Meet us on:
Entire Site
    Try our fun game

    Dueling book covers…may the best design win!

    Random Quote
    "There are painters who transform the sun to a yellow spot, but there are others who with the help of their art and their intelligence, transform a yellow spot into the sun."

    Subscribe to Our Newsletter

    Follow us on Twitter

    Never miss a good book again! Follow Read Print on Twitter

    Book I: Chapter 4

    • Rate it:
    • Average Rating: 5.0 out of 5 based on 1 rating
    • 11 Favorites on Read Print
    Launch Reading Mode Next Chapter
    Chapter 5
    Previous Chapter


    When the division of labour has been once thoroughly established, it is but
    a very small part of a man's wants which the produce of his own labour can
    supply. He supplies the far greater part of them by exchanging that surplus
    part of the produce of his own labour, which is over and above his own
    consumption, for such parts of the produce of other men's labour as he has
    occasion for. Every man thus lives by exchanging, or becomes, in some
    measure, a merchant, and the society itself grows to be what is properly a
    commercial society.

    But when the division of labour first began to take place, this power of
    exchanging must frequently have been very much clogged and embarrassed in
    its operations. One man, we shall suppose, has more of a certain commodity
    than he himself has occasion for, while another has less. The former,
    consequently, would be glad to dispose of; and the latter to purchase, a
    part of this superfluity. But if this latter should chance to have nothing
    that the former stands in need of, no exchange can be made between them. The
    butcher has more meat in his shop than he himself can consume, and the
    brewer and the baker would each of them be willing to purchase a part of it.
    But they have nothing to offer in exchange, except the different productions
    of their respective trades, and the butcher is already provided with all the
    bread and beer which he has immediate occasion for. No exchange can, in this
    case, be made between them. He cannot be their merchant, nor they his
    customers ; and they are all of them thus mutually less serviceable to one
    another. In order to avoid the inconveniency of such situations, every
    prudent man in every period of society, after the first establishment of the
    division of labour, must naturally have endeavoured to manage his affairs in
    such a manner, as to have at all times by him, besides the peculiar produce
    of his own industry, a certain quantity of some one commodity or other, such
    as he imagined few people would be likely to refuse in exchange for the
    produce of their industry. Many different commodities, it is probable, were
    successively both thought of and employed for this purpose. In the rude ages
    of society, cattle are said to have been the common instrument of commerce ;
    and, though they must have been a most inconvenient one, yet, in old times,
    we find things were frequently valued according to the number of cattle
    which had been given in exchange for them. The armour of Diomede, says
    Homer, cost only nine oxen; but that of Glaucus cost a hundred oxen. Salt is
    said to be the common instrument of commerce and exchanges in Abyssinia ; a
    species of shells in some parts of the coast of India ; dried cod at
    Newfoundland; tobacco in Virginia; sugar in some of our West India colonies;
    hides or dressed leather in some other countries; and there is at this day a
    village In Scotland, where it is not uncommon, I am told, for a workman to
    carry nails instead of money to the baker's shop or the ale-house.

    In all countries, however, men seem at last to have been determined by
    irresistible reasons to give the preference, for this employment, to metals
    above every other commodity. Metals can not only be kept with as little loss
    as any other commodity, scarce any thing being less perishable than they
    are, but they can likewise, without any loss, be divided into any number of
    parts, as by fusion those parts can easily be re-united again; a quality
    which no other equally durable commodities possess, and which, more than any
    other quality, renders them fit to be the instruments of commerce and
    circulation. The man who wanted to buy salt, for example, and had nothing
    but cattle to give in exchange for it, must have been obliged to buy salt to
    the value of a whole ox, or a whole sheep, at a time. He could seldom buy
    less than this, because what he was to give for it could seldom be divided
    without loss; and if he had a mind to buy more, he must, for the same
    reasons, have been obliged to buy double or triple the quantity, the value,
    to wit, of two or three oxen, or of two or three sheep. If, on the contrary,
    instead of sheep or oxen, he had metals to give in exchange for it, he could
    easily proportion the quantity of the metal to the precise quantity of the
    commodity which he had immediate occasion for.

    Different metals have been made use of by different nations for this
    purpose. Iron was the common instrument of commerce among the ancient
    Spartans, copper among the ancient Romans, and gold and silver among all
    rich and commercial nations.

    Those metals seem originally to have been made use of for this purpose in
    rude bars, without any stamp or coinage. Thus we are told by Pliny (Plin.
    Hist Nat. lib. 33, cap. 3), upon the authority of Timaeus, an ancient
    historian, that, till the time of Servius Tullius, the Romans had no coined
    money, but made use of unstamped bars of copper, to purchase whatever they
    had occasion for. These rude bars, therefore, performed at this time the
    function of rnoney.

    The use of metals in this rude state was attended with two very considerable
    inconveniences ; first, with the trouble of weighing, and secondly, with
    that of assaying them. In the precious metals, where a small difference in
    the quantity makes a great difference in the value, even the business of
    weighing, with proper exactness, requires at least very accurate weights and
    scales. The weighing of gold, in particular, is an operation of some nicety
    In the coarser metals, indeed, where a small error would be of little
    consequence, less accuracy would, no doubt, be necessary. Yet we should find
    it excessively troublesome if every time a poor man had occasion either to
    buy or sell a farthing's worth of goods, he was obliged to weigh the
    farthing. The operation of assaying is still more difficult, still more
    tedious ; and, unless a part of the metal is fairly melted in the crucible,
    with proper dissolvents, any conclusion that can be drawn from it is
    extremely uncertain. Before the institution of coined money, however, unless
    they went through this tedious and difficult operation, people must always
    have been liable to the grossest frauds and impositions; and instead of a
    pound weight of pure silver, or pure copper, might receive, in exchange for
    their goods, an adulterated composition of the coarsest and cheapest
    materials, which had, however, in their outward appearance, been made to
    resemble those metals. To prevent such abuses, to facilitate exchanges, and
    thereby to encourage all sorts of industry and commerce, it has been found
    necessary, in all countries that have made any considerable advances towards
    improvement, to affix a public stamp upon certain quantities of such
    particular metals, as were in those countries commonly made use of to
    purchase goods. Hence the origin of coined money, and of those public
    offices called mints; institutions exactly of the same nature with those of
    the aulnagers and stamp-masters of woollen and linen cloth. All of them are
    equally meant to ascertain, by means of a public stamp, the quantity and
    uniform goodness of those different commodities when brought to market.

    The first public stamps of this kind that were affixed to the current
    metals, seem in many cases to have been intended to ascertain, what it was
    both most difficult and most important to ascertain, the goodness or
    fineness of the metal, and to have resembled the sterling mark which is at
    present affixed to plate and bars of silver, or the Spanish mark which is
    sometimes affixed to ingots of gold, and which, being struck only upon one
    side of the piece, and not covering the whole surface, ascertains the
    fineness, but not the weight of the metal. Abraham weighs to Ephron the four
    hundred shekels of silver which he had agreed to pay for the field of
    Machpelah. They are said, however, to be the current money of the merchant,
    and yet are received by weight, and not by tale, in the same manner as
    ingots of gold and bars of silver are at present. The revenues of the
    ancient Saxon kings of England are said to have been paid, not in money, but
    in kind, that is, in victuals and provisions of all sorts. William the
    Conqueror introduced the custom of paying them in money. This money,
    however, was for a long time, received at the exchequer, by weight, and not
    by tale,

    The inconveniency and difficulty of weighing those metals with exactness,
    gave occasion to the institution of coins, of which the stamp, covering
    entirely both sides of the piece, and sometimes the edges too, was supposed
    to ascertain not only the fineness, but the weight of the metal. Such
    coins, therefore, were received by tale, as at present, without the trouble
    of weighing.

    The denominations of those coins seem originally to have expressed the
    weight or quantity of metal contained in them. In the time of Servius
    Tullius, who first coined money at Rome, the Roman as or pondo contained a
    Roman pound of good copper. It was divided, in the same manner as our Troyes
    pound, into twelve ounces, each of which contained a real ounce of good
    copper. The English pound sterling, in the time of Edward I. contained a
    pound, Tower weight, of silver of a known fineness. The Tower pound seems to
    have been something more than the Roman pound, and something less than the
    Troyes pound. This last was not introduced into the mint of England till the
    18th of Henry the VIII. The French livre contained, in the time of
    Charlemagne, a pound, Troyes weight, of silver of a known fineness. The fair
    of Troyes in Champaign was at that time frequented by all the nations of
    Europe, and the weights and measures of so famous a market were generally
    known and esteemed. The Scots money pound contained, from the time of
    Alexander the First to that of Robert Bruce, a pound of silver of the same
    weight and fineness with the English pound sterling. English, French, and
    Scots pennies, too, contained all of them originally a real penny-weight of
    silver, the twentieth part of an ounce, and the two hundred-and-fortieth
    part of a pound. The shilling, too, seems originally to have been
    the denomination 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 proportion, 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 William the Conqueror among the English, the proportion between the
    pound, the shilling, and the penny, seems to have been uniformly 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
    reduced to the twenty-fourth part of its original value, and, instead of
    weighing a pound, came to weigh only half an ounce. The English 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 performed 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 privilege, and might
    pay with the same nominal sum of the new and debased coin whatever they had
    borrowed in the old. Such operations, 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 nations, 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 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 meanings, and
    sometimes expresses the utility of some particular object, 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 exchange 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 exchangeable 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 sometimes 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, perhaps, in some places, appear
    unnecessarily tedious; and his attention, 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
    taking the utmost pains that I can to be perspicuous, some obscurity may
    still appear to remain upon a subject, in its own nature extremely
    Next Chapter
    Chapter 5
    Previous Chapter
    If you're writing a Adam Smith essay and need some advice, post your Adam Smith essay question on our Facebook page where fellow bookworms are always glad to help!

    Top 5 Authors

    Top 5 Books

    Book Status
    Want to read

    Are you sure you want to leave this group?