Abstract
In the Wealth of Nations Smith says that
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 labour, and the profits of the stock employed in the 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. (Smith 1776, p. 72)
In the same chapter he explains that in economic theory this particular price level is important because it is a sort of benchmark for the actual price of the commodity, its market price (p. 73). The market price is different from the natural price but tends to move towards it all the time because of competition between producers. ‘The natural price, therefore, is, as it were, the central price, to which the prices of all commodities are continuously gravitating’ (p. 73). Smith’s concept of natural price and his description of the competitive mechanism which guarantees that the market prices tend to move towards it became an important element in classical political economy. Smith’s analysis was entirely subscribed to by Ricardo (Ricardo 1821, pp. 88–91), and was a central point in the classical theory of value and in the price theories of some neoclassical economists.
Keywords
- Bon prix
- Cantillon, R.
- Competition
- Cost of production
- Effectual demand
- Exchange value
- Fundamental price
- Hutcheson, F.
- Locke, J.
- Market price
- Marshall, A.
- Marx, K. H.
- Natural price
- Net product
- Normal price
- North, D.
- Petty, W.
- Physiocracy
- Price theory
- Pufendorf, S.
- Quesnay, F.
- Rent
- Smith, A.
- Sraffa, P.
- Steuart, Sir J.
- Turgot, A. R. J.
- Uniform rate of profit
- Value theory
JEL Classifications
This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume
This is a preview of subscription content, log in via an institution.
Bibliography
Cantillon, R. 1755. Essai sur la nature du commerce en général. Edited by H. Higgs. London: Cass, 1959.
Garegnani, P. 1976. On a change in the notion of equilibrium in recent work on value and distribution. In Essays in modern capital theory, ed. M. Brown, K. Sato, and P. Zarembka. Amsterdam: North-Holland.
Garegnani, P. 1983. The classical theory of wages and the role of demand schedules in the determination of relative prices. American Economic Review 73: 309–313.
Groenewegen, P.D. 1971. A reinterpretation of Turgot’s theory of capital and interest. Economic Journal 81: 327–340.
Hutcheson, F. 1754–5. A system of moral philosophy. Glasgow: Robert and Andrew Foulis.
Locke, J. 1691. Some considerations of the consequences of the lowering of interest and raising the value of money. In The works of John Locke, vol. 5. London, 1823.
Marshall, A. 1920. Principles of economics, 8th ed. Reprinted, London: Macmillan, 1972.
Marx, K. 1894. Capital. Vol. 3. London: Lawrence & Wishart, 1977.
Meek, R.L. 1962. The economics of physiocracy. London: George Allen & Unwin.
Meek, R.L., ed. 1973. Turgot on progress, sociology and economics. Cambridge: Cambridge University Press.
North, D. 1691. Discourses upon trade. In Early English tracts on commerce. London: The Political Economy Club. Reprinted, Edited by J.R. McCulloch. Cambridge: Cambridge University Press, 1954.
Petty, W. 1662. A treatise of taxes and contributions. In The economic writings of Sir William Petty, ed. C.H. Hull. Cambridge: Cambridge University Press, 1899.
Quesnay, F. 1756. Fermiers. In François Quesnay et la Physiocratie. Paris: INED, 1958.
Quesnay, F. 1757. Hommes. In François Quesnay et la Physiocratie. Paris: INED, 1958.
Quesnay, F. 1766. Du commerce. In François Quesnay et la Physiocratie. Paris: INED, 1958.
Ricardo, D. 1821. On the principles of political economy and taxation. In The works and correspondence of David Ricardo, ed. P. Sraffa with the collaboration of M.H. Dobb. Cambridge: Cambridge University Press, 1951.
Smith, A. 1762–3. Lectures on jurisprudence. Edited by R.L. Meek, D.D. Raphael, and P.G. Stein. Oxford: Oxford University Press, 1978.
Smith, A. 1776. An inquiry into the nature and causes of the wealth of nations. Oxford: Oxford University Press, 1976.
Sraffa, P. 1951. Introduction to the works and correspondence of David Ricardo. Vol. 1. Cambridge: Cambridge University Press.
Sraffa, P. 1960. Production of commodities by means of commodities. Cambridge: Cambridge University Press.
Steuart, J. 1767. An inquiry into the principles of political oeconomy. Edited by A. Skinner. Edinburgh/London: Oliver & Boyd, 1966.
Sylos-Labini, P. 1976. Competition: The product market. In The market and the state, ed. T. Wilson and A. Skinner. Oxford: Clarendon Press.
Turgot, A.R.J. 1766. Réflexions sur la formation et la distribution des richesses. Edited by Meek. 1973.
Turgot, A.R.J. 1767. Observations sur le mémoire de Saint-Péravy. In The economics of A.R.J. Turgot, ed. P.D. Groenewegen. The Hague: Martinus Nijhoff, 1977.
von Pufendorf, S. 1688. De jure naturae et gentium – libri octo. Oxford: Clarendon Press, 1934.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2008 The Author(s)
About this entry
Cite this entry
Vaggi, G. (2008). Natural Price. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_1011-2
Download citation
DOI: https://doi.org/10.1057/978-1-349-95121-5_1011-2
Received:
Accepted:
Published:
Publisher Name: Palgrave Macmillan, London
Online ISBN: 978-1-349-95121-5
eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences
Publish with us
Chapter history
-
Latest
Natural Price- Published:
- 15 March 2017
DOI: https://doi.org/10.1057/978-1-349-95121-5_1011-2
-
Original
Natural Price- Published:
- 28 October 2016
DOI: https://doi.org/10.1057/978-1-349-95121-5_1011-1