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consequence of some flattering speculation of extraordinary gain；
is almost always extremely dangerous； and frequently fatal； to
the banking company which attempts it。 But the constitution of
joint stock companies renders them in general more tenacious of
established rules than any private copartnery。 Such companies；
therefore； seem extremely well fitted for this trade。 The
principal banking companies in Europe； accordingly； are joint
stock companies； many of which manage their trade very
successfully without any exclusive privilege。 The Bank of England
has no other exclusive privilege except that no other banking
company in England shall consist of more than six persons。 The
two banks of Edinburgh are joint stock companies without any
exclusive privilege。
The value of the risk； either from fire； or from loss by
sea； or by capture； though it cannot； perhaps； be calculated very
exactly； admits； however； of such a gross estimation as renders
it； in some degree； reducible to strict rule and method。 The
trade of insurance； therefore； may be carried on successfully by
a joint stock company without any exclusive privilege。 Neither
the London Assurance nor the Royal Exchange Assurance companies
have any such privilege。
When a navigable cut or canal has been once made； the
management of it becomes quite simple and easy； and it is
reducible to strict rule and method。 Even the making of it is so
as it may be contracted for with undertakers at so much a mile；
and so much a lock。 The same thing may be said of a canal； an
aqueduct； or a great pipe for bringing water to supply a great
city。 Such undertakings； therefore； may be； and accordingly
frequently are； very successfully managed by joint stock
companies without any exclusive privilege。
To establish a joint stock company； however； for any
undertaking； merely because such a company might be capable of
managing it successfully； or to exempt a particular set of
dealers from some of the general laws which take place with
regard to all their neighbours； merely because they might be
capable of thriving if they had such an exemption； would
certainly not be reasonable。 To render such an establishment
perfectly reasonable； with the circumstance of being reducible to
strict rule and method； two other circumstances ought to concur。
First； it ought to appear with the clearest evidence that the
undertaking is of greater and more general utility than the
greater part of common trades； and secondly； that it requires a
greater capital than can easily be collected into a private
copartnery。 If a moderate capital were sufficient； the great
utility of the undertaking would not be a sufficient reason for
establishing a joint stock company； because； in this case； the
demand for what it was to produce would readily and easily be
supplied by private adventures。 In the four trades above
mentioned； both those circumstances concur。
The great and general utility of the banking trade when
prudently managed has been fully explained in the second； book of
this Inquiry。 But a public bank which is to support public
credit； and upon particular emergencies to advance to government
the whole produce of a tax； to the amount； perhaps； of several
millions； a year or two before it comes in； requires a greater
capital than can easily be collected into any private copartnery。
The trade of insurance gives great security to the fortunes
of private people； and by dividing among a great many that loss
which would ruin an individual； makes it fall light and easy upon
the whole society。 In order to give this security； however； it is
necessary that the insurers should have a very large capital。
Before the establishment of the two joint stock companies for
insurance in London； a list； it is said； was laid before the
attorney…general of one hundred and fifty private insurers who
had failed in the course of a few years。
That navigable cuts and canals； and the works which are
sometimes necessary for supplying a great city with water； are of
great and general utility； while at the same time they frequently
require a greater expense than suits the fortunes of private
people； is sufficiently obvious。
Except the four trades above mentioned； I have not been able
to recollect any other in which all the three circumstances
requisite for rendering reasonable the establishment of a joint
stock company concur。 The English copper company of London； the
lead smelting company； the glass grinding company； have not even
the pretext of any great or singular utility in the object which
they pursue； nor does the pursuit of that object seem to require
any expense unsuitable to the fortunes of many private men。
Whether the trade which those companies carry on is reducible to
such strict rule and method as to render it fit for the
management of a joint stock company； or whether they have any
reason to boast of their extraordinary profits； I do not pretend
to know。 The mine…adventurers' company has been long ago
bankrupt。 A share in the stock of the British Linen Company of
Edinburgh sells； at present； very much below par； though less so
that it did some years ago。 The joint stock companies which are
established for the public…spirited purpose of promoting some
particular manufacture； over and above managing their own affairs
ill； to the dimunition of the general stock of the society； can
in other respects scarce ever fail to do more harm than good。
Notwithstanding the most upright intentions； the unavoidable
partiality of their directors to particular branches of the
manufacture of which the undertakers mislead and impose upon them
is a real discouragement to the rest； and necessarily breaks；
more or less； that natural proportion which would otherwise
establish itself between judicious industry and profit； and
which； to the general industry of the country； is of all
encouragements the greatest and the most effectual。
ARTICLE II
Of the Expense of the Institutions for the Education of
Youth
The institutions for the education of the youth may； in the
same manner； furnish a revenue sufficient for defraying their own
expense。 The fee or honorary which the scholar pays to the master
naturally constitutes a revenue of this kind。
Even where the reward of the master does not arise
altogether from this natural revenue； it still is not necessary
that it should be derived from that general revenue of the
society； of which the collection and application is； in most
countries； assigned to the executive power。 Through the greater
part of Europe； accordingly； the endowment of schools and
colleges makes either no charge upon that general revenue； or but
a very small one。 It everywhere arises chiefly from some local or
provincial revenue； from the rent of some landed estate； or from
the interest of some sum of money allotted and put under the
management of