# real-price

## Definition

The real price of any commodity is the toil and trouble of acquiring it, or the quantity of labour which it can command or enable the possessor to purchase. This represents the actual cost in terms of human effort and sacrifice required to obtain something, as opposed to its nominal or monetary price. Smith argues that labour is the only universal and accurate measure of value because equal quantities of labour always have equal value to the labourer, regardless of time or place.

## Source Chapter

Book 1, Chapter 5: "OF THE REAL AND NOMINAL PRICE OF COMMODITIES, OR OF THEIR PRICE IN LABOUR, AND THEIR PRICE IN MONEY."

## Context

Smith introduces the concept of real price in the opening paragraphs of Chapter 5, establishing it as the foundational measure of value in his economic analysis. He contrasts real price with nominal price (price in money), arguing that while people commonly estimate value by monetary price, labour is the true measure because it reflects the actual human effort required. This concept is central to his argument that labour, not money, is the original and universal standard by which all commodities should be valued.

## Economic Domain

General Theory

## Smith's Original Wording

"The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it."

## Modern Interpretation

Real price represents the actual human cost of obtaining goods and services, measured in terms of the labour time required. This concept remains relevant in modern economics as it highlights that monetary prices can be misleading indicators of true value, since they can fluctuate due to changes in the value of money itself. The real price concept anticipates modern discussions about purchasing power parity and real versus nominal values in economic analysis.