Prompt: Natural Prices in Wealth of Nations
Use this quotation from Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations to start a conversation about prices and value.
“Bellringers” are classroom tools that help set the tone or introduce a topic in the classroom. Adam Smith Works bellringers use quotations from and activities based on the work of Adam Smith, allowing you to illustrate the long history of the ideas you will explore in your classroom by grounding them in great books.
Adam Smith Works Activities are quotations with accompanying activities that you can discuss with your students to introduce a topic, generate deeper discussion, or set the tone for your lesson. They cover topics from economics to history to moral philosophy.
Bellringers are presented as slides ready to pull and use in your classroom. On each slide, you can find speaking notes and links to more information.
Adam Smith Works Activities are quotations with accompanying activities that you can discuss with your students to introduce a topic, generate deeper discussion, or set the tone for your lesson. They cover topics from economics to history to moral philosophy.
Bellringers are presented as slides ready to pull and use in your classroom. On each slide, you can find speaking notes and links to more information.
- Click the hyperlinked quotation (for example, look for something like (WN 1.ii.2) to see the quotation in the context of the full text.
- Use the "Find" feature in the left-hand menu to search for the first few words in the quotation and see it in context.
- Alternatively, click on "Contents" to find the relevant chapter of the text. "WN 1.ii.2" is Wealth of Nations Book 1, chapter 2. "TMS I.iii.1.7" is The Theory of Moral Sentiments Book 1, chapter 3, section 1.
(The last number in the citation refers to the paragraph in the section.)
- Where available, click "Click here for more about this quotation" to visit a short article about the passage in question.
- Speaking notes suggest topics for discussion when using each quotation.
“When the price of any commodity is neither more nor less than what is sufficient to pay the rent of the land, the wages of the labour, and the profits of the stock employed in raising, preparing, and bringing it to market, according to their natural rates, the commodity is then sold for what may be called its natural price.”
[...]
“Though the price, therefore, which leaves him this profit, is not always the lowest at which a dealer may sometimes sell his goods, it is the lowest at which he is likely to sell them for any considerable time; at least where there is perfect liberty, or where he may change his trade as often as he pleases.
“The actual price at which any commodity is commonly sold is called its market price. It may either be above, or below, or exactly the same with its natural price.”
(WN 1.vii.4–7)
This group activity should take ten minutes, plus any time allocated for class discussion.
Divide the class into pairs of students and provide them with the prompts below for discussion.
How does Adam Smith, writing here in Wealth of Nations Book 1 Chapter 7, calculate what he calls the “natural price” of a good? How do economists talk about this concept today, and what type of value do they consider instead?
The natural price is found by calculating the ordinary return on the labour, stock, and land used to produce the good and bring it to market and adding them together. Today we talk about the costs of inputs, which are different than the subjective values of a good from which the market derives prices.
For more advanced students: Does selling above the natural price result in an accounting profit or an economic profit?
Students may be asked to share their thoughts with the class or via a short writing assignment.
See the quotation in context as part of the online text of An Inquiry into the Nature and Causes of the Wealth of Nations. Use the "Find" feature in the left-hand menu to search for the first few words in the quotation and see it in context.
See the quotation in context as part of the online text of An Inquiry into the Nature and Causes of the Wealth of Nations. Use the "Find" feature in the left-hand menu to search for the first few words in the quotation and see it in context.