An attempt is made to explain the price of goods by referring to the price of the services (wages, interest, and rent) which make up the cost of production. When the cost of those services comes up for consideration it is assumed that their cost is dependent upon the price of the goods. Wages, for example, are determined by the selling price of the commodities which labour has produced. Escape from the vicious circle is only possible by availing ourselves of the modern theory of economic equilibrium. That theory shows us how prices generally, whether of goods or of services, are interdependent; all being determined simultaneously—like the unknown in an algebraical formula—just when the exchange is taking place. But this theory of economic equilibrium was, of course, unknown to Smith. Cost of production being the regulator of price, it is very important that an analysis of cost of production and a study of the causes which determine the rates of wages, profit, and rent should be made. One might have expected that this study would have cleared away any obscurity that still clung to the theory of prices. But this analysis is one of the least satisfactory portions of Smith’s work. We have already had occasion to note the unsatisfactory character of his theory of rent. That of profits—which Smith fails to distinguish from interest—is equally useless;[183] and his theory of wages is hopelessly inconsistent. He hesitates between the subsistence theory of wages and the other theory which makes them depend upon the relations between demand and supply, without ever making a final choice. We cannot agree with Say in considering Smith’s theory of distribution one of his best claims to fame. His treatment of this problem, which afterwards became the kernel of Ricardian economics, is altogether inferior to his handling of production. We also know that this is the least original part of his work. It was simply added as a kind of afterthought, the original intention being to deal only with production. This becomes evident if we compare the _Wealth of Nations_ with the Glasgow course of 1763, the whole of which is devoted to production. The addition of a theory of distribution to the original skeleton was probably due to the Physiocrats, with whom in the meantime he had become acquainted; and the hesitations and uncertainties which mar this part of the work merely go to prove that Smith had not thought it out as clearly as the other sections.