The Three Pieces of Every Price — The Wealth of Nations

Smith asks what any price is really made of. At first, people traded by comparing work. If killing a beaver took twice the effort of killing a deer, one beaver might trade for two deer. Once bosses started hiring workers with saved money, a third piece appeared: profit on the capital risked. Without that return, no one would hire.

When land became private, landlords added rent. Smith follows corn from field to flour to bread, and flax to linen, to show wages, profit, and rent stacked inside one price at every step. More factory steps mean more profit layers because each stage needs more capital. Even when only wages show on the surface, national income still splits into wages, profit, or rent.

Interest on a loan is profit shared with the lender. Taxes and salaries ultimately trace back to the same three sources. When one person farms his own land, people mix up rent, profit, and wages in everyday speech. Smith closes by noting that not all yearly output goes to workers: idle consumption shrinks what the industrious can command, so how a society divides its produce between workers and idlers shapes whether average wealth rises or falls over time.