Note 178 — Chapter II · : ADAM SMITH

Wealth of Nations, Book I, chap. 5; Cannan, vol. i, p. 32. In this passage Smith seems to imply that the value of an object is determined, not by the amount of labour which it cost to produce it, but by the amount of labour which can be bought in exchange for it. Fundamentally the two ideas are one, for objects of equal value only can be exchanged, so that the amount of labour anyone can buy with any given object is equal to the amount of labour which that object cost to produce. “Goods,” says Smith, “contain the value of a certain quantity of labour, which we exchange for what is supposed at the time to contain the value of an equal quantity.”