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Adam Smith

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Trade is used as a means of full-filling one's self interest in a certain commodity. Smith states that when there is nothing left that you need, trading becomes some what of a problem because you aren't benefiting from it . Smith makes this seen when he talks about "how the butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase part of it"(WN I.ii.27), but have nothing to give the butcher in return because he doesn't need any more beer or bread. Since "every man thus lives by exchanging, or becomes in some measure a merchant, and the society grows to be what is properly a commercial society"(WN I.iv.37) the lack in being able to trade will hurt the society. Money was developed so that the economy would prosper and competition would emerge from prices within the market. Trade of commodities among individuals is the basis of how the market in a nation works.

Adam Smith goes on and talks about prices and values of goods and how they are established separately by individuals for their own commodities without causing chaos in the economy. Prices are regulated by labor according to the Wealth of Nations. Labor "is the real measure of the exchangeable value of all commodities."(WN I.v.47) Smith states that "the real price of everything, what everything really costs to the men who wants to acquire it, is the toil and trouble of acquiring it."(WN I.v.47) The real price of a commodity is determined by the labor put into making it without the inflation. The nominal price is the money value which includes the real price and wages. The market price of a good is "regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity."(WN I.vii.73) Adam Smith is able to show that the "labor belongs to the labouer; and the quantity of labour commonly employed in acquiring or producing any commodity, is the only circumstance which we can regulate the quantity of labour which it ought commonly to purchase, command, or exchange for."(WN Richard Cantillon, one of Smith's



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