Reflections on the Formation and Distribution of wealth [8]
species of riches; how they influence the commercial markets, and how they enter into the composition of fortunes, it is necessary to go back again and return to our first principles.
31. Rise of Commerce. Principle of the valuation of commercial things.
Reciprocal wants first introduced exchanges of what we possessed, for what we stood in need of one species of provision was bartered for another, or for, labour. In exchanging, it is necessary that each party is convinced of the quality and quantity of every thing exchanged. In this agreement it is natural that every one should desire to receive as much as he can, and to give as little; and both being equally masters of what they have to barter, it is in a man's own breast to balance the attachment he has to the thing he gives, with the desire he feels to possess that which he is willing to receive, and consequently to fix the quantity of each of the exchanged things. If the two persons do not agree, they must relax a little on one side or the other, either by offering more or being content with less. I will suppose that one is want of corn and the other of wine; and that they agree to exchange a bushel of corn for six pints of wine. It is evident that by both of them, one bushel of corn and six pints of wine are looked upon as exactly equivalent, and that in this particular exchange, the price of a bushel of corn is six pints of wine, and the price of six pints of wine is one bushel of corn. But in another exchange between other men, this price will be different, accordingly as one or the other of them shall have a more or less pressing want of one commodity or the other; and a bushel of corn may be exchanged against eight pints of wine, while another bushel shall be bartered for four pints only.) Now it is evident, that not one of these three prices can be looked on as the true price of a bushel of corn, rather than the others; to each of the dealers, the wine he has received was equivalent to the corn he had given. In a word, so long as we consider each exchange independent of any other, the value of each thing exchanged has no other measure than the wants or desires of one party weighed with those of the other, and is fixed only by their agreement.
32. How the current value of the exchange of merchandize is established.
Meantime it happens that many individuals have wine to dispose of to those who possess corn. If one is not willing to give more than four pints for a bushel, the proprietor of the corn will not exchange with him, when he shall know that another will give six or eight pints for the same bushel. If the former is determined to have the corn, he will be obliged to raise his price equal to what is offered by others. The sellers of wine profit on their side by the competition among the sellers of corn. No one resolves part with his property, before he has compared the different offers which are made to him, of the commodity he stands in need of, and then he accepts of the best offer. The value of the wine and corn is not fixed by the two proprietors with respect to their own wants and reciprocal abilities, but by a general balance of the wants of all the sellers of corn, with those of all the sellers of wine. For those who will willingly give eight pints of wine for a bushel of corn, will give but four when they shall know that a proprietor of corn is willing to give two bushels for eight pints. The medium price between the different offers and the different demands, will become the current price to which all the buyers and sellers will conform in their exchanges; and it will be true if we say, that six pints of wine will be to every one the equivalent for a bushel of corn, that is, the medium price, until a diminution of supply on one side, or of demand on the other, causes a variation.
33. Commerce gives in all merchandize a current value with respect to any other merchanize; from whence it follows that all merchandize is the equivalent for a certain quantity of any other merchandize, and may be looked on as a pledge to
31. Rise of Commerce. Principle of the valuation of commercial things.
Reciprocal wants first introduced exchanges of what we possessed, for what we stood in need of one species of provision was bartered for another, or for, labour. In exchanging, it is necessary that each party is convinced of the quality and quantity of every thing exchanged. In this agreement it is natural that every one should desire to receive as much as he can, and to give as little; and both being equally masters of what they have to barter, it is in a man's own breast to balance the attachment he has to the thing he gives, with the desire he feels to possess that which he is willing to receive, and consequently to fix the quantity of each of the exchanged things. If the two persons do not agree, they must relax a little on one side or the other, either by offering more or being content with less. I will suppose that one is want of corn and the other of wine; and that they agree to exchange a bushel of corn for six pints of wine. It is evident that by both of them, one bushel of corn and six pints of wine are looked upon as exactly equivalent, and that in this particular exchange, the price of a bushel of corn is six pints of wine, and the price of six pints of wine is one bushel of corn. But in another exchange between other men, this price will be different, accordingly as one or the other of them shall have a more or less pressing want of one commodity or the other; and a bushel of corn may be exchanged against eight pints of wine, while another bushel shall be bartered for four pints only.) Now it is evident, that not one of these three prices can be looked on as the true price of a bushel of corn, rather than the others; to each of the dealers, the wine he has received was equivalent to the corn he had given. In a word, so long as we consider each exchange independent of any other, the value of each thing exchanged has no other measure than the wants or desires of one party weighed with those of the other, and is fixed only by their agreement.
32. How the current value of the exchange of merchandize is established.
Meantime it happens that many individuals have wine to dispose of to those who possess corn. If one is not willing to give more than four pints for a bushel, the proprietor of the corn will not exchange with him, when he shall know that another will give six or eight pints for the same bushel. If the former is determined to have the corn, he will be obliged to raise his price equal to what is offered by others. The sellers of wine profit on their side by the competition among the sellers of corn. No one resolves part with his property, before he has compared the different offers which are made to him, of the commodity he stands in need of, and then he accepts of the best offer. The value of the wine and corn is not fixed by the two proprietors with respect to their own wants and reciprocal abilities, but by a general balance of the wants of all the sellers of corn, with those of all the sellers of wine. For those who will willingly give eight pints of wine for a bushel of corn, will give but four when they shall know that a proprietor of corn is willing to give two bushels for eight pints. The medium price between the different offers and the different demands, will become the current price to which all the buyers and sellers will conform in their exchanges; and it will be true if we say, that six pints of wine will be to every one the equivalent for a bushel of corn, that is, the medium price, until a diminution of supply on one side, or of demand on the other, causes a variation.
33. Commerce gives in all merchandize a current value with respect to any other merchanize; from whence it follows that all merchandize is the equivalent for a certain quantity of any other merchandize, and may be looked on as a pledge to