Adam Smith's Simplified Wealth of Nations, Book 1, Chap. 5: Coin Reformation

Chap. 6a: the Component Parts of the Price of Commodities

In the rude state, price has one component: wages

1 In the rude state of society, only the quantity of labour regulates the exchangeable value of  commodities. 2 If one kind of work is harder, it naturally becomes worth more than an easier kind of work. 3 Or if one kind of work requires specialized skills, the people's esteem for such skills will naturally give it a higher value. 4 In the rude state, without the accumulation of stock, one's work belongs solely to oneself.

In the advanced state, price has three components: wages, profits, rent

5 In the advanced state, stock is accumulated.

6 Profits of stock are not the same as the wages of management, although people may mistake them as the same.

7In this state of things, the whole produce of labour does not always belong to the labourer.

The Third Component: Rent

8As soon as land becomes private property, the landlords, like all other men, love to reap where they never sowed.

9 The real value of the parts of price is measured by the quantity of labour which each part can purchase or command.

10 The price of every commodity finally resolves itself into some or all of those three parts.

Examples Of The Three Parts In Commodity Prices

11 For example, the price of corn is composed ultimately of the: A fourth part might be thought necessary for replacing the: But the price of the tools and labouring cattle is itself made up of the: Even if the price of the corn pays for such wear and tear, its total price still resolves itself ultimately into rent, labour, and profit.

12 The price of flour includes the:

The price of bread has the:

13 The price of flax has the same three parts as corn. The price of linen includes the:

More Processing, More Profits

14The more a good is processed:

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Next: Chapter 6b: Rent, Wages, Profits