of that use. If it is fixed precisely at the 
lowest market price, it ruins, with honest people 
who respect the laws of their country, the 
credit of all those who cannot give the very 
best security, and obliges them to have recourse 
to exorbitant usurers. In a country 
such as Great Britain, where money is lent to 
government at three per cent. and to private 
people, upon good security, at four and four 
and a-half, the present legal rate, five per cent
is perhaps as proper as any. 
The legal rate, it is to be observed, though 
it ought to be somewhat above, ought not to 
be much above the lowest market rate. If 
the legal rate of interest in Great Britain, 
for example, was fixed so high as eight or ten 
per cent. the greater part of the money which 
was to be lent, would be lent to prodigals and 
projectors, who alone would be willing to give 
this high interest. Sober people, who will 
give for the use of money no more than a 
part of what they are likely to make by the 
use of it, would not venture into the competition
A great part of the capital of the 
country would thus be kept out of the hands 
which were most likely to make a profitable 
and advantageous use of it, and thrown into 
those which were most likely to waste and destroy 
it. Where the legal rate of interest, on 
the contrary, is fixed but a very little above 
the lowest market rate, sober people are universally 
preferred, as borrowers, to prodigals 
and projectors. The person who lends money 
gets nearly as much interest from the former 
as he dares to take from the latter, and his 
money is much safer in the hands of the one 
set of people than in those of the other. A 
great part of the capital of the country is thus 
thrown into the hands in which it is most 
likely to be employed with advantage
No law can reduce the common rate of interest 
below the lowest ordinary market rate 
at the time when that law is made. Notwithstanding 
the edict of 1766, by which the 
French king attempted to reduce the rate of 
interest from five to four per cent. money 
continued to be lent in France at five per 
cent. the law being evaded in several different 
The ordinary market price of land, it is to 
be observed, depends everywhere upon the ordinary 
market rate of interest. The person 
who has a capital from which he wishes to derive 
a revenue, without taking the trouble to 
employ it himself, deliberates whether he 
should buy land with it, or lend it out at interest
The superior security of land, together 
with some other advantages which almost 
everywhere attend upon this species of 
property, will generally dispose him to content 
himself with a smaller revenue from land
than what he might have by lending out his 
money at interest. These advantages are sufficient 
to compensate a certain difference of 
revenue; but they will compensate a certain 
difference only; and if the rent of land should 
fall short of the interest of money by a greater 
difference, nobody would buy land, which 
would soon reduce its ordinary price. On 
the contrary, if the advantages should much 
more than compensate the difference, everybody 
would buy land, which again would 
soon raise its ordinary price. When interest 
was at ten per cent. land was commonly sold 
for ten or twelve years purchase. As interest 
sunk to six, five, and four per cent. the price 
of land rose to twenty, five-and-twenty, and 
thirty years purchase. The market rate of 
interest is higher in France than in England, 
and the common price of land is lower. In 
England it commonly sells at thirty, in France 
at twenty years purchase
Though all capitals are destined for the maintenance 
of productive labour only, yet the 
quantity of that labour which equal capitals 
are capable of putting into motion, varies extremely 
according to the diversity of their employment; 
as does likewise the value which 
that employment adds to the annual produce 
of the land and labour of the country. 
A capital may be employed in four different 
ways; either, first, in procuring the rude 
produce annually required for the use and 
consumption of the society; or, secondly, in 
manufacturing and preparing that rude produce 
for immediate use and consumption; or, 
thirdly in transporting either the rude or manufactured 
produce from the places where 
they abound to those where they are wanted
or, lastly, in dividing particular portions of 
either into such small parcels as suit the occasional 
demands of those who want them. 
In the first way are employed the capitals of 
all those who undertake improvement or cultivation 
of lands, mines, or fisheries; in the 
second, those of all master manufacturers; in 
the third, those of all wholesale merchants
and in the fourth, those of all retailers. It is 
difficult to conceive that a capital should be 
employed in any way which may not be classed 
under some one or other of these four. 
Each of those four methods of employing 
a capital is essentially necessary, either to the 
existence or extension of the other three, or 
to the general conveniency of the society
Unless a capital was employed in furnishing 
rude produce to a certain degree of abundance
neither manufactures nor trade of any kind 
could exist
Unless a capital was employed in manufacturing