An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith [e book reader pdf TXT] 📗
- Author: Adam Smith
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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 command 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 common and ordinary transactions.
of human life.
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 consider 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 command 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 Canton. 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 common 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 compare, 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 they have in few
places been regularly recorded, are in general better known, and have been
more frequently taken notice of by historians and other writers. We must
generally, therefore, content ourselves with them, not as being always
exactly in the same proportion as the current prices of labour, but as being
the nearest approximation which can commonly be had to that proportion. I
shall hereafter have occasion to make several comparisons of this kind.
In the progress of industry, commercial nations have found it convenient to
coin several different metals into money; gold for larger payments, silver
for purchases of moderate value, and copper, or some other coarse metal, for
those of still smaller consideration, They have always, however, considered
one of those metals as more peculiarly the measure of value than any of the
other two; and this preference seems generally to have been given to the
metal which they happen first to make use of as the instrument of commerce.
Having once begun to use it as their standard, which they must have done
when they had no other money, they have generally continued to do so even
when the necessity was not the same.
The Romans are said to have had nothing but copper money till within five
years before the first Punic war (Pliny, lib. xxxiii. cap. 3), when they
first began to coin silver. Copper, therefore, appears to have continued
always the measure of value in that republic. At Rome all accounts appear to
have been kept, and the value of all estates to have been computed, either
in asses or in sestertii. The as was always the denomination of a copper
coin. The word sestertius signifies two asses and a half. Though the
sestertius, therefore, was originally a silver coin, its value was estimated
in copper. At Rome, one who owed a great deal of money was said to have a
great deal of other people’s copper.
The northern nations who established themselves upon the ruins of the
Roman empire, seem to have had silver money from the first beginning of
their settlements, and not to have known either gold or copper coins for
several ages thereafter. There were silver coins in England in the time of
the Saxons ; but there was little gold coined till the time of Edward III
nor any copper till that of James I. of Great Britain. In England,
therefore, and for the same reason, I believe, in all other modern nations
of Europe, all accounts are kept, and the value of all goods and of all
estates is generally computed, in silver: and when we mean to express the
amount of a person’s fortune, we seldom mention the number of guineas, but
the number of pounds sterling which we suppose would be given for it.
Originally, in all countries, I believe, a legal tender of payment could be
made only in the coin of that metal which was peculiarly considered as the
standard or measure of value. In England, gold was not considered as a legal
tender for a long time after it was coined into money. The proportion
between the values of gold and silver money was not fixed by any public law
or proclamation, but was left to be settled by the market. If a debtor
offered payment in gold, the creditor might either reject such payment
altogether, or accept of it at such a valuation of the gold as he and his
debtor could agree upon. Copper is not at present a legal tender, except in
the change of the smaller silver coins.
In this state of things, the distinction between the metal which was the
standard, and that which was not the standard, was something more than a
nominal distinction.
In process of time, and as people became gradually more familiar with the
use of the different metals in coin, and consequently better acquainted with
the proportion between their respective values, it has, in most countries, I
believe, been found convenient to ascertain this proportion, and to declare
by a public law, that a guinea, for example, of such a weight and fineness,
should exchange for one-and-twenty shillings, or be a legal tender for a debt
of that amount. In this state of things, and during the continuance of any
one regulated proportion of this kind, the distinction between the metal,
which is the standard, and that which is not the standard, becomes little
more than a nominal distinction.
In consequence of any change, however, in this regulated proportion, this
distinction becomes, or at least seems to become, something more than
nominal again. If the regulated value of a guinea, for example, was either
reduced to twenty, or raised to two-and-twenty shillings, all accounts being
kept, and almost all obligations for debt being expressed, in silver money,
the greater part of payments could in either case be made with the same
quantity of silver money as before; but would require very different
quantities of gold money ; a greater in the one case, and a smaller in the
other. Silver would appear to be more invariable in its value than gold.
Silver would appear to measure the value of gold, and gold would not appear
to measure the value of silver. The value of gold would seem to depend upon
the quantity of silver which it would exchange for, and the value of silver
would not seem to depend upon the quantity of gold which it would exchange
for. This difference, however, would be altogether owing to the custom of
keeping accounts, and of expressing the amount of all great and small sums
rather in silver than in gold money. One of Mr Drummond’s notes for
five-and-twenty or fifty guineas would, after an alteration of this kind, be
still payable with five-and-twenty or fifty guineas, in the same manner as
before. It would, after such an alteration, be payable with the same
quantity of gold as before, but with very different quantities of silver. In
the payment of such a note, gold would appear to be more invariable in its
value than silver. Gold would appear to measure the value of silver, and
silver would not appear to measure the value of gold. If the custom of
keeping accounts, and of expressing promissory-notes and other obligations
for money, in this manner should ever become general, gold, and not silver,
would be considered as the metal which was peculiarly the standard or
measure of value.
In reality, during the continuance of any one regulated proportion between the respective
values of the different metals in coin, the value of the most precious metal regulates the value
of the whole coin. Twelve copper pence contain half a pound avoirdupois of copper, of not the
best quality, which, before it is coined, is seldom worth sevenpence in silver. But as, by the
regulation, twelve such pence are ordered to exchange for a shilling, they
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