The Wealth of Nations

The Wealth of Nations Glossary

absolute demander

all persons who desire to purchase a certain commodity, whether or not they can reasonably afford it

balance of trade

the money difference between the value of exports and imports of a certain country compared with another country, measured over time


Bounties are subsidies on goods that will be exported, with the express purpose of making those goods more competitive in foreign markets, and of creating monopolies abroad. In the logic of the mercantile system, it is thought that bounties will swing the balance of trade in favor of the government that awards such bounties. Bounties are usually petitioned for by the manufacturers of a particular good.


the portion of stock which is employed not for immediate consumption, but for generating revenue

circulating capital

capital which gains revenue by changing hands, e.g., goods that are purchased to be sold at a profit


a good (manufactured or not) that is sold on the market


Drawbacks allow a merchant to “draw back” or to recuperate whatever taxes or inland duties are levied upon his good when he manages to export them. This lets him cancel out taxes he pays at home if he manages to sell goods abroad.

effectual demander

a person who desires to purchase a certain commodity, and also can reasonably afford to purchase it. It is effectual demanders, not absolute demanders, that regulate the market price of a commodity.


a special interest group which seeks to control the administration of a certain trade or to influence government to make laws to favor or disfavor certain trades

fixed capital

capital which does not gain revenue from changing hands, but rather from investing in productivity


a person who sells his labor for a wage; a person engaged in producing concrete goods

market price

the price of a commodity that reflects the relationship between the effectual demand for and supply of a particular commodity in a given market


an employer; the person who provides wages to laborers


Mercantilism is the name for the economic theory and practical system that Smith was writing against. The major tenets of mercantilism were that money constituted wealth, and that exports would always benefit a country while imports would always harm it, because money comes into the country through exportation and leaves it through importation of goods. Smith believed this view was mistaken.

natural price

the price of a commodity which reflects only the cost of the labor, land and stock employed in bringing it to market

productive labor

any labor that directly results in the production of a tangible commodity (factory work, mining work, construction work, etc.)

public debt

Public debt is incurred by the government when its expenses exceed revenue generated from taxes. Public debt is financed through private means, and usually stems from defense expenses.

public good

A public good is often a public work that benefits all of society. Public goods can be enjoyed equally by all members of society

public works

Public works are institutions or constructions (e.g., roads, lighthouses, bridges) constructed and funded by the state, and open for use by all citizens, sometimes upon the condition of paying a small fee.


money paid to a landowner for the use of land, necessarily a monopoly price, or the highest price that a tenant can afford to pay


stored wealth that lies in the hands of a master, or employer

unproductive labor

Unproductive labor, according to Smith, is work that does not result in a tangible product. Unproductive laborers includes lawyers, government officials, and artists. Though the work of unproductive laborers may indirectly facilitate productive labor, the salaries of unproductive laborers ultimately rely on profits generated by what is produced by productive labor.