An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader macos .TXT) 📕

price, is the effect of something in the state of the coin, which, at that time, renders a certain

quantity of coin either of more value or of less value than the precise quantity of bullion

which it ought to contain. The constancy and steadiness of the effect supposes a

proportionable constancy and steadiness in the cause.

The money of any particular country is, at any particular time and place, more or less an

accurate measure or value, according as the current coin is more or less exactly agreeable to

its standard, or contains more or less exactly the precise quantity of pure gold or pure silver

which it ought to contain. If in England, for example, fortyfour guineas and a half contained

exactly a pound weight of standard gold, or eleven ounces of fine gold, and one ounce of

alloy, the gold coin of England would be as accurate a measure of the actual value of goods at

any particular time and place as the nature of the thing would admit. But if, by rubbing and

wearing, fortyfour guineas and a half generally contain less than a pound weight of standard

gold, the diminution, however, being greater in some pieces than in others, the measure of

value comes to be liable to the same sort of uncertainty to which all other weights and

measures are commonly exposed. As it rarely happens that these are exactly agreeable to their

standard, the merchant adjusts the price of his goods as well as he can, not to what those

weights and measures ought to be, but to what, upon an average, he finds, by experience, they

actually are. In consequence of a like disorder in the coin, the price of goods comes, in the

same manner, to be adjusted, not to the quantity of pure gold or silver which the coin ought to

contain, but to that which, upon an average, it is found, by experience, it actually does

contain.

By the money price of goods, it is to be observed, I understand always the quantity of pure

gold or silver for which they are sold, without any regard to the denomination of the coin. Six

shillings and eight pence, for example, in the time of Edward I., I consider as the same money

price with a pound sterling in the present times, because it contained, as nearly as we can

judge, the same quantity of pure silver.

CHAPTER VI.

OF THE COMPONENT PART OF THE PRICE OF COMMODITIES.

In that early and rude state of society which precedes both the accumulation

of stock and the appropriation of land, the proportion between the

quantities of labour necessary for acquiring different objects, seems to be

the only circumstance which can afford any rule for exchanging them for one

another. If among a nation of hunters, for example, it usually costs twice

the labour to kill a beaver which it does to kill a deer, one beaver should

naturally exchange for or be worth two deer. It is natural that what is

usually the produce of two days or two hours labour, should be worth double

of what is usually the produce of one day’s or one hour’s labour.

If the one species of labour should be more severe than the other, some

allowance will naturally be made for this superior hardship; and the produce

of one hour’s labour in the one way may frequently exchange for that of two

hour’s labour in the other.

Or if the one species of labour requires an uncommon degree of dexterity

and ingenuity, the esteem which men have for such talents, will naturally

give a value to their produce, superior to what would be due to the time

employed about it. Such talents can seldom be acquired but in consequence of

long application, and the superior value of their produce may frequently be

no more than a reasonable compensation for the time and labour which must be

spent in acquiring them. In the advanced state of society, allowances of

this kind, for superior hardship and superior skill, are commonly made in

the wages of labour ; and something of the same kind must probably have

taken place in its earliest and rudest period.

In this state of things, the whole produce of labour belongs to the

labourer; and the quantity of labour commonly employed in acquiring or

producing any commodity, is the only circumstance which can regulate the

quantity of labour which it ought commonly to purchase, command, or exchange

for.

As soon as stock has accumulated in the hands of particular persons, some of

them will naturally employ it in setting to work industrious people, whom

they will supply with materials and subsistence, in order to make a profit

by the sale of their work, or by what their labour adds to the value of the

materials. In exchanging the complete manufacture either for money, for

labour, or for other goods, over and above what may be sufficient to pay the

price of the materials, and the wages of the workmen, something must be given

for the profits of the undertaker of the work, who hazards his stock in this

adventure. The value which the workmen add to the materials, therefore,

resolves itself in this case into two parts, of which the one pays their

wages, the other the profits of their employer upon the whole stock of

materials and wages which he advanced. He could have no interest to employ

them, unless he expected from the sale of their work something more than

what was sufficient to replace his stock to him ; and he could have no

interest to employ a great stock rather than a small one, unless his profits

were to bear some proportion to the extent of his stock.

The profits of stock, it may perhaps be thought, are only a different name

for the wages of a particular sort of labour, the labour of inspection and

direction. They are, however, altogether different, are regulated by quite

different principles, and bear no proportion to the quantity, the hardship,

or the ingenuity of this supposed labour of inspection and direction. They

are regulated altogether by the value of the stock employed, and are greater

or smaller in proportion to the extent of this stock. Let us suppose, for

example, that in some particular place, where the common annual profits of

manufacturing stock are ten per cent. there are two different manufactures,

in each of which twenty workmen are employed, at the rate of fifteen pounds

a year each, or at the expense of three hundred a-year in each manufactory.

Let us suppose, too, that the coarse materials annually wrought up in the

one cost only seven hundred pounds, while the finer materials in the other

cost seven thousand. The capital annually employed in the one will, in this

case, amount only to one thousand pounds; whereas that employed in the other

will amount to seven thousand three hundred pounds. At the rate of ten per

cent. therefore, the undertaker of the one will expect a yearly profit of

about one hundred pounds only; while that of the other will expect about

seven hundred and thirty pounds. But though their profits are so very

different, their labour of inspection and direction may be either altogether

or very nearly the same. In many great works, almost the whole labour of

this kind is committed to some principal clerk. His wages properly express

the value of this labour of inspection and direction. Though in settling

them some regard is had commonly, not only to his labour and skill, but to

the trust which is reposed in him, yet they never bear any regular

proportion to the capital of which he oversees the management ; and the

owner of this capital, though he is thus discharged of almost all labour,

still expects that his profit should bear a regular proportion to his

capital. In the price of commodities, therefore, the profits of stock

constitute a component part altogether different from the wages of labour, and

regulated by quite different principles.

In this state of things, the whole produce of labour does not always belong

to the labourer. He must in most cases share it with the owner of the stock

which employs him. Neither is the quantity of labour commonly employed in

acquiring or producing any commodity, the only circumstance which can

regulate the quantity which it ought commonly to purchase, command or

exchange for. An additional quantity, it is evident, must be due for the

profits of the stock which advanced the wages and furnished the materials of

that labour.

As soon as the land of any country has all become private property, the

landlords, like all other men, love to reap where they never sowed, and

demand a rent even for its natural produce. The wood of the forest, the

grass of the field, and all the natural fruits of the earth, which, when

land was in common, cost the labourer only the trouble of gathering them,

come, even to him, to have an additional price fixed upon them. He must then

pay for the licence to gather them, and must give up to the landlord a

portion of what his labour either collects or produces. This portion, or,

what comes to the same thing, the price of this portion, constitutes the

rent of land, and in the price of the greater part of commodities, makes a

third component part.

The real value of all the different component parts of price, it must be

observed, is measured by the quantity of labour which they can, each of

them, purchase or command. Labour measures the value, not only of that part

of price which resolves itself into labour, but of that which resolves

itself into rent, and of that which resolves itself into profit.

In every society, the price of every commodity finally resolves itself into

some one or other, or all of those three parts ; and in every improved

society, all the three enter, more or less, as component parts, into the

price of the far greater part of commodities.

In the price of corn, for example, one part pays the rent of the landlord,

another pays the wages or maintenance of the labourers and labouring cattle

employed in producing it, and the third pays the profit of the farmer. These

three parts seem either immediately or ultimately to make up the whole price

of corn. A fourth part, it may perhaps be thought is necessary for replacing

the stock of the farmer, or for compensating the wear and tear of his

labouring cattle, and other instruments of husbandry. But it must be

considered, that the price of any instrument of husbandry, such as a

labouring horse, is itself made up of the same time parts ; the rent of the

land upon which he is reared, the labour of tending and rearing him, and the

profits of the farmer, who advances both the rent of this land, and the

wages of this labour. Though the price of the corn, therefore, may pay the

price as well as the maintenance of the horse, the whole price still

resolves itself, either immediately or ultimately, into the same three parts

of rent, labour, and profit.

In the price of flour or meal, we must add to the price of the corn, the

profits of the miller, and the wages of his servants ; in the price of

bread, the profits of the baker, and the wages of his servants; and in the

price of both, the labour of transporting the corn from the house of the

farmer to that of the miller, and from that of the miller to that of the

baker,