To return to Adam Smith: not only has he "made it quite clear" that he confounded the two laws, and had never been summoned to examine whether they led to different results, but I go further, and will affirm that if he had been summoned to such an examination, he could not have pursued it with any success until the discovery of the true law of Profits. For, in the case of the hats, as before argued, he would have said, "The wages of the hatter, whether they have been augmented by increased quantity of labor, or by increased value of labor, must, in any case, be paid." Now, what is the answer? They must be paid, but from what fund? Adam Smith knew of no fund, nor could know of any, until Mr. Ricardo had ascertained the true law of Profits, except Price: in either case, therefore, as Political Economy then stood, he was compelled to conclude that the fifteen shillings would be paid out of the price,--that is, that the whole difference between the twelve shillings and the fifteen shillings would settle upon the purchaser. But we now know that this will happen only in the case when the difference has arisen from increased labor; and that every farthing of the difference which arises from increased value of labor will be paid out of another fund, namely, Profits. But this conclusion could not be arrived at without the new theory of Profits (as will be seen more fully when we come to that theory); and thus one error was the necessary parent of another. Here I will pause, and must beg you to pardon my long speeches in consideration of the extreme importance of the subject; for everything in Political Economy depends, as I said before, on the law of value; and I have not happened to meet with one writer who seemed fully to understand Mr. Ricardo's law, and still less who seemed to perceive the immense train of consequences which it involves. _Phæd_. I now see enough to believe that Mr. Ricardo is right; and, if so, it is clear that all former writers are wrong. Thus far I am satisfied with your way of conducting the argument, though some little confusion still clouds my view. But, with regard to the consequences you speak of, how do you explain that under so fundamental an error (as you represent it) many writers, but above all Adam Smith, should have been able to deduce so large a body of truth, that we regard him as one of the chief benefactors to the science?