ABSTRACT
This chapter begins the discussion of value theory proper; it examines the statement at the end of Book I, Chapter 4, where Smith introduces the subject. There are two lines of inquiry that open up here. The first has to do with the relation between Smith’s two books as I note that The Theory of Moral Sentiments (TMS) is structured such that the answers precede the questions, while here, he will proceed didactically by stating definitions, questions, followed by answers. Also, the chapter shows the presence of the impartial spectator in WN as a philosophical observer and as the “voice of reason” in making moral judgements. The second line of inquiry is that contextual vs. systemic perspectives emerge once again as important to understand Smith’s procedure, as he says value theory is first about rules and then about principles—moving from contextual to systemic perspectives. There is also the famous diamond and water paradox, which is shown not to have been a paradox at all. The important implication of this is that Smith did not discard demand and subjective evaluation as determinates of price.
