his basis, he concluded that value is determined by rules observed in the exchange of goods for money.
Labor was the central factor in Smith's (1776, 1978) determination of value. In what he referred to as an "early and rude society," value was determined through the process of barter, where the value of a good was determined by the amount of some other good that one could obtain through the exchange of goods (Smith, 1776, 1978, p. 131). Within this context, Smith (1776, 1978, p. 132) stated:
If among a nation of hunters, for example, it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer. It is natural that what is usually the produce of two days' or two hours' labour, should be worth double of what is usually the produce of one day's or one hour's labour.
In economies that are more sophisticated however, Smith (1776, 1978) contended that the context changed the relationship. In relation to a more sophisticated economy, Smith (1776, 1978, p. 133) held th
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