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

by tale,

The inconveniency and difficulty of weighing those metals with exactness,

gave occasion to the institution of coins, of which the stamp, covering

entirely both sides of the piece, and sometimes the edges too, was supposed

to ascertain not only the fineness, but the weight of the metal. Such

coins, therefore, were received by tale, as at present, without the trouble

of weighing.

The denominations of those coins seem originally to have expressed the

weight or quantity of metal contained in them. In the time of Servius

Tullius, who first coined money at Rome, the Roman as or pondo contained a

Roman pound of good copper. It was divided, in the same manner as our Troyes

pound, into twelve ounces, each of which contained a real ounce of good

copper. The English pound sterling, in the time of Edward I. contained a

pound, Tower weight, of silver of a known fineness. The Tower pound seems to

have been something more than the Roman pound, and something less than the

Troyes pound. This last was not introduced into the mint of England till the

18th of Henry the VIII. The French livre contained, in the time of

Charlemagne, a pound, Troyes weight, of silver of a known fineness. The fair

of Troyes in Champaign was at that time frequented by all the nations of

Europe, and the weights and measures of so famous a market were generally

known and esteemed. The Scots money pound contained, from the time of

Alexander the First to that of Robert Bruce, a pound of silver of the same

weight and fineness with the English pound sterling. English, French, and

Scots pennies, too, contained all of them originally a real penny-weight of

silver, the twentieth part of an ounce, and the two hundred-and-fortieth

part of a pound. The shilling, too, seems originally to have been

the denomination of a weight. “When wheat is at twelve shillings the quarter,”

says an ancient statute of Henry III.” then wastel bread of a farthing shall

weigh eleven shillings and fourpence”. The proportion, however, between the

shilling, and either the penny on the one hand, or the pound on the other,

seems not to have been so constant and uniform as that between the penny and

the pound. During the first race of the kings of France, the French sou or

shilling appears upon different occasions to have contained five, twelve,

twenty, and forty pennies. Among the ancient Saxons, a shilling appears at

one time to have contained only five pennies, and it is not improbable that

it may have been as variable among them as among their neighbours, the

ancient Franks. From the time of Charlemagne among the French, and from that

of William the Conqueror among the English, the proportion between the

pound, the shilling, and the penny, seems to have been uniformly the same as

at present, though the value of each has been very different ; for in every

country of the world, I believe, the avarice and injustice of princes and

sovereign states, abusing the confidence of their subjects, have by degrees

diminished the real quantity of metal, which had been originally contained

in their coins. The Roman as, in the latter ages of the republic, was

reduced to the twenty-fourth part of its original value, and, instead of

weighing a pound, came to weigh only half an ounce. The English pound and

penny contain at present about a third only ; the Scots pound and penny

about a thirty-sixth ; and the French pound and penny about a sixty-sixth

part of their original value. By means of those operations, the princes and

sovereign states which performed them were enabled, in appearance, to pay

their debts and fulfil their engagements with a smaller quantity of silver

than would otherwise have been requisite. It was indeed in appearance only ;

for their creditors were really defrauded of a part of what was due to them.

All other debtors in the state were allowed the same privilege, and might

pay with the same nominal sum of the new and debased coin whatever they had

borrowed in the old. Such operations, therefore, have always proved

favourable to the debtor, and ruinous to the creditor, and have sometimes

produced a greater and more universal revolution in the fortunes of private

persons, than could have been occasioned by a very great public calamity.

It is in this manner that money has become, in all civilized nations, the

universal instrument of commerce, by the intervention of which goods of all

kinds are bought and sold, or exchanged for one another.

What are the rules which men naturally observe, in exchanging them either

for money, or for one another, I shall now proceed to examine. These rules

determine what may be called the relative or exchangeable value of goods.

The word VALUE, it is to be observed, has two different meanings, and

sometimes expresses the utility of some particular object, and sometimes the

power of purchasing other goods which the possession of that object conveys.

The one may be called ‘ value in use ;’ the other, ‘value in exchange.’ The

things which have the greatest value in use have frequently little or no

value in exchange ; and, on the contrary, those which have the greatest

value in exchange have frequently little or no value in use. Nothing is more

useful than water ; but it will purchase scarce any thing; scarce any thing

can be had in exchange for it. A diamond, on the contrary, has scarce any

value in use; but a very great quantity of other goods may frequently be had

in exchange for it.

In order to investigate the principles which regulate the exchangeable value

of commodities, I shall endeavour to shew,

First, what is the real measure of this exchangeable value; or wherein

consists the real price of all commodities.

Secondly, what are the different parts of which this real price is composed

or made up.

And, lastly, what are the different circumstances which sometimes raise some

or all of these different parts of price above, and sometimes sink them

below, their natural or ordinary rate; or, what are the causes which

sometimes hinder the market price, that is, the actual price of commodities,

from coinciding exactly with what may be called their natural price.

I shall endeavour to explain, as fully and distinctly as I can, those three

subjects in the three following chapters, for which I must very earnestly

entreat both the patience and attention of the reader : his patience, in

order to examine a detail which may, perhaps, in some places, appear

unnecessarily tedious; and his attention, in order to understand what may

perhaps, after the fullest explication which I am capable of giving it,

appear still in some degree obscure. I am always willing to run some hazard

of being tedious, in order to be sure that I am perspicuous; and, after

taking the utmost pains that I can to be perspicuous, some obscurity may

still appear to remain upon a subject, in its own nature extremely

abstracted.

CHAPTER V.

OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN

LABOUR, AND THEIR PRICE IN MONEY.

Every man is rich or poor according to the degree in which he can afford to

enjoy the necessaries, conveniencies, and amusements of human life. But

after the division of labour has once thoroughly taken place, it is but a

very small part of these with which a man’s own labour can supply him. The

far greater part of them he must derive from the labour of other people, and

he must be rich or poor according to the quantity of that labour which he

can command, or which he can afford to purchase. The value of any commodity,

therefore, to the person who possesses it, and who means not to use or

consume it himself, but to exchange it for other commodities, is equal to

the quantity of labour which it enables him to purchase or command. Labour

therefore, is the real measure of the exchangeable value of all commodities.

The real price of every thing, what every thing really costs to the man who

wants to acquire it, is the toil and trouble of acquiring it. What every

thing is really worth to the man who has acquired it and who wants to

dispose of it, or exchange it for something else, is the toil and trouble

which it can save to himself, and which it can impose upon other people.

What is bought with money, or with goods, is purchased by labour, as much as

what we acquire by the toil of our own body. That money, or those goods,

indeed, save us this toil. They contain the value of a certain quantity of

labour, which we exchange for what is supposed at the time to contain the

value of an equal quantity. Labour was the first price, the original

purchase money that was paid for all things. It was not by gold or by silver,

but by labour, that all the wealth of the world was originally purchased;

and its value, to those who possess it, and who want to exchange it for some

new productions, is precisely equal to the quantity of’ labour which it can

enable them to purchase or command.

Wealth, as Mr Hobbes says, is power. But the person who either acquires, or

succeeds to a great fortune, does not necessarily acquire or succeed to any

political power, either civil or military. His fortune may, perhaps, afford

him the means of acquiring both; but the mere possession of that fortune

does not necessarily convey to him either. The power which that possession

immediately and directly conveys to him, is the power of purchasing a

certain command over all the labour, or over all the produce of labour which

is then in the market. His fortune is greater or less, precisely in

proportion to the extent of this power, or to the quantity either of other

men’s labour, or, what is the same thing, of the produce of other men’s

labour, which it enables him to purchase or command. The exchangeable value

of every thing must always be precisely equal to the extent of this power

which it conveys to its owner.

But though labour be the real measure of the exchangeable value of all

commodities, it is not that by which their value is commonly estimated. It

is often difficult to ascertain the proportion between two different

quantities of labour. The time spent in two different sorts of work will not

always alone determine this proportion. The different degrees of hardship

endured, and of ingenuity exercised, must likewise be taken into account.

There may be more labour in an hour’s hard work, than in two hours easy

business ; or in an hour’s application to a trade which it cost ten years

labour to learn, than in a month’s industry, at an ordinary and obvious

employment. But it is not easy to find any accurate measure either of

hardship or ingenuity. In exchanging, indeed, the different productions of

different sorts of labour for one another, some allowance is commonly made

for both. It is adjusted, however, not by any accurate measure, but by the

higgling and bargaining of the market, according to that sort of rough

equality which, though not exact, is sufficient for carrying on the business

of common life.

Every commodity, besides, Is more frequently exchanged for, and thereby

compared with, other commodities, than with labour. It is more natural,

therefore, to estimate its exchangeable value by the quantity of some other

commodity, than by that of the labour which it can produce. The greater part

of people, too, understand better what is meant by a quantity of a

particular