WEALTH OF NATIONS BOOK I CHAPTER 5

 Labor Value and Price

 

Of the Real and Nominal Price of Commodities, or their Price in Labour, and their Price in Money

Value of any commodity is equal to the quantity of labor that is needed to produce it.

 

The value of any commodity ... 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.

 

The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people.

 

Labor value cannot be measured just by time spent in production, because production of different goods may require labor of different  complexity and intensity. It is therefore more simple to measure the value in quantity of money.

 

But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated. It is of difficult to ascertain the proportion between two different quantities of labour. The time spent in two different sorts of work will not always alone determine this proportion. The different degrees of hardship endured, and of ingenuity exercised, must likewise be taken into account. There may be more labour in an hour's hard work than in

two hours' easy business It is more natural, therefore, to estimate its exchangeable value by the quantity of some other commodity than by that of the labour which it can purchase.

In exchanging, indeed, the different productions of different sorts of labour for one another, some allowance is commonly made for both. It is adjusted, however, not by any accurate measure, but by the higgling and bargaining of the market,

This is complicated by the fact, that the labor value of the metals from which the coins are made can also change.

 

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

 

In addition to that the metal content of coins has frequently been diminished.

 
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.

As any commodity labor has also real and nominal price.

 

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. . 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 conveniences of life which are given for it; its nominal price, in the quantity of money.

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.

Because value of money is changing over time labor is the only universal and accurate measure of value.

 

     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.

       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.

At the same time and place money is a good measure.
 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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