An Inquiry into the Nature and Causes of the Wealth of Nations by Adam Smith (ebook reader with highlighter txt) 📖

commodity, than by a quantity of labour. The one is a plain

palpable object ; the other an abstract notion, which though it can be made

sufficiently intelligible, is not altogether so natural and obvious.

 

But when barter ceases, and money has become the common instrument of

commerce, every particular commodity is more frequently exchanged for money

than for any other commodity. The butcher seldom carries his beef or his

mutton to the baker or the brewer, in order to exchange them for bread or

for beer ; but he carries them to the market, where he exchanges them for

money, and afterwards exchanges that money for bread and for beer. The

quantity of money which he gets for them regulates, too, the quantity of

bread and beer which he can afterwards purchase. It is more natural and

obvious to him, therefore, to estimate their value by the quantity of money,

the commodity for which he immediately exchanges them, than by that of

bread and beer, the commodities for which he can exchange them only by the

intervention of another commodity ; and rather to say that his butcher’s

meat is worth threepence or fourpence a-pound, than that it is worth three

or four pounds of bread, or three or four quarts of small beer. Hence it

comes to pass, that the exchangeable value of every commodity is more

frequently estimated by the quantity of money, than by the quantity either

of labour or of any other commodity which can be had in exchange for it.

 

Gold and silver, however, like every other commodity, vary in their value;

are sometimes cheaper and sometimes dearer, sometimes of easier and

sometimes of more difficult purchase. The quantity of labour which any

particular quantity of them can purchase or command, or the quantity of

other goods which it will exchange for, depends always upon the fertility or

barrenness of the mines which happen to be known about the time when such

exchanges are made. The discovery of the abundant mines of America, reduced,

in the sixteenth century, the value of gold and silver in Europe to about a

third of what it had been before. As it cost less labour to bring those

metals from the mine to the market, so, when they were brought thither, they

could purchase or command less labour; and this revolution in their value,

though perhaps the greatest, is by no means the only one of which history

gives some account. But as a measure of quantity, such as the natural foot,

fathom, or handful, which is continually varying in its own quantity, can

never be an accurate measure of the quantity of other things ; so a

commodity which is itself continually varying in its own value, can never be

an accurate measure of the value of other commodities. Equal quantities of

labour, at all times and places, may be said to be of equal value to the

labourer. In his ordinary state of health, strength, and spirits ; in the

ordinary degree of his skill and dexterity, he must always lay down the same

portion of his ease, his liberty, and his happiness. The price which he pays

must always be the same, whatever may be the quantity of goods which he

receives in return for it. Of these, indeed, it may sometimes purchase a

greater and sometimes a smaller quantity ; but it is their value which

varies, not that of the labour which purchases them. At all times and

places, that is dear which it is difficult to come at, or which it costs

much labour to acquire; and that cheap which is to be had easily, or with

very little labour. Labour alone, therefore, never varying in its own value,

is alone the ultimate and real standard by which the value of all

commodities can at all times and places be estimated and compared. It is

their real price; money is their nominal price only.

 

But though equal quantities of labour are always of equal value to the

labourer, yet to the person who employs him they appear sometimes to be of

greater, and sometimes of smaller value. He purchases them sometimes with a

greater, and sometimes with a smaller quantity of goods, and to him the

price of labour seems to vary like that of all other things. It appears to

him dear in the one case, and cheap in the other. In reality, however, it is

the goods which are cheap in the one case, and dear in the other.

 

In this popular sense, therefore, labour, like commodities, may be said to

have a real and a nominal price. Its real price may be said to consist in

the quantity of the necessaries and conveniencies of life which are given

for it ; its nominal price, in the quantity of money. The labourer is rich

or poor, is well or ill rewarded, in proportion to the real, not to the

nominal price of his labour.

 

The distinction between the real and the nominal price of commodities and

labour is not a matter of mere speculation, but may sometimes be of

considerable use in practice. The same real price is always of the same

value; but on account of the variations in the value of gold and silver, the

same nominal price is sometimes of very different values. When a landed

estate, therefore, is sold with a reservation of a perpetual rent, if it is

intended that this rent should always be of the same value, it is of

importance to the family in whose favour it is reserved, that it should not

consist in a particular sum of money. Its value would in this case be liable

to variations of two different kinds: first, to those which arise from the

different quantities of gold and silver which are contained at different

times in coin of the same denomination; and, secondly, to those which arise

from the different values of equal quantities of gold and silver at

different times.

 

Princes and sovereign states have frequently fancied that they had a

temporary interest to diminish the quantity of pure metal contained in their

coins; but they seldom have fancied that they had any to augment it. The

quantity of metal contained in the coins, I believe of all nations, has

accordingly been almost continually diminishing, and hardly ever augmenting.

Such variations, therefore, tend almost always to diminish the value of a

money rent.

 

The discovery of the mines of America diminished the value of gold and

silver in Europe. This diminution, it is commonly supposed, though I

apprehend without any certain proof, is still going on gradually, and is

likely to continue to do so for a long time. Upon this supposition,

therefore, such variations are more likely to diminish than to augment the

value of a money rent, even though it should be stipulated to be paid, not

in such a quantity of coined money of such a denomination (in so many pounds

sterling, for example), but in so many ounces, either of pure silver, or of

silver of a certain standard.

 

The rents which have been reserved in corn, have preserved their value much

better than those which have been reserved in money, even where the

denomination of the coin has not been altered. By the 18th of Elizabeth, it

was enacted, that a third of the rent of all college leases should be

reserved in corn, to be paid either in kind, or according to the current

prices at the nearest public market. The money arising from this corn rent,

though originally but a third of the whole, is, in the present times,

according to Dr. Blackstone, commonly near double of what arises from the

other two-thirds. The old money rents of colleges must, according to this

account, have sunk almost to a fourth part of their ancient value, or are

worth little more than a fourth part of the corn which they were formerly

worth. But since the reign of Philip and Mary, the denomination of the

English coin has undergone little or no alteration, and the same number of

pounds, shillings, and pence, have contained very nearly the same quantity

of pure silver. This degradation, therefore, in the value of the money rents

of colleges, has arisen altogether from the degradation in the price of

silver.

 

When the degradation in the value of silver is combined with the diminution

of the quantity of it contained in the coin of the same denomination, the

loss is frequently still greater. In Scotland, where the denomination of the

coin has undergone much greater alterations than it ever did in England, and

in France, where it has undergone still greater than it ever did in

Scotland, some ancient rents, originally of considerable value, have, in

this manner, been reduced almost to nothing.

 

Equal quantities of labour will, at distant times, be purchased more nearly

with equal quantities of corn, the subsistence of the labourer, than with

equal quantities of gold and silver, or, perhaps, of any other commodity.

Equal quantities of corn, therefore, will, at distant times, be more nearly

of the same real value, or enable the possessor to purchase or command more

nearly the same quantity of the labour of other people. They will do this, I

say, more nearly than equal quantities of almost any other commodity; for

even equal quantities of corn will not do it exactly. The subsistence of the

labourer, or the real price of labour, as I shall endeavour to shew

hereafter, is very different upon different occasions ; more liberal in a

society advancing to opulence, than in one that is standing still, and in

one that is standing still, than in one that is going backwards. Every

other commodity, however, will, at any particular time, purchase a greater

or smaller quantity of labour, in proportion to the quantity of subsistence

which it can purchase at that time. A rent, therefore, reserved in corn, is

liable only to the variations in the quantity of labour which a certain

quantity of corn can purchase. But a rent reserved in any other commodity is

liable, not only to the variations in the quantity of labour which any

particular quantity of corn can purchase, but to the variations in the

quantity of corn which can be purchased by any particular quantity of that

commodity.

 

Though the real value of a corn rent, it is to be observed, however, varies

much less from century to century than that of a money rent, it varies much

more from year to year. The money price of 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 market. 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