I have found places in this book where I respectfully differ with Mr. Smith. They fall into two categories: 1. Those things which he couldn’t have understood simply because the information wasn’t available at the time he wrote (one cannot expect advanced metallurgy from a culture which just that morning discovered iron, or or full understanding of a market economy just as it’s gearing up), and 2. Occasional objections to his method, where it seems to me made complex, contradictory processes seem linear and mechanical (as for example when he speaks of acquiring stock coming first, then division of labor).
One trouble I’m having in this chapter is that I’m seeing what appear to be a different sort of error–false deductions and cases of ignoring significant data. It seems to me that if I’m seeing those kinds of errors, I’m missing something; I am more likely to be mistaken about that kind of thing than he is. All I can think of to do is try to grasp what he means, point to the mistakes I’m seeing, and hope some Smart Person can, using small words, help me figure out what I’m missing.
That said, let’s look at Page 236: “Money, therefore, is the only part of the circulating capital of society, of which the maintenance can occasion any diminution of their neat revenue.” Doesn’t this ignore the cost of transport, payment of storage of finished commodities, and the cost of various middlemen, who, by definition, concern themselves with circulating capital?
Page 237: ” A certain quantity of very valuable materials, gold and silver, and of very curious labor, instead of augmenting the stock reserved for immediate consumption…is employed in supporting that great but expensive instrument of commerce, by means of which every individual in society has his subsistence, conveniencies, and amusements, regularly distributed to him in their proper proportion.” Is this the answer to my point above? That is, is he here referring to the market itself, as well as the infrastructure that supports it?
“…as the machines and instruments of trade, &c, which compose the fixed capital either of an individual or of a society, make no part either of the gross or of the neat revenue of either,; so money, by means of whichthe whole revenue of the society is regularly distributed among all its different members, makes itself no part of that revenue. The great wheel of circulation is altogether different from the goods which are circulated by means of it. The revenue of the society consists altogether in those goods, and not in the wheel which circulates them.
He becomes more specific about this point later. His point is that money is the means whereby commodities circulate, and, in calculating the revenue of an individual or nation, one can count the money, OR the commodities one can purchase with the money, but not both. As far as that goes, it makes sense. The trouble is, money is a commodity. Whether paper (which he discuses later) or heavy metals makes no difference. Money in any case, has a use-value, an exchange-value, is interchangable, and was created for exchange. That is the definition of a commodity. What makes money unique is that it is the only commodity whose use-value is quantifiable–or, put another way, whose use-value is its exchange-value. This permits us to exchange commodities using money as a medium, and thus it appears to be a separate thing, but it isn’t. In actual practice, when determining the “net worth” of an individual, one takes into account the market value of that person’s possessions, AND that person’s money–no one suggests counting the possessions, the money, and what a person could buy with the money.
Smith is obviously making a point here, and it is a point I’m missing.