Now the central doctrine of the Physiocrats, it will be remembered, was that the only source of the increase of wealth of a nation lay in its agriculture, inasmuch as in 'Agriculture alone did Nature come to the assistance of Man, whereas in Manufactures, Nature did nothing but Man did all.' From this central principle they drew the conclusion that the economic classes in a nation could be divided into two, the 'productive' and the 'unproductive'; the landlords and farmers alone being productive, the manufacturers, merchants, artisans and labourers unproductive, inasmuch as like menial servants they cost as much for their keep as they produce. Adam Smith, on the contrary, from the same premises drew the modified conclusion that all classes alike were 'productive' and capable of adding to the wealth of a nation, although in different degrees; the landlords and farmers together adding the most, inasmuch as they had Nature to help them; the manufacturers, merchants, artisans, and labourers adding less, inasmuch as they had to do all by their own devices without the assistance of Nature. And in defence of this position he adduced five different considerations.

The first was that the manufacturers, artisans, and labourers, did not 'eat their heads off,' like the menial servants, inasmuch as at the worst they at least replaced in their various ways by their labour the wealth they consumed; this labour ending in the production of some vendible commodity, and not in mere services. The second was, that by the principle of the 'division of labour,' a number of men working under one roof, as it were, on the different parts or stages of a complex process, - as in pin-making for instance, - could by the saving of time and increase of skill involved in doing one thing repeatedly, produce more in a given time than if each worked independently and had to do all the different operations by himself; and that, therefore, if a man working by himself could earn his living, he could do more than that, and so add something to the wealth of the nation, by working in combination and co-operation with his fellows. But if the Physiocrats should object that this extra product went to the manufacturer, and so only replaced the ordinary profit incidental to the capital he bad sunk in his business, Adam Smith has a third consideration in reserve with which to confront them, and this is that not only manufacturers, but artisans and labourers could always save something, if they were careful, out of the profits and wages they received; and so in this way could add to the wealth of the country; - the manufacturers, I presume, by reducing their expenses and unnecessary luxuries, the artisans and labourers by saving a little each week to put into an old stocking or into the bank.

Adam Smith's fourth consideration was, that as division of labour was more applicable to manufactures than to farming, more exchangeable wealth would be produced in a given time in manufactures than in farming. If the farmers therefore, he argued, were to be put among the productive classes, much more must this be the case with the manufacturers. For although Nature came to the assistance of Man only in agriculture, it was to the landlord and not to the farmer that she came; inasmuch as the farmer only got the ordinary rate of profit on his capital invested, while all the excess of production due to the powers of Nature inherent in the soil, went to the landlord in an increase of rent. If then the Physiocrats, as they were logically bound to do, would let corn come into a country free, - in the same way as at that very time they had succeeded in France in getting its export made free, - they would find themselves confronted with the fifth and last consideration of Adam Smith; and that is, that as a larger quantity of actual wealth, in the shape of corn, cattle, etc., could be got from the sale of a small quantity of manufactured goods abroad, than its own lands in the actual state of cultivation could supply, it follows that manufacturers and their artisans are not only 'productive' classes, but that through this export of their productions, more wealth can be added to a nation than would otherwise be possible.

From these differences between the Physiocrats and Adam Smith in reference to the sources of wealth, follow corresponding differences in their schemes of taxation. The Physiocrats believing that land was the sole source of wealth, were logically bound to base all their taxation on it; and accordingly they made a single tax on land values their one source of revenue. Adam Smith on the contrary believing . that all classes could and did contribute to the wealth of a nation, either by division of labour, saving, or foreign trade, was logically and in justice bound to make them all bear their fair share in taxation, and not to throw all the taxes on the land. And accordingly he has given us those excellent chapters on the distribution, the mode of payment, and the incidence of taxation, which have remained a permanent contribution to the literature of the subject.

Now the above constitute practically the main differences between the system of the Physiocrats and that of Adam Smith. And on running them over it becomes apparent that they are differences rather of detail than of essential principle. And indeed this is precisely what we should expect from Adam Smith's own express admission, that the system of the Physiocrats in spite of its discrepancies and imperfections was the nearest approximation to the truth that had as yet been published on the subject of Political Economy. The difference is as the difference between the fit and the cut of a coat; and is one rather of degree, proportion, and symmetry, - as of breadth of shoulders, and length of waist, or a piece inserted here or cut off there, - than of structure or organic type.