Adam Smith's Simplified Wealth of Nations, Book 1, Chap. 7b: Secrets & Monopolies

Chap. 7b: Secrets and monopolies

Keeping Up The Market Price Above The Natural Price Through Secrets Of Trade And Manufactures

20 Though the market price always gravitates towards the natural price, it may stay above the natural price for long periods due to: 21 When the effective demand increases, sellers are careful to conceal this increase to prevent new rivals.

22 Secrets in manufactures can be kept longer than secrets in trade.

23 Both kinds of secrets may last for many years.

24 Some large-scale natural productions require a huge amount of land which is not available in the countryside.

25 Such enhancements are the effect of natural causes and may continue forever.

Monopolies Increase Prices

26 A monopoly granted to an individual or trading company has the same effect as a secret in trade or manufactures.

27 The price of monopoly is the highest, while the natural price, or the price of free competition, is the lowest which can be taken in the long term.

28 The exclusive privileges of corporations, or enlarged monopolies, and all laws which restrain the competition also increase market prices for ages, but to a lesser degree.

29 Such enhancements of the market price may last as long as the regulations which cause them.

30 Though the market price may stay higher than the natural price for a long time, it cannot stay below the natural price as long.

31 The statutes of apprenticeship and corporation laws allow a worker to raise his wage rate above the natural rate during the prosperity of manufactures. 32 These are all the causes of the differences between the market price and the natural price of commodities. 33 Natural price itself varies with the natural rate of wages, profits, and rent. 34-35 I shall explain:

36 There is a proportion between the monetary wages in all the different employments of labour and the monetary profits in all the different employments of stock.

37 Lastly, I shall explain the circumstances which regulate rent which affects the real price of the produce of land.
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Next: Chapter 8: Wages