# central-price

## Definition

The central price is Smith's metaphorical description of the natural price as the gravitational center toward which all commodity prices continually tend, despite temporary deviations caused by accidents, natural causes, or policy regulations. This concept emphasizes the equilibrating tendency of markets and the long-run stability of natural prices as benchmarks for market activity.

## Source Chapter

Book 1, Chapter 7: "OF THE NATURAL AND MARKET PRICE OF COMMODITIES."

## Context

Smith uses the metaphor of gravitational attraction to describe how market prices, despite temporary fluctuations, tend to return to natural prices over time. This concept reinforces his view of markets as self-regulating systems that naturally move toward equilibrium.

## Economic Domain

General Theory

## Smith's Original Wording

"The natural price, therefore, is, as it were, the central price, to which the prices of all commodities are continually gravitating. Different accidents may sometimes keep them suspended a good deal above it, and sometimes force them down even somewhat below it. But whatever may be the obstacles which hinder them from settling in this centre of repose and continuance, they are constantly tending towards it."

## Modern Interpretation

The central price concept anticipates modern economic theories about market equilibrium and the tendency of prices to return to fundamental values. This gravitational metaphor captures the dynamic stability of competitive markets and their self-correcting properties.