# V: Of the Real and Nominal Price of Commodities, or of Their Price in Labour, and Their Price in Money explained — The Wealth of Nations > Chapter companion for The Wealth of Nations by Adam Smith. ## What happens Smith distinguishes between the real price of a commodity (the labor it can command) and its nominal price (the money it can fetch). He argues that labor is the true measure of value, while money is merely a nominal representation. The chapter explores how variations in the value of gold and silver affect nominal prices, and why corn rents preserve real value better than money rents over time. ## Themes in this chapter ### Labor Theory of Value Smith argues that labor is the real measure of exchangeable value and the original purchase-money for all things. ### Wealth and Money Explores the distinction between real price (labor) and nominal price (money), and how money's value fluctuates with silver and gold. ### Historical Development of Society Discusses long-term changes in the value of silver and corn, and how institutions like college rents reflect historical economic conditions. ## Character check-ins ### Adam Smith Author and narrator of the chapter, presenting the distinction between real and nominal price. ### The Teacher Implied role as Smith explains the theoretical concepts of value and price. ### The Employer Referenced as the person who purchases labor and perceives its price as varying. ### A Workman The laborer whose real reward is measured by necessaries and conveniencies, not money. ### Queen Elizabeth I Mentioned in the context of the 18th Elizabeth act requiring college rents to be reserved in corn. ## Key lines > Labour, therefore, is the real measure of the exchangeable value of all commodities. The true worth of any item is determined by the amount of labor it can buy or command. _Central thesis of the chapter: labor as the universal standard of value._ > 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. The actual cost of any good is the effort and hardship required to obtain it. _Smith defines real price in terms of labor effort, not money._ > Labour was the first price, the original purchase-money that was paid for all things. Labor was the original currency used to acquire all goods before money existed. _Historical perspective on the origin of value._ > The discovery of the mines of America diminished the value of gold and silver in Europe. The influx of precious metals from American mines reduced their purchasing power in Europe. _Explains a key historical factor affecting nominal prices._ > 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. Over long periods, corn maintains a more stable relationship with labor than gold or silver do. _Justifies why corn rents preserve real value better than money rents._ ## Links - HTML: https://www.betterreads.online/discover/the_wealth_of_nations_se/chapters/v-of-the-real-and-nominal-price-of-commodities-or-of-their-price-in-labour-and-their-price-in-money - Book: https://www.betterreads.online/discover/the_wealth_of_nations_se - All chapters: https://www.betterreads.online/discover/the_wealth_of_nations_se/chapters