An inquiry into the nature and causes of the wealth of

29

Adam Smith

part of an ounce, and the two hundred-and-fortieth part of a

pound. The shilling, too, seems originally to have been the de-

nomination 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 pro-

portion, 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 Will-

iam the Conqueror among the English, the proportion between

the pound, the shilling, and the penny, seems to have been uni-

formly 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 re-

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

of weighing a pound, came to weigh only half an ounce. The En-

glish 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 per-

formed 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 privi-

lege, and might pay with the same nominal sum of the new and

debased coin whatever they had borrowed in the old. Such opera-

tions, 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 na-

tions, 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

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30

The Wealth of Nations

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 mean-

ings, and sometimes expresses the utility of some particular ob-

ject, 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 ex-

change 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 exchange-

able 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 some-

times 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, per-

haps, in some places, appear unnecessarily tedious; and his atten-

tion, 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 tak-

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

may still appear to remain upon a subject, in its own nature ex-

tremely abstracted.

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31

Adam Smith

CHAPTER 

CHAPTER 

CHAPTER 

CHAPTER 

CHAPTER V

V

V

V

V

OF 

OF 

OF 

OF 

OF THE REAL AND NOMINAL PRICE OF

THE REAL AND NOMINAL PRICE OF

THE REAL AND NOMINAL PRICE OF

THE REAL AND NOMINAL PRICE OF

THE REAL AND NOMINAL PRICE OF

COMMODITIES, OR OF 

COMMODITIES, OR OF 

COMMODITIES, OR OF 

COMMODITIES, OR OF 

COMMODITIES, OR OF THEIR PRICE IN

THEIR PRICE IN

THEIR PRICE IN

THEIR PRICE IN

THEIR PRICE IN

L

L

L

L

LABOUR, AND 

ABOUR, AND 

ABOUR, AND 

ABOUR, AND 

ABOUR, AND THEIR PRICE IN MONE

THEIR PRICE IN MONE

THEIR PRICE IN MONE

THEIR PRICE IN MONE

THEIR PRICE IN MONEY

Y

Y

Y

Y

E

VERY

 

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 com-

mand, or which he can afford to purchase. The value of any com-

modity, 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 mea-

sure 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 pos-

sess 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 ac-

quire 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 con-

vey 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

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