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

been the year before, or fluctuate, for example, from five-and-twenty to

fifty shillings the quarter. But when corn is at the latter price, not only

the nominal, but the real value of a corn rent, will be double of what it is

when at the former, or will command double the quantity either of labour, or

of the greater part of other commodities; the money price of labour, and

along with it that of most other things, continuing the same during all

these fluctuations.

Labour, therefore, it appears evidently, is the only universal, as well as

the only accurate, measure of value, or the only standard by which we can

compare the values of different commodities, at all times, and at all

places. We cannot estimate, it is allowed, the real value of different

commodities from century to century by the quantities of silver which were

given for them. We cannot estimate it from year to year by the quantities of

corn. By the quantities of labour, we can, with the greatest accuracy,

estimate it, both from century to century, and from year to year. From

century to century, corn is a better measure than silver, because, from

century to century, equal quantities of corn will command the same quantity

of labour more nearly than equal quantities of silver. From year to year, on

the contrary, silver is a better measure than corn, because equal quantities

of it will more nearly command the same quantity of labour.

But though, in establishing perpetual rents, or even in letting very long

leases, it may be of use to distinguish between real and nominal price; it

is of none in buying and selling, the more common and ordinary transactions.

of human life.

At the same time and place, the real and the nominal price of all

commodities are exactly in proportion to one another. The more or less money

you get for any commodity, in the London market, for example, the more or

less labour it will at that time and place enable you to purchase or

command. At the same time and place, therefore, money is the exact measure

of the real exchangeable value of all commodities. It is so, however, at the

same time and place only.

Though at distant places there is no regular proportion between the real and

the money price of commodities, yet the merchant who carries goods from the

one to the other, has nothing to consider but the money price, or the

difference between the quantity of silver for which he buys them, and that

for which he is likely to sell them. Half an ounce of silver at Canton in

China may command a greater quantity both of labour and of the necessaries

and conveniencies of life, than an ounce at London. A commodity, therefore,

which sells for half an ounce of silver at Canton, may there be really

dearer, of more real importance to the man who possesses it there, than a

commodity which sells for an ounce at London is to the man who possesses it

at London. If a London merchant, however, can buy at Canton, for half an

ounce of silver, a commodity which he can afterwards sell at London for an

ounce, he gains a hundred per cent. by the bargain, just as much as if an

ounce of silver was at London exactly of the same value as at Canton. It is

of no importance to him that half an ounce of silver at Canton would have

given him the command of more labour, and of a greater quantity of the

necessaries and conveniencies of life than an ounce can do at London. An

ounce at London will always give him the command of double the quantity of

all these, which half an ounce could have done there, and this is precisely

what he wants.

As it is the nominal or money price of goods, therefore, which finally

determines the prudence or imprudence of all purchases and sales, and

thereby regulates almost the whole business of common life in which price is

concerned, we cannot wonder that it should have been so much more attended

to than the real price.

In such a work as this, however, it may sometimes be of use to compare the

different real values of a particular commodity at different times and

places, or the different degrees of power over the labour of other people

which it may, upon different occasions, have given to those who possessed

it. We must in this case compare, not so much the different quantities of

silver for which it was commonly sold, as the different quantities or labour

which those different quantities of silver could have purchased. But the

current prices of labour, at distant times and places, can scarce ever be

known with any degree of exactness. Those of corn, though they have in few

places been regularly recorded, are in general better known, and have been

more frequently taken notice of by historians and other writers. We must

generally, therefore, content ourselves with them, not as being always

exactly in the same proportion as the current prices of labour, but as being

the nearest approximation which can commonly be had to that proportion. I

shall hereafter have occasion to make several comparisons of this kind.

In the progress of industry, commercial nations have found it convenient to

coin several different metals into money; gold for larger payments, silver

for purchases of moderate value, and copper, or some other coarse metal, for

those of still smaller consideration, They have always, however, considered

one of those metals as more peculiarly the measure of value than any of the

other two; and this preference seems generally to have been given to the

metal which they happen first to make use of as the instrument of commerce.

Having once begun to use it as their standard, which they must have done

when they had no other money, they have generally continued to do so even

when the necessity was not the same.

The Romans are said to have had nothing but copper money till within five

years before the first Punic war (Pliny, lib. xxxiii. cap. 3), when they

first began to coin silver. Copper, therefore, appears to have continued

always the measure of value in that republic. At Rome all accounts appear to

have been kept, and the value of all estates to have been computed, either

in asses or in sestertii. The as was always the denomination of a copper

coin. The word sestertius signifies two asses and a half. Though the

sestertius, therefore, was originally a silver coin, its value was estimated

in copper. At Rome, one who owed a great deal of money was said to have a

great deal of other people’s copper.

The northern nations who established themselves upon the ruins of the

Roman empire, seem to have had silver money from the first beginning of

their settlements, and not to have known either gold or copper coins for

several ages thereafter. There were silver coins in England in the time of

the Saxons ; but there was little gold coined till the time of Edward III

nor any copper till that of James I. of Great Britain. In England,

therefore, and for the same reason, I believe, in all other modern nations

of Europe, all accounts are kept, and the value of all goods and of all

estates is generally computed, in silver: and when we mean to express the

amount of a person’s fortune, we seldom mention the number of guineas, but

the number of pounds sterling which we suppose would be given for it.

Originally, in all countries, I believe, a legal tender of payment could be

made only in the coin of that metal which was peculiarly considered as the

standard or measure of value. In England, gold was not considered as a legal

tender for a long time after it was coined into money. The proportion

between the values of gold and silver money was not fixed by any public law

or proclamation, but was left to be settled by the market. If a debtor

offered payment in gold, the creditor might either reject such payment

altogether, or accept of it at such a valuation of the gold as he and his

debtor could agree upon. Copper is not at present a legal tender, except in

the change of the smaller silver coins.

In this state of things, the distinction between the metal which was the

standard, and that which was not the standard, was something more than a

nominal distinction.

In process of time, and as people became gradually more familiar with the

use of the different metals in coin, and consequently better acquainted with

the proportion between their respective values, it has, in most countries, I

believe, been found convenient to ascertain this proportion, and to declare

by a public law, that a guinea, for example, of such a weight and fineness,

should exchange for one-and-twenty shillings, or be a legal tender for a debt

of that amount. In this state of things, and during the continuance of any

one regulated proportion of this kind, the distinction between the metal,

which is the standard, and that which is not the standard, becomes little

more than a nominal distinction.

In consequence of any change, however, in this regulated proportion, this

distinction becomes, or at least seems to become, something more than

nominal again. If the regulated value of a guinea, for example, was either

reduced to twenty, or raised to two-and-twenty shillings, all accounts being

kept, and almost all obligations for debt being expressed, in silver money,

the greater part of payments could in either case be made with the same

quantity of silver money as before; but would require very different

quantities of gold money ; a greater in the one case, and a smaller in the

other. Silver would appear to be more invariable in its value than gold.

Silver would appear to measure the value of gold, and gold would not appear

to measure the value of silver. The value of gold would seem to depend upon

the quantity of silver which it would exchange for, and the value of silver

would not seem to depend upon the quantity of gold which it would exchange

for. This difference, however, would be altogether owing to the custom of

keeping accounts, and of expressing the amount of all great and small sums

rather in silver than in gold money. One of Mr Drummond’s notes for

five-and-twenty or fifty guineas would, after an alteration of this kind, be

still payable with five-and-twenty or fifty guineas, in the same manner as

before. It would, after such an alteration, be payable with the same

quantity of gold as before, but with very different quantities of silver. In

the payment of such a note, gold would appear to be more invariable in its

value than silver. Gold would appear to measure the value of silver, and

silver would not appear to measure the value of gold. If the custom of

keeping accounts, and of expressing promissory-notes and other obligations

for money, in this manner should ever become general, gold, and not silver,

would be considered as the metal which was peculiarly the standard or

measure of value.

In reality, during the continuance of any one regulated proportion between the respective

values of the different metals in coin, the value of the most precious metal regulates the value

of the whole coin. Twelve copper pence contain half a pound avoirdupois of copper, of not the

best quality, which, before it is coined, is seldom worth sevenpence in silver. But as, by the

regulation, twelve such pence are ordered to exchange for a shilling, they