<p>As I read Smith this was because gold and silver were used as currencies. So in Smith’s view you do not earn profit on settling your accounts you earn profit on resale of what you imported or from returns on the investment you bought with your gold. E.g. if you buy widget from China and sell it in the US is your profit derived from sending dollars to the China or from the resale of the goods? Under Smiths view it would be the resale that generates the profit not simply the act of settling the accounts.</p>

CC BY-SA 4.0
2021-07-10T12:14:25.943Z
2021-07-10T12:14:25.943Z
1muflon1
<p>In Chapter I of Book IV of The Wealth of Nations, Adam Smith makes the following assertion:</p>
<blockquote>
<p>The transportation of commodities, when properly suited to the market, is always attended with a considerable profit; whereas that of gold and silver is scarce ever attended with any.</p>
</blockquote>
<p>But he does not back this up with any data or reference. Nonetheless, he continues:</p>
<blockquote>
<p>When those metals are sent abroad in order to purchase foreign commodities, the merchant's profit arises, not from the purchase, but from the sale of the returns.</p>
</blockquote>
<p>What I understand from this is that the merchant books in the profit once he sells the commodities he bought from abroad. Fine, that makes sense (accounting wise). But why couldn't the return be non-zero? As per Smith's first paragraph quoted, the transport of metals is supposed to yield no profit.</p>

CC BY-SA 4.0
2021-07-10T12:15:15.067Z
@Giskard thanks for the reminder :)
1muflon1
<commodities><adam-smith><transportation><transaction-costs>
Why does the transportation of commodities yield a profit but that of gold and silver doesn't?
Paul Razvan Berg
# Why does the transportation of commodities yield a profit but that of gold and silver doesn't?

(Asked by: username_0 on 2021-07-09)

In Chapter I of Book IV of The Wealth of Nations, Adam Smith makes the following assertion:

> The transportation of commodities, when properly suited to the market, is always attended with a considerable profit; whereas that of gold and silver is scarce ever attended with any.

But he does not back this up with any data or reference. Nonetheless, he continues:

> When those metals are sent abroad in order to purchase foreign commodities, the merchant's profit arises, not from the purchase, but from the sale of the returns.

What I understand from this is that the merchant books in the profit once he sells the commodities he bought from abroad. Fine, that makes sense (accounting wise). But why couldn't the return be non-zero? As per Smith's first paragraph quoted, the transport of metals is supposed to yield no profit.

**Tags:** commodities, adam-smith, transportation, transaction-costs

> **Comments:**
> **username_1**: @Giskard thanks for the reminder :)  

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## 1 answers

### Answer by username_1 on 2021-07-10. Score: 1

As I read Smith this was because gold and silver were used as currencies. So in Smith’s view you do not earn profit on settling your accounts you earn profit on resale of what you imported or from returns on the investment you bought with your gold. E.g. if you buy widget from China and sell it in the US is your profit derived from sending dollars to the China or from the resale of the goods? Under Smiths view it would be the resale that generates the profit not simply the act of settling the accounts.


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