Deconstructing Adam Smith’s Theory of Value

Adam Smith describes in his magnum opus “The Wealth of Nations”, several of his theories and attempts at measuring value. These ideas, such as the 3-factor cost model and the labour theory of value, laid the groundwork for future titans of economics, such as Ricardo, Marx, Menger, and other marginal revolutionaries, who have built upon these starting principles to alter the fate of nations and the course of history. Bitter partisanship, revolutions, and wars have been fought over the correct interpretation and conclusion of these ideas, one notable example being the labour theory of value inspired Communist Bloc during the Cold War, and their capitalist-aligned counterparts.

We will first attempt to summarize the common explanation of Smith’s ideas regarding value, before jumping into critiques that authors have made. Some such as Robertson believe that his ideas are contradictory, while others like Kaushil and Meek say that Smith is consistent. Authors like Peach believe his explanations are causally connected, which others such as Kaushii believe they are unrelated.

There are several definitions of value that Smith plays around with. Firstly, Smith distinguishes between market price (exchange value) and a good’s utility (use value), the subjective amount that people appreciate a good. Next, Smith explains that commodities’ market price ought to cost its “natural price” in the long run, which is based on its expected costs of production.

In order to perform this analysis, Smith tries to come up with an invariant measure of value. Measuring value in terms of currency or gold, for example, is unreliable as their prices may fluctuate over time. Instead, the “real measure of the exchangeable value of all commodities” is his “labour commanded” theory, which is how much labour that good can purchase[1].

This follows from Smith’s labour theory of value, where the “source” of all value produced is the average labour time necessary to produce them[2]. This is also referred to as the “labour embodied” in it.  For example, if it takes an hour to catch either two beavers or a deer, then they will exchange at a rate of two beavers to a deer. However, this only applies to a “rude” state, a hypothetical primitive society without the existence of landlords or capital, which would then require payment in the form of rents and profit respectively.  

Hence, Smith’s explanation of value becomes the three-factor cost theory, where all commodities have a “natural price”, based on the sum of the expected costs of their three components: wages from hiring labour, rent from the use of the land, and profit to compensate the use of capital equipment[3]. The “labour embodied” in a good will always be less than or equal to the “labour commanded” by that good, as the latter includes the costs of land and capital. From this perspective, wage increases will thus increase prices as it makes up one of these three components, with the rate of profit being unaffected.

[1] “At all times and places that is dear which it is difficult to come at, or which it costs much labour to acquire; and that cheap which is to be had easily, or with very little labour. Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only.” Vol 1, p. 59

[2] “The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people.“ WN Ch. 5.

[3] “the price or exchangeable value of every particular commodity, taken separately, resolves itself into someone or other, or all of those three parts; so that of all the commodities which compose the whole annual produce of the labour of every country, taken complexly, must resolve itself into the same three parts, and be parcelled out amongst different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. Wages, profit, and rent are the three original sources of all revenue as well as of all exchangeable value.” WN, Vol 1, p. 54.

Each of these components have their own natural prices as well. For example, the return on capital would be regulated by the average rate of profit across industries. A worker’s natural wage would be the costs of reproducing that worker. In this sense, the money price of corn also “regulates” the money price of labour, which regulates that of “all other commodities”. (WN p. 476)

Smith believes that market prices will converge to the natural price in the long run, so long as there is a free or competitive market. In the short run, the market price can fluctuate due to changes in supply and demand. However, if the quantity of a good brought to the market exceeds “effective demand”, which is the quantity that people that are willing to purchase at its natural price, then this will drive prices down, as producers will exit the market, and vice versa. Additional Income increases the amount of “effective demand”, and that durability affects how much the good’s price can deviate by in the short run.

Effective demand is lower than “absolute demand”, which is the quantity that people desire want given if they are not constrained by budget. Monopolies distort this rule because they always set the “highest” possible price, and similar distortions can also happen due to government interference.

According to Phyllis (1978), there are four challenges in creating an accurate theory of value. How and why a commodity acquires value, reconciling intrinsic value with market price, explaining value’s relation to income, and finally measuring and empirically testing measure of value.

He believes that Adam Smith’s value attempts to address all four of these concerns to some degree. For example, commodities originally acquire value due to costing labour to produce them. In terms of explaining the relationship between market price and intrinsic value, Smith notes that when demand exceeds supply, competition will push prices up in the short run, but in the long run, fall to its stable equilibrium, which is its natural price. As for the final challenge, the best quantitative measure of value is how much labour it commands.

In this way, Marian Bowley, who saw Smith’s theory of value as an extension of the scholastic’s just price, says that Smith managed to explain just prices by reconciling the apparent contradiction between market value and natural prices.

Although many believe that Smith has a pure “cost of production” approach to value, Phyllis says that this is merely a way to break down costs to its individual components and does not “explain” value in the way that the labour-based approach does. Phyllis also asserts that many of the apparent inconsistencies is due to other people trying to answer questions that Smith did not originally set out to answer. Instead, Smith focused on what “regulate(s) the exchange value of commodities”.

According to Kaushii (1973), many economists have cited Adam Smith as being inconsistent, accusing him of holding multiple contradictory definitions of value. Kaushil (1973) defends Smith against accusations that his work is inconsistent. He gives four reasons or sources of these misconceptions: the cause or measure of exchange value, the difference between labour embodied or commanded, multiple “causal explanations” of exchange value (such as toil and trouble, the adding-up of factors, demand-supply, labour embodied, and labour commanded).

Finally, the last cause of confusion is that Smith says different things during different time periods. For example, in 1762, Smith gave lectures that asserted three determinants of market price: demand, scarcity, and the income of “those who demand”. However, in The Wealth of Nations, what determines prices is the cost of production and the 3-factor model. This difference between source material will be examined later in this paper.

Firstly, there is debate on the degree to which the philosophical labour theory of value that Smith proposes is a true measure of value that supersedes the 3-factor cost model meant to predict market prices, or vice versa. Based on Smith’s writings in Wealth of Nations, he definitely seems to believe to a certain extent that labour is the source from which value “originates”. However, economists disagree on whether the two theories are mutually contradictory, if one or the other is Smith’s “true” or a better measure of value, or whether they are both legitimate measures of value that exist side-by-side, unconnected to each other.

Kaushil (1973) states that the problem is confounded by people confusing between his labour embodied and labour commanded theory of value. These people criticize him for the former as a theory of value, when Smith only says that labour embodied is the “original” source of wealth and that only the latter is the true measure of invariant value. He argues that Smith also clearly distinguishes between use and exchange value, which people seem to occasionally mix-up, and the 3-factor cost model only predicts the latter.

In either case, Kaushil believes that this “invariable” measure of value was never meant to causally explain the actual exchange value, but rather to quantify the existing exchange value with a measure that is stable over time. The massive influxes of gold and silver from the Americas during Smith’s time period made measuring value with currency or precious metals problematic and unstable.

According to Kaushii, Smith never says that the labour-commanded or labour-embodied in a good is a “cause” of its value, only that it is used as an invariant measure. The latter is the one that is a prediction of the long run market price. The labour commanded theory is “extra-systemic to the causal system” explaining observed prices, and thus people should not confuse one for the other, for they are unrelated.

 Although Smith references labour as a “source” of value, Kaushii believes that Smith merely uses terms such as the “original price” to explain how productive capacity is gained, rather than speaking of it as an empirical predictor of price.

Labour is one vital factor in the 3-factor cost model. Thus, it can be argued that it is not truly “extra-systemic”, but Kaushil rebuts that even in a “rude” state where capital and landlords do not exist, when wage rates are different, according to Smith’s own add-up theory, costs can no longer remain proportionate to labour time itself, but must reflect its varying labour costs. Smith seems to already consider this factor, as he has previously referenced training costs or the level of effort as factors in making wages more expensive or variant, so reaching this conclusion is reasonable. (WN, p.101)

In any case, Kaushil explains that Smith’s true position is that short run prices depend on supply and demand relative to the natural price of the commodity. In the long run, market prices converge to the natural price, as previously explained.

Hence from this perspective, the marginal revolutionaries and Ricardo had a “misconstrued interpretation” of Smith’s analysis. Kaushil believes that Ricardo, for instance, failed to consider the “toil and trouble” clause, and that his criticism that Smith unnecessarily moved away from the labour embodied theory in laying out the 3-factor cost model was invalid.

 Similarly, Meek (1973) believes that Smith’s work was more “consistent” and “intelligible” than commonly assumed, writing that Smith did not consider the discrepancy between use value and exchange value to be a problem, as both existed distinct from each other.

On the other hand, Peach (2009) disputes this conception of Smith’s confining his labour theory of value to “rude” societies or that it is irrelevant in explaining price. He argues that Smith continues to apply the labour theory of value to his later work, and that there is no contradiction between the LTV and prices.

Firstly, while labour is only one part of the 3-factor costs model, the inclusion of rent and profit from land and capital does not nullify the importance of wage costs. This is because parts of rent and profit can be decomposed into its labour costs. For example, the cost of capital equipment can be thought of as the labour time necessary to produce a piece of machinery.

However, this argument can be problematic. Economists such as O’Donnell believe that Smith does not have a “real” labour theory of value, because he was unable to conceive of rent and profit in terms of labour and wage equivalents.

However, Peach disputes O’Donnell’s arguments; for example, arguing that Smith’s inclusion of indirect labour costs in his book demonstrates that Smith was able to reduce Capital to indirect labour expended as well, so the inclusion of Capital was not a problem. One point of agreement, however, between them is that Smith ultimately does try to associate the labour “real value” with price.

Peach also discusses how quantity of labour embodied is always less that labour commanded, due to the latter possessing the other two factors of production, as Smith claims that an “additional quantity, […]  must be due for the profits of the stock which advanced the wages and furnished the materials”.

This is often cited as evidence for Smith abandoning the labour theory of value. However, Peach argues that switching between labour embodied and labour commanded does not necessarily mean that labour no longer has any relationship with a good’s price.  For example, the amount of labour embodied necessary to create objects could still be proportional to its labour commanded, so long as there is “uniformity” between components, a Ricardian approach to the problem.

Peach points out that Smith never explicitly states that the labour theory of value only applied to the “rude” state. However, in the event that Smith does disavow the labour theory of value, Peach describes two possible explanations: due to his theory of market prices superseding it, or because of indirect labour inputs in production.

In any case, despite Smith’s demonstration of certain cases of uniform rations of factors of production, Smith has also written about several cases where there is no uniformity and labour is thus not in proportion to value, such as due to varying capital intensities.

Similarly, if there are varying prices of rents, it may cause issues for the labour theory of value. However, Peach suggests that rent can be increasingly gotten “rid of”, as Smith says that the rent components in the 3 factors model tend to diminish over time due to capital accumulation and the decreasing importance of land.

Peach believes that Smith attempts to seek a connection between market price and labour expended shows that he does not abandon the labour theory of value. The portions of Wealth of Nations talking about the “toil and trouble” of embodied labour being exchanged for goods containing “value of equal quantity”, is inferred to mean that Smith does believe that there are many situations where labour embodied and commanded are equal, situations where we are comparable to a “rude society”.  

Peach agrees that the correlation between price and labour embodied is limited, as labour commanded must always exceed labour embodied due to the inclusion of rent and profit. Nevertheless, he still defends his interpretation.

For example, he notes that Smith argued that the value of gold and silver depends on the labour embodied within it, when it costs “less labour to bring those metals from the mine to the market”, their value falls. Similarly, Smith implicitly assumes in many parts of his book that different quantities of labour embodied will naturally result in price variations. For example, Smith cites the low price of some agricultural products as being caused by their low quantity of labour embodied. The price of fish in different regions being different is due different quantities of necessary labour. (WN V.1, Ch 6.) Similarly, in China, goods are cheaper as less labour is required to produce things due to the better quality of inland navigation.

Similarly, Smith uses corn as “proxy” for measuring value. Peach argues that using corn as a proxy for labour commanded only makes sense in the context where it also is a “measure” of labour embodied, “conflating” the two.  Smith makes the assumptions in his analysis that producing corn requires “nearly equal quantities” across countries, an assumption that Smith acknowledges as weak. However, Smith’s refusal to give up on this approach and insisting on talking about the “real dearness of corn” as opposed to the varied and fluctuating corn market prices, demonstrates that the labour theory of value mattered to Smith.

On this issue, Meek (1956) writes that it is only through the division of labour in society that discussion of value become possible, as each labourer depends upon all others. Hence, it is due to exchange and division of labour that goods acquire exchange value by being a “product” of labour. Therefore, Meek sees Smith’s interpretation of Value as a “social relation” that reflects the existing productive relationship between peoples, and it is only because of this context that that labour become the “source” of value. However, so far this does not explain why labour is associated with a specific quantitative value.

According to Meek, Smith only saw labour as a necessary condition for a good possessing value, but the labour itself does not explain the extent or magnitude of value possessed. In order to do that, one must use first look at its exchange value and convert it into labour equivalent units, or “labour commanded”, which is Smith’s true “measure” of value.

Two other important factors in Smith’s theory of value that people debate about is the role that scarcity and subjective utility play in determining market value, which can be seen as supply and demand. This is complicated by the aforementioned source of confusion in interpreting Smith’s theories of value: the purported inconsistencies between his 1762 lectures and The Wealth of Nations, which was published in 1776.  

For example, according to Robertson and Taylor (1957), one critical way in which they differ is the importance of scarcity in determining value. Smith covers scarcity in his lectures, noting that there are three determinants of market value, demand or utility, scarcity, and the demander’s income.

However, Smith decides to omit this focus later on in The Wealth of Nations, treating it as “implicit” or without “great importance”, apparently changing his mind on the matter. One of the few references to scarcity is that scarcity can drive up competition, which raises the market price above the natural price in the short run.[4] In chapter 2, Smith also states that the demand for precious metals comes from its utility, beauty, and scarcity. However, in the books, Smith does not seem to explicitly indicate that either of these factors can change a good’s long-run price or its inherent value.  

It is also not immediately clear what role subjective preferences or “utility” play in Smith’s analysis of value. According to Robertson, Smith does not require utility as necessary for exchange value due to his treatment of the water-diamond paradox. Water, although essential to life and thus of great utility, costs very little, whilst diamonds, which are useless rocks, are expensive. This is said to be evidence that utility does not matter. In Smith’s lectures, the given reason for this price differential is because of the scarcity diamonds and the “plenty” of water. Later on, Smith states that it is rather because diamonds are difficult to produce, whilst water costs little to produce.

In either case, utility and market price were seen to not have a clear relationship, and so many like Robertson conclude that Smith rejects utility-based explanations on price. Robertson agrees with Smith that scarcity is the correct explanation, demonstrating the importance of scarcity in determining (market) value.

However, later on in his book, Smith appears to change his mind and focuses on the high production costs of diamond compared to water as the explanation for the paradox, which Robertson argues is a mistake and a “childish error”. Kauder and Robertson suggests that Adam Smith had been “inconsistently right” in his original treatment of scarcity, and that the field of economics would have been “advanced” if Smith had been able to build upon these principles.

Similarly, the neoclassical marginal revolutionaries say that Smith led economics away from utility and scarcity into an “inadequate” cost-based theory of value. For example, Schumpeter claims that Smith was not interested in a “causal explanation” of value but used it to establish other ideas in a way that allowed him to ignore the complexity of value.

On the other hand, Kaushii says that the change in opinion between the two mediums is for the better due to the natural price and 3-factor costs model being the more “elegant” and robust theory, whereas the utility-scarcity based interpretations were merely part of the pre-existing literature. Phyllis (1978) and Meek (1956) also discusses this, for example, Hume, Cantillon, and finally Hutcheson, who is Smith’s teacher and had already previously claimed that prices of goods depended “jointly” on demand and supply. Meek (1956) seems to agree that Smith’s change of opinions is an improvement, as he notes that the lectures had not yet managed to “penetrate” to the underlying phenomenon of the natural price, as well as missing coverage on key issues such as profit.

Robertson argues that diamonds have utility from the fact that they are demanded, despite Smith’s belief that diamonds have no “real use”, which he claims to be the result of Smith’s narrower definition of utility than modern economists.

Although many have thought the value of things came from their utility, the water diamond paradox had convinced theorists that value came from either scarcity, or the cost of production, as Adam Smith did. Robertson believes that Adam Smith may have rejected the utility-based analysis because it was “leading nowhere”, as it failed to give concrete quantitative predictions. Smith wanted some explanation of prices that were was more “ambitious” and less “transient”.

However, at the same time Robertson contradicts himself and argues that Smith did not fully abandon utility-based explanations. Firstly, this is because Smith’s conception of exchange requires that both parties want someone more than it is worth to the other, so utility and demand become necessary conditions. Secondly, because of the “connection” between the natural price and the market price, where utility-based demand is the missing link that explains their relationship to each other.

Smith says that labour alone is the commodity that does not vary in value, and so it is the ultimate standard by which to compare commodities. This perspective is seen when Smith calls the labour cost of a good’s the “real price”, and the 3-factor cost theory is the “nominal” price. (WN p.59) However, Robertson says that this is based on an erroneous “psychological assumption”, and that Adam Smith does not abandon scarcity and utility, but rather implicitly assumes it. Thus, when Adam Smith talks about the labour commanded, he was focused on a “different problem”.

As Robertson claims that the labour theory of value cannot explain why the price of a good should be able to command any particular amount of labour, he rejects it as unsatisfactory, and thus it cannot determine market value. Although Smith says that the labour embodied in a good is one of the three sources that comprise its natural price that the market value tends towards, Robertson says he was unable to give a “satisfactory explanation” of profit and rents, and hence the 3-factor cost model is flawed in favour of the utility-scarcity based explanations. Rather, Smith’s analysis was intended to identify the causes of price changes from the factors of production.

However, economists such as Hollander believe that Smith does consider both scarcity and utility. As Phyllis points out, he had also previously mentioned these factors as important in his 1762 lectures. Instead, Smith’s cost-based argument assumes that a good is already produced in an unfettered market after the effects of scarcity and utility have occurred. Smith himself also wrote that if a good gave no utility, then it would not be produced, or if it was, then it would be worthless in exchange[5], hence there is no paradox.

Hence, Smith seems to acknowledge the role of supply and demand in influencing market price in the short run, although in the long run prices will converge towards the “natural” price. On the other hand, Meek (1973) argues that Smith believes demand or utility has no “direct” relation with exchange value, as the natural price is unaffected by shifts in effective demand. Despite this apparent disagreement of linguistic terminology, it seems plausible that they do agree with each other, but merely differ on the degree of importance of the short and long-run in economic analysis.

Additionally, Hollander says that many have argued that Smith does not consider a sloping demand function, as his explanation of “effective demand” incorporates only a single price – a good’s natural price. However, Hollander believes that this effective demand tacitly considers sloping demand via wealth effects, as “the higher the income, the steeper or less elastic the demand curve”. Since Smith writes that there are many who cannot afford a good at the current price, but are willing to pay less, it can be read as an acknowledgement of sloping demand due to price discrimination.

Similarly, Hollander suggests that the Smith’s supply curve is not vertical, as higher prices was acknowledged to create an “importance” to sell off a commodity at a higher rate, and vice versa, especially of perishable goods. Hence, Smith is seen to have a downward sloping demand and upward sloping supply, akin to modern interpretations of the two curves.

Whilst Smith’s long run supply curve suggests a contradiction, that in the long run market prices will fall towards natural prices and nullifying the above interpretation, Hollander points out that Smith’s interpretation of long run says that there can be “long periods” where market prices can diverge from its natural price, and that this is merely a tendency, which may differ from the modern economic interpretation of long-run. Smith also says that rising wages increases nominal costs, but Hollander disagrees, claiming that price level doesn’t rise if wages all increase uniformly.

In addition, more can be discussed regarding the determination of natural prices of each of the 3 components. Hollander notes that Smith’s assertion of a long-run natural price implicitly assumes constant returns to scale and constant costs. However, in other parts of Smith’s writing, such as his discussion on the rising costs of the previously nearly-free goods like cattle due to increasing urbanization, he acknowledges that prices can increase even in long-run equilibrium. On the other hand, Smith also wrote that over time, expanding production allows manufacturing to increase division of labour and the size of markets, which drives down costs, an apparent contradiction according to Hollander.

Hollander also notes that the rent component of the 3-factor model is not fully well-explained, Smith treats rent as different – while the price of wages or profits changes the price, the price of rent seems to be treated as a surplus that is created by the price of the commodity. (pp. 145) This seems to contradict Smith’s adding-up determination of natural prices. Hollander believes this is because rent, unlike the other factors, is not a “necessary” payment, as this land is available regardless of payments. However, Hollander says this argument also applies the profit of capital, rather, it is because food producing land always yields a rent, because it generates greater population, whereas material producing land do not.

In conclusion, economists disagree vehemently on the correct interpretations of Smith’s theory of value, on his consistency, of the role of scarcity (supply) and demand, the determination of prices of the 3 components in the factor model, and of the applicability of different ideas to each other, in particular the role of labour in determining both use and exchange values. As Smith is dead, it is impossible to determine the correct interpretation with certainty, but a probable guess is as follows.

In the long run, prices reflect the expected costs of the three component factors, but in the short run, scarcity, supply, and demand effects dominate. Use value and market value are distinct, and Smith mainly focuses on the latter. Smith’s “true” measure and interpretation of value is likely to be the “natural price” of commodities in labour-equivalent units, in other words, his “labour commanded” definition, which he himself has stated to be the true measure of value.

Labour embodied is likely to be the original source of value, but does not itself quantify the amount possessed, except via a weak correlation due to making up 1 of the 3 mentioned factors of the 3-factor cost model. This analysis only makes sense in the context of goods having gone through a process of exchange, and so we cannot claim that scarcity or utility/demand is negligible before equilibrium, only after.

Bibliography

Smith, Adam. Wealth of Nations (WN), Book I, Ch. 4-7.

Robertson, H. M. and W. L. Taylor (June, 1957). “Adam Smith’s Approach to the Theory of Value”. Economic Journal, Vol.. 67, pp. 181-198. 

Kaushil, S. (1973). “The Case of Adam Smith’s Value Analysis”, Oxford Economic Papers, Vol. 25, pp. 60-71

Meek, Ronald L. (1973). “ Adam Smith and the Development of the Labour Theory” in Studies in the Labour Theory of Value. London: Lawrence and Wishart, Ch. 2, pp. 45-81.
https://www.hetwebsite.net/het/profiles/meek.htm

Deane, Phyllis (1978). “Adam Smith’s Theory of Value”.  The Evolution of Economic Ideas, Cambridge University Press, Chapter 2, pp. 19-28

Hollander, Samuel (1992). “Smith on Value and Distribution”. Classical Economics, University of Toronto Press, Chapter 4, pp. 61-85.

.Peach, Terry (2009). “Adam Smith and the Labor Theory of (Real) Value: A Reconstruction”.  History of Political Economy, Vol. 41, No. 2, pp. 384-406

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[1] [1] “At all times and places that is dear which it is difficult to come at, or which it costs much labour to acquire; and that cheap which is to be had easily, or with very little labour. Labour alone, therefore, never varying in its own value, is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated and compared. It is their real price; money is their nominal price only.” Vol 1, p. 59

[2] [2] [2] “The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people.“ WN Ch. 5.

[3] “the price or exchangeable value of every particular commodity, taken separately, resolves itself into someone or other, or all of those three parts; so that of all the commodities which compose the whole annual produce of the labour of every country, taken complexly, must resolve itself into the same three parts, and be parcelled out amongst different inhabitants of the country, either as the wages of their labour, the profits of their stock, or the rent of their land. Wages, profit, and rent are the three original sources of all revenue as well as of all exchangeable value.” WN, Vol 1, p. 54.

[4] “A competition will immediately begin among them, [buyers] and the market price will rise more or less above the natural price, according as either the greatness of the deficiency,or the wealth . . . of the competitors happened to animate more or less the eagerness of the competition. Among competitors of equal wealth and luxury the same deficiency will generally occasion a more or less eager competition, according as the acquisition of the commodity happens to be of more or less importance to them.” WN Vol 1 Ch. 7.

[5] “Unless a capital was employed in manufacturing that part of the rude produce which requires a good deal of preparation before it can be fit for use and consumption, it either would never be produced, because there could be no demand for it; or if it was produced spontaneously, it would be of no value in exchange, and could add nothing to the wealth of the society.” WN, Vol 2 Ch. 5

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