An inquiry into the nature and causes of the wealth of

50

The Wealth of Nations

greater part of them, their own estates: and accordingly we sel-

dom hear of the rent of a plantation, but frequently of its profit.

Common farmers seldom employ any overseer to direct the gen-

eral operations of the farm. They generally, too, work a good deal

with their own hands, as ploughmen, harrowers, etc. What re-

mains of the crop, after paying the rent, therefore, should not

only replace to them their stock employed in cultivation, together

with its ordinary profits, but pay them the wages which are due to

them, both as labourers and overseers. Whatever remains, how-

ever, after paying the rent and keeping up the stock, is called profit.

But wages evidently make a part of it. The farmer, by saving these

wages, must necessarily gain them. Wages, therefore, are in this

case confounded with profit.

An independent manufacturer, who has stock enough both to

purchase materials, and to maintain himself till he can carry his

work to market, should gain both the wages of a journeyman who

works under a master, and the profit which that master makes by

the sale of that journeyman’s work. His whole gains, however, are

commonly called profit, and wages are, in this case, too, con-

founded with profit.

A gardener who cultivates his own garden with his own hands,

unites in his own person the three different characters, of land-

lord, farmer, and labourer. His produce, therefore, should pay him

the rent of the first, the profit of the second, and the wages of the

third. The whole, however, is commonly considered as the earn-

ings of his labour. Both rent and profit are, in this case, confounded

with wages.

As in a civilized country there are but few commodities of which

the exchangeable value arises from labour only, rent and profit

contributing largely to that of the far greater part of them, so the

annual produce of its labour will always be sufficient to purchase

or command a much greater quantity of labour than what was

employed in raising, preparing, and bringing that produce to

market. If the society were annually to employ all the labour which

it can annually purchase, as the quantity of labour would increase

greatly every year, so the produce of every succeeding year would

be of vastly greater value than that of the foregoing. But there is

no country in which the whole annual produce is employed in

maintaining the industrious. The idle everywhere consume a great

part of it; and, according to the different proportions in which it

is annually divided between those two different orders of people,

its ordinary or average value must either annually increase or di-

minish, or continue the same from one year to another.

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51

Adam Smith

CHAPTER 

CHAPTER 

CHAPTER 

CHAPTER 

CHAPTER VII

VII

VII

VII

VII

OF 

OF 

OF 

OF 

OF THE NA

THE NA

THE NA

THE NA

THE NATURAL AND MARKET PRICE

TURAL AND MARKET PRICE

TURAL AND MARKET PRICE

TURAL AND MARKET PRICE

TURAL AND MARKET PRICE

OF COMMODITIES

OF COMMODITIES

OF COMMODITIES

OF COMMODITIES

OF COMMODITIES

T

HERE

 

IS

 

IN

 

EVERY

 

SOCIETY

 or neighbourhood an ordinary or aver-

age rate, both of wages and profit, in every different employment

of labour and stock. This rate is naturally regulated, as I shall shew

hereafter, partly by the general circumstances of the society, their

riches or poverty, their advancing, stationary, or declining condi-

tion, and partly by the particular nature of each employment.

There is likewise in every society or neighbourhood an ordinary

or average rate of rent, which is regulated, too, as I shall shew

hereafter, partly by the general circumstances of the society or

neighbourhood in which the land is situated, and partly by the

natural or improved fertility of the land.

These ordinary or average rates may be called the natural rates

of wages, profit and rent, at the time and place in which they

commonly prevail.

When the price of any commodity is neither more nor less than

what is sufficient to pay the rent of the land, the wages of the

labour, and the profits of the stock employed in raising, prepar-

ing, and bringing it to market, according to their natural rates, the

commodity is then sold for what may be called its natural price.

The commodity is then sold precisely for what it is worth, or for

what it really costs the person who brings it to market; for though,

in common language, what is called the prime cost of any com-

modity does not comprehend the profit of the person who is to sell

it again, yet, if he sells it at a price which does not allow him the

ordinary rate of profit in his neighbourhood, he is evidently a loser

by the trade; since, by employing his stock in some other way, he

might have made that profit. His profit, besides, is his revenue, the

proper fund of his subsistence. As, while he is preparing and bring-

ing the goods to market, he advances to his workmen their wages,

or their subsistence; so he advances to himself, in the same manner,

his own subsistence, which is generally suitable to the profit which

he may reasonably expect from the sale of his goods. Unless they

yield him this profit, therefore, they do not repay him what they

may very properly be said to have really cost him.

Though the price, therefore, which leaves him this profit, is not

always the lowest at which a dealer may sometimes sell his goods,

it is the lowest at which he is likely to sell them for any consider-

able time; at least where there is perfect liberty, or where he may

change his trade as often as he pleases.

The actual price at which any commodity is commonly sold, is

called its market price. It may either be above, or below, or exactly

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