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Adam Smith's Natural Prices, the Gravitation Metaphor, and the Purposes of Nature

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  • David Andrews

    () (Department of Economics, State University of New York at Oswego, USA)

Abstract

Adam Smith's 'natural price' has long been interpreted as a 'normal price' or 'centre of gravitation price' based on the famous gravitation metaphor of the Wealth of Nations I.vii, natural in the sense that it is the price that would result if competition were truly free, unobstructed by monopoly or government regulation, and could also therefore be called normal price, appealing to a sense of natural opposed to that which is produced artificially. This essay has three purposes. First I criticise this interpretation of Smith's gravitation metaphor. For Smith, it is not a Newtonian metaphor for the attractive character of natural price, but rather an Aristotelian metaphor for the pattern of movement of market prices, in which natural price serves merely as a reference point. Second I present an interpretation of Smith's natural price based on his understanding of nature, in the context of his assertions that the goals of nature are the self-preservation of individuals and the propagation of species, goals humans pursue with divided labour under bonds of mutual dependence, facilitated by exchange and hence prices. The natural price of a commodity is the price that supports nature's goals by providing for the maintenance of those who participate in production and supply in a manner that is just sufficient for these activities to continue indefinitely. Third I highlight the similarity between natural prices construed in this way and the prices of Piero Sraffa's Production of Commodities by Means of Commodities.

Suggested Citation

  • David Andrews, 2014. "Adam Smith's Natural Prices, the Gravitation Metaphor, and the Purposes of Nature," Economic Thought, World Economics Association, vol. 3(1), pages 1-42, March.
  • Handle: RePEc:wea:econth:v:3:y:2014:i:1:p:42
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    References listed on IDEAS

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    1. Leonidas Montes, 2003. "Smith and Newton: some methodological issues concerning general economic equilibrium theory," Cambridge Journal of Economics, Oxford University Press, vol. 27(5), pages 723-747, September.
    2. Geoffrey Harcourt & Peter Kriesler, 2012. "Introduction [to Handbook of Post-Keynesian Economics: Oxford University Press: USA]," Discussion Papers 2012-33, School of Economics, The University of New South Wales.
    3. Redman, Deborah A, 1993. "Adam Smith and Isaac Newton," Scottish Journal of Political Economy, Scottish Economic Society, vol. 40(2), pages 210-230, May.
    4. Ricardo F. Crespo, 2006. "The ontology of 'the economic': an Aristotelian analysis," Cambridge Journal of Economics, Oxford University Press, vol. 30(5), pages 767-781, September.
    5. David Andrews, 2014. "Adam Smith's Natural Prices, the Gravitation Metaphor, and the Purposes of Nature," Economic Thought, World Economics Association, vol. 3(1), pages 1-42, March.
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    Cited by:

    1. Gavin Kennedy, 2015. "Adam Smith's Use of the 'Gravitation' Metaphor," Economic Thought, World Economics Association, vol. 4(1), pages 67-79, March.
    2. David Andrews, 2014. "Adam Smith's Natural Prices, the Gravitation Metaphor, and the Purposes of Nature," Economic Thought, World Economics Association, vol. 3(1), pages 1-42, March.

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