222 ADAM SMITH. 



duction, and because employing many servants or 

 many soldiers is expensive, and employing many arti- 

 sans is profitable ; for what gives increased value to all 

 capital is productive, and the employing more farm 

 servants or more artisans than we require would be as 

 unprofitable as employing more soldiers or servants. 



These and other propositions connected with this 

 subject, though now generally admitted, were much 

 resisted when I first explained and defended them 

 above forty years ago ; and I shall refer the reader to 

 an Appendix containing the principal parts of the 

 tract then published, because it happened to be the 

 foundation of much that has since been written on 

 this controversy without any acknowledgement, and 

 what is of more importance, without a due regard to 

 the limits of the question then discussed."* 



iv. Stock lent at interest is evidently capital to be 

 replaced with a profit ; but it may be used by the bor- 

 rower either for his consumption, or as capital to be 

 employed by him with a profit ; and it is chiefly as 

 capital that it is used. The profit paid to the lender 

 is called interest and depends, like all the other profits 

 of stock, upon the competition in the market, that is, 

 the proportion of the lenders to the borrowers in the 

 money market. The greater or less abundance of the 

 precious metals, or of paper currency, has no effect 

 upon the rate of interest ; for, as Mr. Hume, who first 

 clearly explained this subject, says. " If every man in 

 the country were to awake one morning with double 

 the amount of money in his coffers, all money prices 

 would be doubled ; but profits, though calculated in a 

 different coin, would really be the same, and the pro- 

 fits of lenders, and of merchants, and of manufacturers 

 would not even be nominally increased ; for these 

 profits are to be reckoned by their proportion to the 

 capital employed in the one case, lent in the other ; 



* It was in No. VIII. of the < Edinburgh Review' that the paper was 

 published, July, 1804. 



