Literature Study GuidesThe Wealth Of NationsVolume 1 Book 1 Chapter 11 Summary

The Wealth of Nations | Study Guide

Adam Smith

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The Wealth of Nations | Volume 1, Book 1, Chapter 11 : Of the Rent of Land | Summary

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Summary

Despite its concise title, this chapter embraces a sweeping variety of topics. Smith begins by describing the factors that affect the rent a landowner can expect to derive from the land. He argues that the rent from land devoted to grain will ultimately regulate all other types of rent, since grain (which, according to the usage of his time, he calls "corn") is the most essential commodity. That is, if a pasture or tobacco field is not yielding a competitive rent, it will soon be replanted with grain. He then offers a brief consideration of the rent of non-agricultural lands, including coal, gold, and silver mines. These last two, he says, offer a rent much more variable than that of grain, since both the fertility of the world's mines and the supply of precious metals is constantly fluctuating over time.

In the remaining two thirds of the chapter, Smith offers a protracted "Digression" on the value of silver. He divides his discussion into three historical periods: 1350–1570; 1570–1640; and 1640 to the present (i.e., the mid-18th century). In the first period, he says, the money price of grain was steadily decreasing in Britain and France, while in the middle period "the average money price of [grain], in spite of all improvements, gradually [became] dearer and dearer." In the final period, the money price of grain was fairly constant. In other words, silver was growing in value during the first period, declining during the second, and holding steady during the third. For Smith, this shows the naïveté of the widespread belief that precious metals are simply declining in value as more of them are mined. More importantly, the fluctuations in currency prices have not prevented other goods—especially manufactured products—from becoming cheaper and more widely available. This, Smith says, should cast doubt on the idea that plentiful gold and silver are a sign of real national wealth.

Analysis

This is the point in the text at which the figures really begin to pile up. Accordingly, it's a good opportunity to review the denominations of British currency—knowledge Smith understandably takes for granted among his 18th-century British readers. Then as now, the major British currency unit was the pound sterling (£). Prior to decimalization, however, the pound was not simply divided into 100 pence, as it has been since 1971. Instead, the pound was split into 20 shillings, which were then subdivided into 12 pence each. Together, these three denominations are written out as "£sd," where the "d" represents the pence (it stands for the ancient Roman denarius). Smith sometimes simplifies this notation, although not always consistently. Thus, two pounds six shillings ninepence—Smith's quote for the price of nine bushels of wheat in a given year—might be written as "£2 6s. 9d.," "£2:6:9," or even "£2 6 9."

A variety of coins were used in this system, and Smith mentions most of them at least once. Some denominations—like the halfpenny and the sixpence—are straightforward, but others are far from obvious. A farthing, the smallest unit to appear in the book, is a quarter-penny, and a four-penny coin is called a groat. A crown is five shillings, and sure enough, a half-crown is two shillings sixpence. The most valuable British coin mentioned in The Wealth of Nations is a guinea, which is a pound plus a shilling. Other European currencies occasionally make a cameo, but none of them are central to appreciating the text. An understanding of the pound and its relatives, however, will make for much smoother reading.

Despite the constant presence of money in the book, it is important to remember that Smith sees grain, not gold or silver, as the most fundamental commodity. This will be especially significant in the "Digression," where Smith bases much of his argument on the money price of grain. When he points out, for example, the high money price of grain in a given period, what he is really saying is that silver is cheap. Conversely, a low money price of grain really means it is expensive to "buy" silver with grain. Gold and silver are, for Smith, just like any other commodities in most respects—they merely happen to be more convenient for storing and exchanging value. This core premise will echo throughout the remaining four books, becoming especially prominent in Book 4's critique of mercantilism.

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