The Wealth of Nations · Chapter
Effects of the Progress of Improvement Upon the Real Price of Manufactures explained
Smith argues that as society improves, the real price of most manufactured goods tends to fall due to better machinery, greater dexterity, and improved division of labor, which reduce the quantity of labor required.
What happens
Smith argues that as society improves, the real price of most manufactured goods tends to fall due to better machinery, greater dexterity, and improved division of labor, which reduce the quantity of labor required. He notes exceptions where rising raw material costs offset these gains, such as in carpentry and cabinet work. Using historical examples from the 15th and 16th centuries, he compares the prices of fine and coarse woolen cloth, showing significant reductions in real price over time. He attributes these reductions to technological improvements like the spinning wheel, winding machines, and the fulling mill, as well as changes in the organization of production.
Themes in this chapter
Division of Labor
Smith attributes the reduction in manufacturing costs to better division and distribution of work, which increases productivity.
Labor Theory of Value
The real price of goods is measured by the quantity of labor they command; improvements reduce labor requirements, lowering real prices.
Historical Development of Society
Smith traces the evolution of manufacturing from household production to specialized industry, showing how progress lowers costs.
Characters to notice
- Adam Smith
Author and narrator, analyzing the effects of economic improvement on manufacturing prices.
- Henry VIII
Referenced in the context of a 1487 sumptuary law regulating cloth prices.
- Edward I and III
Referenced for a 1463 sumptuary law limiting cloth prices for servants.
- Queen Elizabeth I
Mentioned as the first person in England to wear stockings, received as a gift from the Spanish ambassador.
Key passages
“It is the natural effect of improvement, however, to diminish gradually the real price of almost all manufactures.”
As society progresses, the real cost of most manufactured goods tends to decrease over time.
Smith's core thesis for this chapter.
“A better movement of a watch, than about the middle of the last century could have been bought for twenty pounds, may now perhaps be had for twenty shillings.”
A watch movement that cost twenty pounds in the mid-1600s can now be bought for twenty shillings, a dramatic price reduction.
Example of price reduction in metal manufactures.
“In 1487, being the 4th of Henry VII it was enacted, that 'whosoever shall sell by retail a broad yard of the finest scarlet grained, or of other grained cloth of the finest making, above sixteen shillings, shall forfeit forty shillings for every yard so sold.'”
A 1487 law under Henry VII set a maximum price of sixteen shillings for a yard of the finest cloth, with a penalty of forty shillings for overcharging.
Historical evidence of cloth prices in the 15th century.