If, other circumstances remaining unaltered, a single individual in a society acquires the power of purchasing some article entering into his system of consumption, at less cost than before, he is by so much a gainer, and the change is equivalent to a proportional increase in revenue.Transferring this fact to societies, it is held that the revenue of every society is increased in exact proportion to the diminution in the cost of any article entering into its system of consumption, and diminished in proportion to the increase in the cost of any such article.By how much, therefore, any operations of the legislator add to the price of any commodity, by so much, it is said, they always, and in every case, take from the revenue of the society.When, therefore, by taxing foreign luxuries, the legislator raises their price, it is asserted that he proportionally diminishes the general revenue.
The answer to this objection is, that though as every commodity consumed by an individual, derives the estimation in which it is held from something in stone most complicated system of persons and things constituting the society of which he is a member, while that system remains in all its parts unchanged, whatever gives him the command of a greater portion of the particular commodity than before, necessarily increases the amount of commodities, which, compared with others, he possesses, and thus makes him, as compared with them, so much richer; yet, if any commodity become universally cheaper throughout a whole society, as this implies a change to a certain extent in the system of things, comprehended with persons in the term society, it may be that the revolution may affect the causes giving estimation to the commodity in question, and that, until we know whether or not this be the case, and how it operates, we act with unwarrantable rashness ill transferring rules true concerning individuals, to societies, and in asserting that a general diminution in cost, is, in all cases, equivalent to a general increase of revenue, or a general augmentation of cost, to a general diminution of revenue.That if there be any class of commodities, the estimation of which depends wholly, or in part, on their power to mark the possession of a certain relative superiority, or a command greater or less of the labor of other men, then the generally diminished cost of such commodities, lessening their power to mark the desired distinction, and taking thus in a like degree from that for which they were altogether, or in part, esteemed, either makes no change in the general revenue, or a smaller change than that indicated by the amount of the diminution.That such commodities serving merely, as Mr.Storch expresses it, for marks of opulence, their fitness for the purpose is diminished as their cost becomes less, and, therefore, a diminution of their cost produces no increase, or no proportionate increase, of general revenue, and an increase of it, no diminution, or no proportionate diminution of general revenue.That thus, though, were the power of procuring a string of pearls for a few hours labor given to any individual European, it might very greatly increase his wealth, yet, the same power given to all Europeans, would produce no increase, or no proportional increase to European wealth, and, on the contrary, as the facility of purchase by putting the wearing of peals out of fashion, would probably render the stock of these articles in the possession of individuals, valueless, it would, in all probability, proportionably diminish the amount of wealth actually existing.(163)If the legislator, by an arbitrary and secret act, could impose a duty on the share of any commodity consumed by an individual, the rest of the community going free, that individual would undoubtedly be exactly so much a loser.It would be to him a matter of indifference what the commodity in question were.If the circumstances of his condition obliged his wife to wear jewels, or him to have a supply of claret on his table, an arbitrary impost of the sort on the claret he consumed, or the jewels his wife wore would probably be to him equivalent, to a like exaction on coals or bread.
In the same way, a secret remission to a single individual of the duty levied on any article, would be just so much gain to him.
The fundamental error on this subject of Adam Smith, and the present prevailing school of political economists in England, lies, in their assuming, that what is true concerning an individual, is true, also, concerning a community, and maintaining, consequently, that every impost is so much absolute loss to the society, and every diminution of it, so much gain.
Before this assumption can be made good, with regard to any particular impost, it is necessary that the three following questions concerning it should be determined.
1st.Will the duty so levied, by directly or indirectly effecting an improvement in the arts, increase the absolute capital of the society?
2d.Will it prevent future waste, by the transfer of an, art producing useful commodities, the supply of which is liable to sudden interruptions?
3d.Does it fall partly or altogether on luxuries, and is its real effect, consequently, not to diminish, by so much, the annual revenue of the society, but only to apply a part of it, which would otherwise have been dissipated by vanity, to supply funds for the necessary expenditure of the legislator?
Unless these questions can be all answered in the negative, the assumed parallel between the effects of an impost on an individual, and on a community, does not hold, and the whole reasoning rounded on it falls to the ground.
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