Page 33: “Every man thus lives by exchanging, or becomes in some measure a merchant.” This is worth some time to look at.
1. Leave it to a theoretician of capitalism to see everyone as a merchant. A theoretician of a feudal monarchical society might just as well have said, “By having control over his home, every man becomes in some measure a lord.”
2. What distinguishes a merchant from other trades, is that he makes his livelihood from the profit of exchanging of goods none of which he has produced or contributed toward producing; yet according to Smith, exchanges are made of equal value for equal value, hence according to his own laws, not only is every man not a merchant, but merchants cannot exist.
3. Nethertheless, there is a powerful truth here, and I think the truth outweighs the quibbles I listed above: In a market economy, exchange is the foundation of existence for everyone. The capitalist must exchange or he has no incentive to produce; the worker must exchange his ability to labor for the goods owned by the capitalist or he will not be able to feed himself to return tomorrow.
He follows this with a brief history of the development of money from 1. something that everything else can be exchanged with 2. metals being useful for this. 3. Coins as an easy form of metal, originally marked to indicate a set weight and purity 4. The inevitable debasement of coins
Page 41: “The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the uility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called ‘value in use;’ the other, ‘value in exchange.'” If this discovery–that double meaning of “value”–was originally discovered by Smith, it ranks as one of his most profound and important achievements.
0 thoughts on “TWoN: Chapter 4”
I believe even in a non-capitalist society every person would in some measure be a “merchant”. I don’t believe this quote necessarily requires that financial profit is the goal. Life is about selling yourself, getting trusted by people, being given more responsibilities, convincing people that you are up to those responsibilities, and can be depended upon when needed. Even where the reward is not financial, every person needs to be a salesperson of their own person.
In a capitalist enterprise this is recognized, at least by management. Everyone is a salesperson for the company, even the introvert programmer in the third sub-basement. They may not want to be a salesperson- but other people are drawing conclusions about the organization based upon their personal interaction with the individual.
Face it, politics of any measure is all about salesmanship, and if you want to maintain your position in a culture, at least at a certain minimum standard, you must engage in being a “merchant” of yourself.
Daniel: “I believe even in a non-capitalist society every person would in some measure be a “merchant”’
To a capitalist theoretician, it is reasonable to say that everyone is a merchant. A proletarian theoretician might claim that, in one way or another, everyone is a worker, and it would be equally valid. Antebellum theoreticians loved to explain the Eastern industrialists in terms of master/slave. If there were such a thing as a theoretician from a primitive communist culture, these same exchanges would be seen as mutual gifts based on need (you can get some of this if you talk to Burners).
My point is that when Smith said that everyone is a merchant, he was saying more about how he viewed the world than about the relationships between people. Your examples and expansion merely show that you view the world in much the same way he did–which is pretty reasonable living in a market economy.
So when my wife says “I will get laundry out of the dryer if you feed the cats” is she being a merchant, or a worker?
This whole discussion could use some more depth.
1. From the perspective of economics, everyone who trades is a merchant, as the etymology of the word makes clear; it has nothing to do with “capitalism”, that socialist straw-man.
2. There is no merchant who trades in something “none of which he has produced or contributed toward producing”, another socialist straw-man — at minimum, the merchant provides a market that provides the “demand” side of the supply-and-demand relationship. No demand, no supply.
3. The rigid distinction between “capitalist” and “worker” is yet another socialist straw-man. Every “worker” is a “capitalist” with respect to his own skills; every “capitalist” works hard to make sure his “capital” is productively employed. These are abstract roles that are not mutually exclusive.
Value does not have a double meaning; it is a variable the expression of which differs depend on the valuer. “Value in use” is value from the point of view of the person who has it; “value in exchange” is value from the point of view of the person who doesn’t have it. The latter “value” can have as many interpretations as there are people who don’t have it. The functional distinction can be useful in analysis but it isn’t an essential distinction.
Steve: “What distinguishes a merchant from other trades, is that he makes his livelihood from the profit of exchanging of goods none of which he has produced or contributed toward producing”
Is this a definition that Smith has implied he holds, or one you supplied?
Specifically, I’d quibble over your “none of which he has produced or contributed toward producing” clause. I feel as though Smith’s usage does not imply this constraint, and that you are supplying it based on your slant.
I agree that the statement does illustrate his worldview, but I’d also say that your definition of merchant illustrates yours… or, really, your disagreement with his.
There’s also the issue of defining a “good”. Is an apple a good? Or is a single apple purchasable at a corner store a different good than a truckload of apples at an orchard?
The merchant (store) has contributed toward producing the “individually purchasable apple”.
It does not matter if it is a good or a service that is being provided, we all sell ourselves and what we produce in one way or another. Artists produce works that others enjoy, and in exchange the public gives the artist something back, whether it is praise, criticism, cash, or simply a smile.
In any case, we package ourselves as much as we package our goods. What we wear, what we say, what car we drive, is all part of the packaging whether we want to admit it or not.
The case of the merchant store is interesting. On the one hand it purchases a truckload of apples and repackages them. A single person has no use for a truckload of apples, he may only want three. He can purchase that at the store. So the merchant buys the truckload, repackages and adds value to the apples, since the user did not want a ton of apples, just three. Not having to deal with the farmer, the truck or the ton of apples has added value to the single apple. So the user will pay more for that apple than he would for the fractional truckload the apple represents.
>… yet according to Smith, exchanges are made of equal
>value for equal value, hence according to his own laws,
>not only is every man not a merchant, but merchants
But, as Kurt touched on, the exchange can still be ‘equal value’ if the merchant adds something to the value of the goods he purchased and then resells. The Kurt pointed out one form of added value (buying more than an individual would, then reselling to multiple individuals allows him to cover the cost of the transportation, storage, physical location and risks involved).
It would be interesting to see a list of what a pure ‘merchant’ adds to/brings to the table in the distribution of goods. Some of it is listed above, and some of it is pretty hard to set a value on: how much is the benefit of convenience worth to the final consumer?
Mike:” So when my wife says “I will get laundry out of the dryer if you feed the cats” is she being a merchant, or a worker?”
Nice! To a theoretician of the market school, a merchant. To someone like Proudhon, a worker. To Eric Berne, she’s being an adult. To me, she’s being a wife.
Nathan Dilday: ‘“What distinguishes a merchant from other trades, is that he makes his livelihood from the profit of exchanging of goods none of which he has produced or contributed toward producing” Is this a definition that Smith has implied he holds, or one you supplied? ‘
Excellent question! Some of each. It’s my understanding of a merchant according to Smith, but (so far) he hasn’t expressed it in those terms, so my understanding is suspect.
Steve – First, I’m enjoying your analysis of Smith.
I asked my question about the sort of bargaining which takes place between married couples because you had suggested that, in a hunter-gatherer society, trade between members did not occur. But, surely, there is some of this sort of trade – I will do this if you do that; today, this job is worth this much to me, but tomorrow it will be worth more, or less?
(incidentally, my limited reading re: the Inuit matches your thinking re: other h-g societies – not all hunt, but no one goes hungry)
Mike: “I asked my question about the sort of bargaining which takes place between married couples because you had suggested that, in a hunter-gatherer society, trade between members did not occur. But, surely, there is some of this sort of trade -”
Sure, but that is clearly not exchange in the sense that Smith is using the term. I discussed how I (or, rather, Smith) was defining exchange or trade in chapter 2.
The exchange between Mike and Steve got me to thinking about the difference between exchange in Smith’s sense and the sort of thing that goes on within a family–or tribe or even a community. While we may have overt trades (in our house, it’s commonly “I’ll take the dog out x times tomorrow if you’ll do it right now”), very often these are not explicit in this way. We do things for one another because they are part of our relationship: I get the laundry out of the dryer because someone’s got to do it (and I trust that my wife will do other things that “balance” things, though it’s not something either of us is keeping track of).
But likewise, when my friend called me to come help him build shelves in his basement, I didn’t think “in the past he helped me when I moved” or “in the future he’ll pay me back for this help.” No: he’s my friend, so I helped him, and he does likewise for me.
Is this an exchange? Sure, but it’s still qualitatively different than one that’s mediated by money or by a sense of value that goes into barter. The kind I’ve been describing depends on my relationship to the other person and, at the same time, builds my relationship with the person. The capitalist exchange is a relationship between me and my money and between the other’s product or service and money before it’s between us. And that mediation of money/value fundamentally alters the character of the exchange.