WEALTH OF NATIONS. 151 



acknowledgement, and what is of more importance, with- 

 out 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 em- 

 ployed 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 sub- 

 ject, 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 profits 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 ; 

 and he who before would have vested one hundred 

 pounds either in trade or loan, would now vest two hun- 

 dred pounds, and would receive ten pounds instead of the 

 five he before received, being the very same per centage 

 in each case." In this chapter Dr. Smith, with a very 

 singular deviation from his general principles, regards 

 laws regulating the rate of interest with favour, provided 



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

 was published, July, 1804. 



