TWoN Book 3 Chapter 1

319: “The great commerce of every civilized society, is that carried between the inhabitants of the town and those of the country.”  Even though this has changed in the sense that this commerce is now a tiny fraction of all commerce, it is still the most fundamental, because without it, nothing else can happen.  The country stops growing food, and the cities starve.

320: “The corn which grows within a mile of the town, sells there for the same price with that which comes from twenty miles distance.  But the price of the latter must generally, not only pay the expense of raising and bringing it to market, but afford too the ordinary profits of agriculture to the farmer.”  Smith’s point here is the advantage of those parts of the country that lie physically near the market (ie, the city); which is true, but there is another point that deserves discussion, which is that the above appears to contradict a previous statement.  As I see it, Smith earlier declared that the value of a commodity is the amount of labor necessary TO PRODUCE it.  Later (previous chapter) he indicates that transportation adds value.  Here, he once again denies that transportation adds value.  It would seem clear that labor adds value; the point is that, if the commodity (corn in this case) requires increased transportation cost, then some of that added value must go to the labor of transporting it, thus reducing the amount of added value that can go into the pocket of the farmer as profit.

“As subsistence is, in the nature of things, prior to conveniency and luxry, so the industry which procures the former, must necessarily be prior to that which ministers of the latter.” This is true both historically and theoretically; the development of the country proceeded the development of the town, and it was only when country was able to produce a considerable surplus that the town came to exist (see division of labor, book 1 chapter 1).

Page 321:  “Upon equal, or nearly equal profits, most men will chuse to employ their capitals rather in the imporivement and cultivation of land, than either in manufactures or in foreign trade.  The man who employs his capital in land his more under his view and command, and his fortune is much less liable to accident, then that of the trader…”  Two things.  First, he ignores vagaries of weather, which are a vital and unpredictable element of agriculture, and, two, the profits are not generally liable to be equal or nearly equal.  Today, the greatest profits by far are to be found in the realm of finance, which at the time Smith was writing was barely considered an industry.  (I kept his spelling of “chuse” because I think it’s charming). His thesis is Agriculture > manufacture > transport or foreign commerce; making money directly from finance never enters the equation.

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Site administrative account, so probably Corwin, Felix or DD-B.

0 thoughts on “TWoN Book 3 Chapter 1”

  1. There was some financial industry at the time, and at much earlier times; Smith simply chose to ignore it (or overlooked it?). Bits of it are actively railed against in the Bible, to give an example of how old it is.

    Smith, of course, is quite early in the endeavor of putting this stuff on a vaguely sound theoretical basis. I think what pretty much everybody has determined, in the end, is that “location” plays a clear part in the value of things.

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