Four Ways to Use Money Wisely — The Wealth of Nations

Smith closes Book Two by asking how the same pile of money can be used in different ways. Every stock must eventually pay for productive work, but capital can go into four channels: raising farm produce, manufacturing goods, moving goods between places in bulk, or selling them in small amounts to customers. Each link matters. Shopkeepers are not parasites; competition among grocers often lowers prices. A poor workman who must buy a whole ox at once would tie up capital meant for his tools; retailers let him buy day by day. Smith defends shopkeepers against writers who would tax or restrict their numbers. Their rivalry tends to make goods cheaper for buyers and dearer for wholesalers, without hurting consumers or producers as a class.