Book 1, Chapter 5 Summary and Analysis

The first Book within the entire work contains 11 chapters. Here, we come to the last chapter. Adam Smith introduces major concepts that formed the first published theory of economics. He completes his explanation of nominal versus real price by showing how the amount of silver contained in the British coins of the 1700s is the nominal price of wheat. Next, Smith gives more details about the metals markets. He tells a true story about how two small island nations had something and needed something. What they had was surface gold nuggets. What they were short on was food. Enthusiastic Spaniards learned that they could trade corn for gold. Despite severe misunderstandings and at least some misplaced aggression, this worked. Smith explains that in the world's marketplace: gold and corn are set as valuable in direct relation to one another...