The Wealth of Nations · Chapter
III: Of the Variations in the Proportion Between the Respective Values of That Sort of Produce Which Always Affords Rent, and of That Which Sometimes Does and Sometimes Does Not Afford Rent explained
This chapter examines how the prices of different types of rude produce vary with economic development.
What happens
This chapter examines how the prices of different types of rude produce vary with economic development. Smith distinguishes three sorts of produce: those whose price naturally rises with improvement (like butcher's-meat), those whose price is limited by other factors (like wool and hides), and those where human industry's effect is uncertain. He argues that rising prices of certain goods reflect real increases in value due to greater labor and subsistence costs, not merely silver degradation. He concludes that high or low money prices of goods in general indicate mine fertility, not national wealth, while relative price differences reveal a country's stage of development.
Themes in this chapter
Labor Theory of Value
Smith argues that the real price of produce rises because it costs more labor and subsistence to bring to market, linking value to embodied labor.
Wealth and Money
The chapter critiques the notion that high silver value indicates national wealth, distinguishing between money price and real wealth.
Characters to notice
- David Hume
Cited for his observation that in Saxon times the fleece was valued at two-fifths of the whole sheep.
- Mr. Duprè de St. Maur
Mentioned as a collector of French market price data.
- Mr. Meggens
Referenced as a diligent collector of price accounts (implied by 'Mr. Messance').
Key passages
“Gain is the end of all improvement, and nothing could deserve that name of which loss was to be the necessary consequence.”
Profit is the goal of all economic improvement; any venture that inevitably results in loss cannot be called improvement.
Smith emphasizes that rising produce prices are a natural and beneficial part of development, not a calamity.
“The cheapness and abundance of gold and silver plate, would be the sole advantage which the world could derive from the one event, and the dearness and scarcity of those trifling superfluities the only inconveniency it could suffer from the other.”
If silver becomes abundant, the only benefit is cheaper plate; if scarce, the only drawback is more expensive luxury items.
Smith downplays the importance of silver abundance for national wealth, focusing instead on real production.
“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 lacks solid evidence from grain or other food prices.
Smith refutes the common notion of silver degradation, attributing price changes to other factors.