, as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry.”[162] Money is thus the product of the simultaneous though not concerted action of a great number of people, each obeying his personal inclination. The intervention of the public authority is much later, and its object is merely to guarantee by means of a design the weight and purity of such coins as are already in circulation.
Take another well-known phenomenon—capital.[163] With the exception of division of labour and the invention of money, Smith thought there was no phenomenon of greater importance and no more essential fount of national wealth than capital. The larger the store of capital, the greater the number of productive workers, makers of tools and machinery—the essentials of increased productivity—the further will division of labour extend. To increase a nation’s capital is to expand its industry and to further its well-being.[164] In some passages the growth of wealth appears not merely as the chief but as the only method of augmenting a nation’s wealth. “The industry of the society can augment only in proportion as its capital augments, and its capital can augment only in proportion to what can be gradually saved out of its revenue.”[165] In short, capital limits industry,[166] a phrase that was destined to become classic, and one that was repeated by every economist down to Mill. Capital is the true source of economic life. Let capital increase and industry will expand in every direction; diminish it and a bar is set to all improvement. Capital fertilises the earth, whereas the labour of man simply leaves it a weary waste.
Criticism has been freely levelled at this extravagant importance which capital is made to assume. It is certainly somewhat curious that labour should now be treated as altogether subordinate to capital, whereas earlier in the volume labour alone was regarded as the great wealth-producing agent. But we are not here concerned with the revival of these threadbare controversies.[167] We merely wish to note that Smith finds in this accumulation of capital a new illustration of spontaneity. The saving of capital is not the result of any foresight on the part of society, but is solely due to the simultaneous and concurrent actions of thousands of individuals. These individuals, urged on by a desire to better their situation, are spontaneously urged to save their earnings and to employ those savings productively.
“The principle which prompts to save, is the desire of bettering our condition, a desire which, though generally calm and dispassionate, comes with us from the womb, and never leaves us till we go into the grave. … An augmentation of fortune is the means by which the greater part of men propose and wish to better their condition. It is the means the most vulgar and the most obvious; and the most likely way of augmenting their fortune, is to save and accumulate some part of what they acquire.” This desire is so powerful that even the greatest follies perpetrated by Governments have never succeeded in annulling its beneficial effects. “The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which public and national as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour