An inquiry into the nature and causes of the wealth of

52

The Wealth of Nations

the same with its natural price.

The market price of every particular commodity is regulated by

the proportion between the quantity which is actually brought to

market, and the demand of those who are willing to pay the natu-

ral price of the commodity, or the whole value of the rent, labour,

and profit, which must be paid in order to bring it thither. Such

people may be called the effectual demanders, and their demand

the effectual demand; since it maybe sufficient to effectuate the

bringing of the commodity to market. It is different from the ab-

solute demand. A very poor man may be said, in some sense, to

have a demand for a coach and six; he might like to have it; but his

demand is not an effectual demand, as the commodity can never

be brought to market in order to satisfy it.

When the quantity of any commodity which is brought to mar-

ket falls short of the effectual demand, all those who are willing to

pay the whole value of the rent, wages, and profit, which must be

paid in order to bring it thither, cannot be supplied with the quan-

tity which they want. Rather than want it altogether, some of them

will be willing to give more. A competition will immediately be-

gin among them, and the market price will rise more or less above

the natural price, according as either the greatness of the defi-

ciency, or the wealth and wanton luxury of the competitors, hap-

pen to animate more or less the eagerness of the competition.

Among competitors of equal wealth and luxury, the same deficiency

will generally occasion a more or less eager competition, according

as the acquisition of the commodity happens to be of more or less

importance to them. Hence the exorbitant price of the necessaries

of life during the blockade of a town, or in a famine.

When the quantity brought to market exceeds the effectual de-

mand, it cannot be all sold to those who are willing to pay the

whole value of the rent, wages, and profit, which must be paid in

order to bring it thither. Some part must be sold to those who are

willing to pay less, and the low price which they give for it must

reduce the price of the whole. The market price will sink more or

less below the natural price, according as the greatness of the ex-

cess increases more or less the competition of the sellers, or ac-

cording as it happens to be more or less important to them to get

immediately rid of the commodity. The same excess in the impor-

tation of perishable, will occasion a much greater competition than

in that of durable commodities; in the importation of oranges, for

example, than in that of old iron.

When the quantity brought to market is just sufficient to sup-

ply the effectual demand, and no more, the market price naturally

comes to be either exactly, or as nearly as can be judged of, the

same with the natural price. The whole quantity upon hand can

be disposed of for this price, and can not be disposed of for more.

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53

Adam Smith

The competition of the different dealers obliges them all to accept

of this price, but does not oblige them to accept of less.

The quantity of every commodity brought to market naturally

suits itself to the effectual demand. It is the interest of all those

who employ their land, labour, or stock, in bringing any com-

modity to market, that the quantity never should exceed the effec-

tual demand; and it is the interest of all other people that it never

should fall short of that demand.

If at any time it exceeds the effectual demand, some of the com-

ponent parts of its price must be paid below their natural rate. If it

is rent, the interest of the landlords will immediately prompt them

to withdraw a part of their land; and if it is wages or profit, the

interest of the labourers in the one case, and of their employers in

the other, will prompt them to withdraw a part of their labour or

stock, from this employment. The quantity brought to market

will soon be no more than sufficient to supply the effectual de-

mand. All the different parts of its price will rise to their natural

rate, and the whole price to its natural price.

If, on the contrary, the quantity brought to market should at

any time fall short of the effectual demand, some of the compo-

nent parts of its price must rise above their natural rate. If it is

rent, the interest of all other landlords will naturally prompt them

to prepare more land for the raising of this commodity; if it is

wages or profit, the interest of all other labourers and dealers will

soon prompt them to employ more labour and stock in preparing

and bringing it to market. The quantity brought thither will soon

be sufficient to supply the effectual demand. All the different parts

of its price will soon sink to their natural rate, and the whole price

to its natural price.

The natural price, therefore, is, as it were, the central price, to

which the prices of all commodities are continually gravitating.

Different accidents may sometimes keep them suspended a good

deal above it, and sometimes force them down even somewhat

below it. But whatever may be the obstacles which hinder them

from settling in this centre of repose and continuance, they are

constantly tending towards it.

The whole quantity of industry annually employed in order to

bring any commodity to market, naturally suits itself in this man-

ner to the effectual demand. It naturally aims at bringing always

that precise quantity thither which may be sufficient to supply,

and no more than supply, that demand.

But, in some employments, the same quantity of industry will,

in different years, produce very different quantities of commodi-

ties; while, in others, it will produce always the same, or very nearly

the same. The same number of labourers in husbandry will, in

different years, produce very different quantities of corn, wine,

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