The Wealth of Nations · Chapter
Conclusion of the Digression Concerning the Variations in the Value of Silver explained
Smith concludes his digression on silver value by arguing that high or low money prices of goods in general do not indicate national wealth or poverty, but rather the fertility of silver mines.
What happens
Smith concludes his digression on silver value by arguing that high or low money prices of goods in general do not indicate national wealth or poverty, but rather the fertility of silver mines. He distinguishes between price changes due to silver value fluctuations and those due to real improvements in land and cultivation, using examples from China, Poland, Spain, and Portugal. He asserts that the rise in price of certain provisions relative to corn reflects agricultural progress, not silver degradation, and cites market data to support his claim that silver has not continuously depreciated.
Themes in this chapter
Wealth and Money
Smith argues that the value of precious metals does not determine national wealth; rather, it reflects mine fertility and accidental discoveries.
Historical Development of Society
Smith contrasts the feudal system with modern governments and links agricultural improvement to societal progress.
Social Class and Inequality
Smith discusses the impact of price changes on the pecuniary reward of inferior servants and the relative wealth of nations.
Characters to notice
- Mr. Meggens
Referenced as Mr. Messance, who collected French market data on corn prices.
- Mr. Duprè de St. Maur
Referenced as having collected French market data on corn prices.
Key passages
“The greater part of the writers who have collected the money prices of things in ancient times, seem to have considered the low money price of corn, and of goods in general, or, in other words, the high value of gold and silver, as a proof, not only of the scarcity of those metals, but of the poverty and barbarism of the country at the time when it took place.”
Many earlier writers mistakenly thought that low prices for corn and goods meant a country was poor and barbaric, when it actually just reflected scarce gold and silver.
Smith critiques the mercantilist view linking precious metal abundance to national wealth.
“The increase of the quantity of gold and silver in Europe, and the increase of its manufactures and agriculture, are two events which, though they have happened nearly about the same time, yet have arisen from very different causes, and have scarce any natural connection with one another.”
Europe's growth in precious metals and its economic development occurred simultaneously but were caused by separate, unrelated factors.
Smith separates the accidental discovery of mines from the structural improvements in industry and farming.
“But though the low money price either of goods in general, or of corn in particular, be no proof of the poverty or barbarism of the times, the low money price of some particular sorts of goods, such as cattle, poultry, game of all kinds, etc. in proportion to that of corn, is a most decisive one.”
While general low prices don't indicate poverty, low prices of animal products relative to corn clearly show a country's underdevelopment and uncultivated land.
Smith uses relative prices as a more reliable indicator of economic stage than absolute prices.
“The opinion, therefore, that silver is continually sinking in its value, seems not to be founded upon any good observations, either upon the prices of corn, or upon those of other provisions.”
The belief that silver's value is steadily declining is not supported by evidence from corn or other food prices.
Smith refutes the common notion of continuous silver depreciation using empirical data.