An inquiry into the nature and causes of the wealth of

36

The Wealth of Nations

labour, as I shall endeavour to shew hereafter, does not fluctuate

from year to year with the money price of corn, but seems to be

everywhere accommodated, not to the temporary or occasional,

but to the average or ordinary price of that necessary of life. The

average or ordinary price of corn, again is regulated, as I shall

likewise endeavour to shew hereafter, by the value of silver, by the

richness or barrenness of the mines which supply the market with

that metal, or by the quantity of labour which must be employed,

and consequently of corn which must be consumed, in order to

bring any particular quantity of silver from the mine to the mar-

ket. But the value of silver, though it sometimes varies greatly from

century to century, seldom varies much from year to year, but

frequently continues the same, or very nearly the same, for half a

century or a century together. The ordinary or average money

price of corn, therefore, may, during so long a period, continue

the same, or very nearly the same, too, and along with it the money

price of labour, provided, at least, the society continues, in other

respects, in the same, or nearly in the same, condition. In the

mean time, the temporary and occasional price of corn may fre-

quently be double one year of what it had 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 com-

mand 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 com-

mon and ordinary transactions of human life.

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37

Adam Smith

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 con-

sider 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 com-

mand 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 Can-

ton. 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 com-

mon 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 com-

pare, 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

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