The Wealth of Nations

The Wealth of Nations

by

Adam Smith

A commodity’s real price is its price in terms of what can be exchanged for it. Specifically, Smith argues that all commodities come from human labor, so the true measure of a commodity’s price is the amount of labor that can be exchanged for it. Smith argues that people tend to focus on nominal prices, which vary widely depending on currency conditions, but forget about real prices.

Real Price Quotes in The Wealth of Nations

The The Wealth of Nations quotes below are all either spoken by Real Price or refer to Real Price. For each quote, you can also see the other terms and themes related to it (each theme is indicated by its own dot and icon, like this one:
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).
Book 1, Chapter 5 Quotes

Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life. But after the division of labour has once thoroughly taken place, it is but a very small part of these with which a man’s own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase. The value of any commodity, therefore, to the person who possesses it, and who means not to use or consume it himself, but to exchange it for other commodities, is equal to the quantity of labour which it enables him to purchase or command. Labour therefore, is the real measure of the exchangeable value of all commodities.

Page Number: 43
Explanation and Analysis:
Book 1, Chapter 11 Quotes

Upon all these accounts, therefore, we may rest assured, that equal quantities of corn will, in every state of society, in every stage of improvement, more nearly represent, or be equivalent to, equal quantities of labour, than equal quantities of any other part of the rude produce of land. Corn, accordingly, it has already been observed, is, in all the different stages of wealth and improvement, a more accurate measure of value than any other commodity or set of commodities. In all those different stages, therefore, we can judge better of the real value of silver, by comparing it with corn, than by comparing it with any other commodity or set of commodities.

Page Number: 255
Explanation and Analysis:

In the course of a century or two, it is possible that new mines may be discovered, more fertile than any that have ever yet been known; and it is just equally possible, that the most fertile mine then known may be more barren than any that was wrought before the discovery of the mines of America. Whether the one or the other of those two events may happen to take place, is of very little importance to the real wealth and prosperity of the world, to the real value of the annual produce of the land and labour of mankind. Its nominal value, the quantity of gold and silver by which this annual produce could be expressed or represented, would, no doubt, be very different; but its real value, the real quantity of labour which it could purchase or command, would be precisely the same.

Page Number: 321
Explanation and Analysis:
Book 4, Chapter 5 Quotes

The nature of things has stamped upon corn a real value, which cannot be altered by merely altering its money price. No bounty upon exportation, no monopoly of the home market, can raise that value. The freest competition cannot lower it, Through the world in general, that value is equal to the quantity of labour which it can maintain, and in every particular place it is equal to the quantity of labour which it can maintain in the way, whether liberal, moderate, or scanty, in which labour is commonly maintained in that place. Woollen or linen cloth are not the regulating commodities by which the real value of all other commodities must be finally measured and determined; corn is. The real value of every other commodity is finally measured and determined by the proportion which its average money price bears to the average money price of corn.

Page Number: 649–650
Explanation and Analysis:
Book 5, Chapter 2 Quotes

Ground-rents, so far as they exceed the ordinary rent of land, are altogether owing to the good government of the sovereign, which, by protecting the industry either of the whole people or of the inhabitants of some particular place, enables them to pay so much more than its real value for the ground which they build their houses upon; or to make to its owner so much more than compensation for the loss which he might sustain by this use of it. Nothing can be more reasonable, than that a fund, which owes its existence to the good government of the state, should be taxed peculiarly, or should contribute something more than the greater part of other funds, towards the support of that government.

Related Characters: Landlords
Page Number: 1068
Explanation and Analysis:
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Real Price Term Timeline in The Wealth of Nations

The timeline below shows where the term Real Price appears in The Wealth of Nations. The colored dots and icons indicate which themes are associated with that appearance.
Book 1, Chapter 4
Labor, Markets, and Growth Theme Icon
Money and Banking Theme Icon
...other products. In the next three chapters, Smith will try to show what determines commodities’ real price (or exchange-value), what makes up this price, and why market prices sometimes rise above or... (full context)
Book 1, Chapter 5
Labor, Markets, and Growth Theme Icon
Mercantilism and Free Trade Theme Icon
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...either directly from one’s own labor, or from exchange for someone else’s labor. Thus, something’s real price is “the quantity of labour which it enables [its possessor] to purchase or command.” Obtaining... (full context)
Labor, Markets, and Growth Theme Icon
Institutions and Good Governance Theme Icon
Mercantilism and Free Trade Theme Icon
Money and Banking Theme Icon
Real prices —how much labor or a commodity is worth in terms of “the necessaries and conveniences... (full context)
Labor, Markets, and Growth Theme Icon
Mercantilism and Free Trade Theme Icon
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Ordinary commerce only involves nominal prices, not real prices , because it takes place at one time and place. Thus, money is a perfectly... (full context)
Book 1, Chapter 11
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...prohibited. This makes it clear that what really happened in England was not that the real price of grain fell, but that the real price of silver rose. (full context)
Labor, Markets, and Growth Theme Icon
Money and Banking Theme Icon
...as society advances. This is not because silver prices fall but rather because that produce’s real price rises. (full context)
Labor, Markets, and Growth Theme Icon
Capital Accumulation and Investment Theme Icon
Institutions and Good Governance Theme Icon
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...and nominal prices generally increased from the 15th to 18th centuries, although policy made their real price slightly lower in 1776 than the 1400s. This is in part because hides are more... (full context)
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...ones will soon be discovered. But either way, this will only affect nominal prices, not real prices . (full context)
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...gold and silver, they are still among the poorest countries in Europe. In contrast, low real prices for cattle, poultry, and game do reflect a country’s poverty, as they show that these... (full context)
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“Effects of the Progress of Improvement upon the real Price of Manufactures.” Manufactured goods become cheaper as a nation develops, as the efficiency benefits of... (full context)
Book 2, Chapter 4
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...circulated in a country for the same amount of money, nominal prices would fall but real prices would remain the same. Due to the rise in the country’s real revenue—the amount of... (full context)
Book 4, Chapter 1
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Capital Accumulation and Investment Theme Icon
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...has grown rich by colonizing America not because its gold and silver imports affected the real price of goods, but because the colonies served as a new source of goods and market... (full context)
Book 4, Chapter 5
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...nominal grain prices, not real ones. By increasing nominal grain prices, however, it reduces the real price of silver. Since grain is the basis for subsistence, nominal grain prices also regulate the... (full context)
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Similarly, a worldwide fall in real silver prices has little effect on the real price of anything else, but if these prices only fall in a single country, they will... (full context)
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Capital Accumulation and Investment Theme Icon
Institutions and Good Governance Theme Icon
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...the basic difference between grain and manufactured goods, for which monopolies and bounties do increase real prices (but also waste society’s capital by funneling it into a losing trade). (full context)
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...better solution is to place bounties on commodity production, rather than exportation. This would reduce real prices for domestic consumers. But due to the mercantile system’s focus on international trade and manufacturers’... (full context)
Book 4, Chapter 9
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...in two ways. First, by raising the price of foreign goods, they correspondingly raise the real price of their land’s rude produce. Second, they give a monopoly to domestic manufacturers and merchants,... (full context)