Picking up where we left off, Adam Smith concludes Chapter 4 of The Wealth of Nations (available here) thus:

1. Para. 13a. First, Smith draws a fundamental distinction between use-value and exchange-value: “The word VALUE, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called ‘value in use ;’ the other, ‘value in exchange.’” (WN, I.iv.13)
2. Para. 13b. He then not only employs this distinction to solve the so-called “paradox of value“; he also illustrates his solution with one of the most famous and memorable examples in all of economics: “The things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing; scarce any thing can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.” [1] (ibid)
3. Paras. 14-17. Next, he provides a roadmap for the next three chapters of The Wealth of Nations:

• To begin, Smith says that he will address the following question: “what is the real measure of this exchangeable value; or, wherein consists the real price of all commodities”? (I.iv.15) (see Ch. 5, “Of the Real and Nominal Price of Commodities”)
• Next, he tells us that he will identify “the different parts of which this real price is composed or made up.” (I.iv.16) (see Ch. 6, “Of the Component Parts of the Price of Commodities”)
• And lastly, he promises to explain the difference between “market prices” and “natural prices.” (I.iv.17) (see Ch. 7, “Of the Natural and Market Price of Commodities”)

4. Para. 18. Last but not least, Smith concludes Chapter 4 with the following words of warning or an apology of sorts:

I shall endeavour to explain, as fully and distinctly as I can, those three subjects in the three following chapters, for which I must very earnestly entreat both the patience and attention of the reader: his patience in order to examine a detail which may perhaps in some places appear unnecessarily tedious; and his attention in order to understand what may, perhaps, after the fullest explication which I am capable of giving of it, appear still in some degree obscure. I am always willing to run some hazard of being tedious in order to be sure that I am perspicuous; and after taking the utmost pains that I can to be perspicuous, some obscurity may still appear to remain upon a subject in its own nature extremely abstracted. (WN, I.iv.17)

In other words, Smith’s deep dive into the foundational concepts of “value” and “price” in the next three chapters of The Wealth of Nations are going to be so “tedious” that Smith is apologizing to us, his loyal readers, in advance!

[1] For an illuminating critique and further discussion of Smith’s solution, see Kwok Ping Tsang, “Three ways of looking at the water-diamond paradox” (April 14, 2021).