Economic Thought Is The Most Confusing Chapter By Modern Economist

734 Words Sep 7th, 2016 3 Pages
One of the most complicated concepts throughout the history of economic thought is the idea of the measure of value. Therefore, it is no surprise Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations Chapter five, entitled “Of the real and nominal Price of Commodities, or of their Price in Labour, and their Price in Money”, is considered the most confusing chapter by modern economist. Smith attempts to explain the measure of value and the mechanisms, by which that value fluctuates. Value, as defined by Smith, “has two different meanings, and sometimes, expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys.” He further clarifies these values as ‘value in use’ and ‘value in exchange,’ defined as the value an individual receives from the use of a good and the value an individual would pay for or would be willing to sell a good for, respectively. The chapter consist of three main goals, Smith endeavored to show “what is the real measure of this exchangeable value,” “what are the real parts of which this real price is composed,” and “what are the different circumstances which sometimes raise some or all of these different parts of price above, and sometimes sink them below their natural or ordinary rate.” Showing the real measure of an exchangeable value quickly proves difficult. Smith is content to conclude, “Labour, therefore, is the real measure of the…

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