The Meanings of (The Word) Trade: Adam Smith’s Political Economy as General Grammar

Abstract

Some mid-eighteenth-century Political Economists, among them Adam Smith, employed the conceptual and methodological tools from General Grammar. Instead of offering, at the outset, a set of formal definitions of their concepts, they departed from ordinary language’s words (‘popular notions’, as Smith puts it) and endeavored to map all the different meanings of a particular notion. The goal of this paper is to follow Smith’s efforts as Grammarian by offering a mapping of the meanings of the word trade in the Wealth of Nations. According to Smith, trade has (1) a proper and original meaning as occupation or métier, that is, a specific productive activity or branch of labor; (2) a derived meaning as business, when it involves the employment of capital in pursuit of profit; and (3) an abstract meaning as commerce, especially when referring to a sector of economic activity, such as domestic or foreign trade. The article argues that key Mercantilist errors also stem from a grammatical confusion between these meanings, illustrating the critical aspect of Smith’s Political Economy.

1. Introduction

Mankind have had, at all times, a strong propensity to realize their own abstractions (…). Adam Smith, History of Ancient Logics and Metaphysics

What counts as wealth? Few questions were more central to eighteenth-century political economy—and few proved more elusive. In the Wealth of Nations, Adam Smith famously rejects the “popular notion” that “wealth consists in money” ([1] WN IV.i.1), a confusion he regarded as both intellectually and politically pernicious. Yet to correct it, Smith could not simply offer a new doctrine. He first needed to clarify the language through which economic activity was imagined and discussed. The opening chapter of Book IV makes this clear: the errors of the mercantile system stem less from false principles than from the unexamined use of ordinary terms such as wealth, money and trade. This paper proposes that the Wealth of Nations can be read as grounded in an often-overlooked linguistic and logical problem: how to stabilize meaning when analysis depends on ordinary, shifting terms. While Smith’s initial emphasis in the opening chapter of Book IV falls on wealth and money, the case of the word trade offers a distinct and revealing entry point into his method. Reconstructing the semantic order of this term suggests that Smith’s economic reasoning is supported by an underlying discipline of meaning.

Although the relation between language and Smith’s philosophy has been widely discussed—see [2,3,4,5,6,7,8,9,10,11]—its implications for the architecture of his political economy remain insufficiently explored. Recent works [12,13,14,15,16] have shown that Smith’s economic analysis is deeply rooted in linguistic, rhetorical, and semantic concerns, opening the way to understand language not as an external interpretive tool but as a methodological principle within his analytical practice. The present paper aims to contribute to this recent orientation by reconstructing Smith’s political economy from within the conceptual procedures he inherited from Rational or General Grammar, a tradition he explicitly praised and practiced.

General Grammar—associated with Arnauld and Lancelot, Dumarsais, Girard, Beauzée, Harris, and the Encyclopédie—was not confined to syntax but sought to uncover the logical forms by which language expresses thought. In contemporary terms, it is closer to logic and semantics than to syntax. Smith’s early writings, notably his review of Samuel Johnson’s Dictionary of the English Language—originally published in 1755 and available in [17], and the Essay on the Formation of Languages—originally published in 1761 [18] and later republished as an appendix of the third, fourth, fifth and sixth editions of Theory of Moral Sentiments [19], show him adopting its basic questions and operations: distinguishing proper from figurative meanings, arranging derivative senses, and tracing the abstraction of general terms. The hypothesis of this paper is that these grammatical procedures continue to inform the conceptual architecture of the Wealth of Nations by providing a disciplined way of clarifying the categories on which Smith’s inquiry depends, such as wealth, labour, value and capital.

The word trade serves here as an initial case study for this broader claim. In the Wealth of Nations, Smith employs the term with notable precision: sometimes as a specific occupation (the trade of the pin-maker), sometimes as a particular business, and sometimes as commerce in general. Mercantilist writers, by contrast, collapse these meanings, especially by equating trade with foreign commerce, which produces both theoretical and practical errors. Reading Smith through the lens of General Grammar helps illuminate why he was so attentive to such distinctions: the “popular notions” of common speech were, for him, not merely careless expressions but cause and consequence of logical confusion. To clarify them was already to do philosophy.

This article therefore offers a modest internal reconstruction of how grammatical analysis contributes to the intelligibility of Smith’s political economy. Its purpose is exploratory rather than exhaustive: the analysis of trade is only one instance of how Smith’s grammatical sensibility orders his economic reasoning, opening the way to a more systematic consideration of language across his work, though this broader task is not pursued here. The argument proceeds as follows. Section 2 introduces General Grammar and its treatment of meaning. Section 3 examines Smith’s own practice as a grammarian. Section 4 analyzes the multiple uses of the word trade in the Wealth of Nations. Section 5 discusses how mercantile abstractions distort those meanings. Section 6 concludes with brief remarks on the epistemological place of language in Smith’s system.

2. The Meanings of Words and Conjectural History

General Grammar, also known as Universal Grammar and, in Smith’s preferred expression, Rational Grammar (see Section 3 below), was an eighteenth-century attempt to analyse the logical structure of language. Its aim was not merely descriptive but epistemological: it sought to clarify how general terms acquire meaning and how abstraction operates in reasoning. In modern terms, General Grammar anticipates questions later explored in analytic philosophy and philosophy of language—how meaning is fixed, how abstraction operates, and how ambiguity affects reasoning. This clarification of meaning was also essential for emerging sciences such as political economy, which depended on ordinary language terms like wealth, value, and trade.1

In the definition of one of the most important Grammarians of the period, César Chesneau, known as Dumarsais2:

“Grammar is therefore the science or art concerned with words as signs of our thoughts. It teaches how to pronounce words, write them, inflect them, and place them in discourse according to the custom established by men in a given country for communicating their thoughts. More precisely, grammar is the art that teaches the reflections we make upon words and upon the ways of speaking in a language, so as to speak and write correctly, that is, according to accepted usage.”3

([22] p. 61)

Although each language (English, French, Latin, etc.) has its own particular grammar, there are, as Dumarsais notes, “observations that are valid for all languages,” which constitute the proper object of General Grammar:

“Such are the remarks concerning articulated sounds and the letters that serve as their signs; concerning the nature of words and the different ways in which they may be arranged or inflected in order to acquire meaning.”4

([22] pp. 61–62)

Strictly speaking, the discussion of proper and metaphorical (or figurative) meanings lies outside the scope of traditional grammar, since words do not change their form or syntactic position according to their meanings. However, because “a genuine understanding of words requires knowledge of their different meanings, taken as signs of our thoughts,” Dumarsais includes in his work “a particular treatise on the various meanings a word may assume.” ([22], p. 64). One of the key analytical tools developed by this grammatical tradition was the classification of the different acceptions of a word, that is, the distinct senses it acquires through usage and abstraction. The term acception5 appears throughout the Encyclopédie and is employed systematically by Dumarsais, Beauzée, and Girard to organise meaning historically and logically. This notion plays a central role in the present reconstruction, since it allows us to map semantic transitions from proper to derivative meanings in a controlled way, rather than by arbitrary stipulation.

This science was particularly appealing to philosophers of the Lockean empiricist tradition, including Adam Smith.6 In this view, articulated sounds (words) perform two basic functions: first, they “fix” our inner thoughts, serving—as Locke puts it—as “signs of internal conceptions” or “marks of the ideas within” ([25] Essay III.I.2); second, they communicate these ideas to others7 ([25] Essay III.I.1). Within this project, grammar becomes more than a science of linguistic elements: as Turgot put it in the article “Etymologie” of the Encyclopedie, it is also, at least in part, a science of ideas—a kind of logic:

“Locke, and after him, Condillac, have shown that the language is truly a species of calculus, of which the grammar and great part of the logic, are nothing more than its rules. But this calculus is much more complex than numerical ones, and is prone to many more errors and difficulties.”8

([21] v.6, p. 108)

One of the main difficulties concerns the fixation of meaning. Whereas in mathematics the relation between sign and signified is univocal, in ordinary languages it is multiple, fluid, and subject to changes governed by custom (usage):

“Metaphors, multiplied by necessity and by a kind of luxury of the imagination, which here becomes a creator of false needs, have gradually complicated the paths of this immense labyrinth into which man enters before his eyes are open and in which he becomes increasingly lost at every step.”9

([21] v.6, p. 108)

The only method available to clarify the evolution of meanings is to retrace their development through historical analysis which, in the absence of reliable data, must proceed conjecturally: ‘as with every other conjectural art, the etymological art is composed of two parts: the art of forming conjectures or suppositions, and the art of verifying them, in other terms, invention and critique.’ ([21] v.6, p. 98)

Etymology, therefore, is a theoretical or conjectural history of the different meanings of a particular word—of its acceptions. About a decade earlier, Condillac had offered an ambitious conjectural history not of a single word or linguistic structure but of language as a whole, in Part II of his Essay on the Origin of Human Knowledge, published in 1746 [29].

This debate was not strange to political economy. In mid-eighteenth-century France, the term commerce had itself become the object of intense debate. As Quesnay observed in 1766, “The commerce of merchants, the commerce of the nation, industry, luxury, the revenues of the kingdom, the costs of commerce—everything that has any relation to commerce has been confused or enveloped under the generic and equivocal denomination of commerce”10 ([30] p. 404). The word thus condensed a whole series of relations (mercantile, industrial, fiscal, and moral) under a single, equivocal designation. One decade earlier, Forbonnais could still define commerce in the Encyclopédie as “reciprocal communication,” ([21] v.3, p. 690) encompassing both sociability and exchange, while the physiocrats would narrow its meaning to economic circulation alone. The result was not conceptual clarity but a proliferation of meanings that mirrored the very formation of political economy as a field.

As I have argued elsewhere [32], in the French debate of the time, commerce displayed at least six distinct acceptions: (i) mercantile exchange; (ii) business or enterprise; (iii) branch of economic activity; (iv) economy as a whole; (v) market; and (vi) sociability. Far from being a purely lexical matter, this instability revealed the epistemological difficulty of defining the boundaries between moral communication and economic exchange. It was in this intellectual milieu that Smith’s grammatical sensibility concerning political economy matured. Having spent time in France, from 1764 to 1766 ([24] cap.13), he was well acquainted with these discussions and with the analytical instruments developed to address them. Yet his approach to General Grammar did not originate there. Before his travels, Smith had already elaborated a distinctive grammatical framework in his early writings. It is from within this prior theoretical horizon that he reorganised the semantic field of the word trade, applying to political economy the same discipline of meaning he had first cultivated through linguistic analysis.

3. Smith as a Grammarian

If General Grammar provided a method for analysing meaning, Smith did not encounter it abstractly but practiced it in his early writings. Before publishing The Wealth of Nations, published in 1776, he was known primarily as a moral philosopher, due to The Theory of Moral Sentiments, first published in 1759. However, from 1748, at the Philosophical Society of Edinburgh, and from 1751, at the University of Glasgow, he taught not only moral philosophy but also logic, jurisprudence, and rhetoric. As noted above, the conjectural reconstruction of the formation of language is a characteristic theme of the philosophical approach to General Grammar.11

Smith’s interest in General Grammar is explicit. In a letter dated 7 February 1763, he writes:

“I approve greatly of his [Mr. Ward’s] plan for a Rational Grammar and am convinced that a work of this kind executed with his abilities and industry, may prove not only the best System of Grammar, but the best System of Logic in any Language, as well as the best History of the natural progress of the Human mind in forming the most important abstractions upon which all reasoning depends.”12

([33] Letter 69)

In the same letter, Smith recommends Gabriel Girard’s The True Principles of the French Language,13 published in 1747 [35] and notes: “The grammatical articles too in the French Encyclopédie have given me a good deal of entertainment”14 [33]. This section follows that second lead and examines what Smith found in the Encyclopédie concerning General Grammar.

Smith’s interest in the Encyclopédie leads directly to the article “Grammaire” by Nicolas Beauzée, one of the leading authors of General Grammar. Beauzée states that all nations require words “to express perceptions, judgments, and reasoning,” and that despite considerable differences among languages, all are organised in “propositions” that “necessarily follow the laws of the analytical logic of thought” ([21] v.7, p. 841).

He identifies a gap between “words in the order of enunciation” and “thoughts in their analytical order,” and this gap explains why different nations adopted different linguistic forms and why rhetoric has space to operate within language. Beauzée writes: “Writing (parole écrite) is the image of speech (parole prononcée), and speech is the image of thought” ([21] p. 841). Beauzée distinguishes between two levels of linguistic analysis. Orthology (orthologie) is the study of spoken language, while orthography concerns written language ([21] p. 843). Orthology is further subdivided into lexicology (lexicologie), the study of words15 (ibid., p. 843), and syntax, the study of the combination of words in propositions16 ([21] p. 844).

Smith’s earliest published text was an anonymous critical review of Samuel Johnson’s Dictionary of the English Language, published in 1755 [37] and reviewed by Smith later that same year [17] in the first issue of the short-lived Edinburgh Review (1755–1756). There Smith acknowledged the “great” merit of Johnson’s work, but also identified certain “defects”:

“Those defects consist chiefly in the plan, which appears to us not to be sufficiently grammatical. The different significations of a word are indeed collected; but they are seldom digested into general classes, or ranged under the meaning which the word principally expresses. And sufficient care has not been taken to distinguish words apparently synonymous.”

([17] p. 232)

To correct them, Smith suggested to follow the principles found in the article “Dictionnaire” by d’Alembert ([21] v.4, pp. 958–970). According to d’Alembert, once the lexicographer has determined which words deserve inclusion in a dictionary ([21] v.4, p. 959), the next task is to distinguish between their “precise and proper meaning (sens précis et propre)” and their “vague and metaphorical meaning (sens vague et métaphorique)” ([21] v.4, p. 960). This distinction is indispensable for the establishment of synonyms:

“What makes two or three words to be considered synonyms? A general meaning (sens) that is common to these words. What prevents them from being synonyms in every case? The often delicate and sometimes almost indiscernible nuan;ces that modify this general and primitive meaning.”

([21] v.4, p.960)

Smith’s examples (of the words but and humour) follow closely the “perspective [vûe]” proposed by d’Alembert for producing a “perfectly complete” dictionary ([21] v.4, p. 963). For instance,

“BUT, an English particle which denotes opposition, and which, according to the different modifications of the general sense of opposition, sometimes holds the place of an adverb, sometimes of a preposition, sometimes of a conjunction, and sometimes even of an interjection. It serves as a conjunction of four different species, as an adversitive, as an alternative, as a conductive, and as a transitive conjunction. In its original and most proper meaning, however, it seems to be an adversitive conjunction, in the sense in which it is synonomous with however; and in which it is expressed in Latin by sed, in French by mais.”

([17] p. 236)

This is a clear example of what Beauzée called Orthology: Smith discusses all the possible syntactic functions of the term before identifying its “most proper meaning.” He then organises his definition according to seven distinct acceptions of the word but, in the following order: (i) synonym of however; (ii) synonym of unless; (iii) equivalent to than or that; (iv) equivalent to or; (v) meaning no more than; (vi) meaning except; and (vii) as an interjection ([17] pp. 236–238; see also his discussion of humour, [17] pp. 238–241).

The hypothesis of this paper is that these grammatical concerns were not limited to questions of definition for their own sake but revealed an analytical discipline that Smith would later apply to economic concepts derived from ordinary language. The next section will show that Smith’s review of Johnson already anticipates the semantic discipline he would later apply to economic concepts in the Wealth of Nations. Among these terms, few underwent greater semantic distortion in mercantile discourse than trade. It therefore provides a useful case for examining how Smith employs grammatical analysis to clarify meaning.

4. The Meanings of the Word Trade in Smith’s Wealth of Nations

According to General Grammar, one of the first tasks of any theoretical inquiry is to ascertain carefully the proper and original meaning of the central terms in a system of thought. This concern was already present among mid-eighteenth-century political economists, particularly in the debates opened by the physiocrats.17 Smith, however, believed that the so-called mercantile economists frequently failed in this task: “To grow rich is to get money; and wealth and money, in short, are, in common language, considered as in every respect synonymous” ([1] WN IV.i.1). The uncritical reliance on “popular notions,” he argues, leads both to theoretical error and misguided policy ([1] WN IV.i.5). This semantic confusion is especially visible in mercantilist writings, particularly in their use of the expression balance of trade, where trade is treated simply as a synonym for foreign commerce ([1] WN IV.i.8).

In ordinary eighteenth-century usage, the most common meaning of the word trade was commerce, and Smith himself employed the term in this sense. For example

“The greatest and most important branch of the commerce of every nation, it has already been observed, is that which is carried on between the inhabitants of the town and those of the country. […] The trade which is carried on between these two different sets of people, consists ultimately in a certain quantity of rude produce exchanged for a certain quantity of manufactured produce.”

([1] WN IV.ix.48)

In this passage, trade clearly means commerce as a specific branch of economic activity, alongside agriculture and manufacture (see also [1] WN IV.ix.25). However, this meaning as commerce is not the only one Smith employs, nor is it necessarily, in grammatical terms, the “most original and proper meaning” of the word. To recover that original sense, we must return to the opening chapters of the Wealth of Nations, where Smith uses the term trade in a quite different sense, not as commerce but as a specific occupation or line of work:

“To take an example, therefore, from a very trifling manufacture; but one in which the division of labour has been very often taken notice of, the trade of the pin-maker; a workman not educated to this business (which the division of labour has rendered a distinct trade), (…).”

([1] WN I.i.3—italics mine)

In these early passages of the Wealth of Nations, trade is used as a perfect synonym of business. Smith employs both terms interchangeably to denote a line of productive activity organised around a specific form of work. This is clear in the well-known description of the pin factory:

“in the way in which this business is now carried on, not only the whole work is a peculiar trade, but it is divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations (…).”18

([1] WN I.i.3—italics mine)

In this context, trade and business name the same economic reality: a structured and specialised set of operations grounded in labour. Each of these trades or businesses can be further subdivided and separated as the division of labor deepens:

“The division of labour, however, so far as it can be introduced, occasions, in every art, a proportionable increase of the productive powers of labour. The separation of different trades and employments from one another, seems to have taken place, in consequence of this advantage. […] How many different trades are employed in each branch of the linen and woollen manufactures, from the growers of the flax and the wool, to the bleachers and smoothers of the linen, or to the dyers and dressers of the cloth. The nature of agriculture, indeed, does not admit of so many subdivisions of labour, nor of so complete a separation of one business from another, as manufactures. It is impossible to separate so entirely, the business of the grazier from that of the corn-farmer, as the trade of the carpenter is commonly separated from that of the smith.”19

([1] WN I.i.4—italics mine)

This explains why even the fabrication of the instruments of a trade can itself become a distinct trade ([1] WN IV.viii.1), as well as a business in the strict sense: “Many improvements have been made by the ingenuity of the makers of the machines, when to make them became the business of a peculiar trade” ([1] WN I.i.9).

Up to this point, therefore, trade consistently refers either to an occupation or to a business grounded in labour. But how, then, does trade also come to mean commerce in Smith’s economic analysis? The key to this semantic shift lies in his theory of capital. For Smith, trade acquires the meaning of commerce only when capital is employed in commercial activity, that is, when exchange itself becomes someone’s business. He establishes this relationship explicitly in Book II:

“A capital may be employed in four different ways: either, first, in procuring the rude produce annually required for the use and consumption of the society; or, secondly, in manufacturing and preparing that rude produce for immediate use and consumption; or, thirdly, in transporting either the rude or manufactured produce from the places where they abound to those where they are wanted; or, lastly, in dividing particular portions of either into such small parcels as suit the occasional demands of those who want them.”

([1] WN II.v.2)

The third and fourth forms of employing capital define commercial activity, which can be of two types: retail trade and wholesale trade. Retail trade appears when capital is employed in selling goods directly to final consumers:

“The quantity of grocery goods, for example, which can be sold in a particular town, is limited by the demand of that town and its neighbourhood. The capital, therefore, which can be employed in the grocery trade cannot exceed what is sufficient to purchase that quantity. If this capital is divided between two different grocers, their competition will tend to make both of them sell cheaper, than if it were in the hands of one only, and if it were divided among twenty, their competition would be just so much the greater, and the chance of their combining together, in order to raise the price, just so much the less. Their competition might perhaps ruin some of themselves; but to take care of this is the business of the parties concerned, and it may safely be trusted to their discretion. It can never hurt either the consumer, or the producer; on the contrary, it must tend to make the retailers both sell cheaper and buy dearer, than if the whole trade was monopolized by one or two persons.”

([1] WN II.v.7—italics mine)

This passage is crucial for the argument made here. In it, Smith employs once again the synonymy between trade and business that already appears in the opening chapter of the Wealth of Nations. What changes is simply the kind of economic activity described: not the “trade of the pin-maker”, but the “trade” of the retailer.

The wholesale trade, by contrast, comprises both domestic and international commercial activity:

“All wholesale trade, all buying in order to sell again by wholesale, may be reduced to three different sorts. The home trade, the foreign trade of consumption, and the carrying trade. The home trade is employed in purchasing in one part of the same country, and selling in another, the produce of the industry of that country. It comprehends both the inland and the coasting trade. The foreign trade of consumption is employed in purchasing foreign goods for home consumption. The carrying trade is employed in transacting the commerce of foreign countries, or in carrying the surplus produce of one to another.”

([1] WN II.v.24)

As all sorts of trades, wholesale trade arises wherever and whenever they are “naturally introduced” without impediments ([1] WN II.v.32). However, unlike agriculture and retail trade, wholesale trade involves a new and distinctive relationship to its spatial location. While agriculture and retail trade are tied to a definite place—“confined almost to a precise spot, to the farm, and to the shop of the retailer” ([1] WN II.v.13)—and while manufacture retains at least a stable site of production even when distant from raw materials or markets ([1] WN II.v.15), wholesale trade introduces a decisive transformation:

“The capital of a wholesale merchant, on the contrary, seems to have no fixed or necessary residence anywhere, but may wander about from place to place, according as it can either buy cheap or sell dear.”

([1] WN II.v.14)

This spatial distinction is semantically significant for the present argument. It marks the moment in which the meaning of trade begins to detach itself from concrete, localised productive activity and move toward a more abstract use. Here, the term trade takes a step toward abstraction. No longer designating a localized occupation, it begins to refer to a form of economic activity defined not by place or production, but by circulation. This semantic shift prepares the final sense of trade in Smith: its identification with commerce. This identification reaches paroxysm in the Mercantile praise of the carrying trade as the principal agent of the economic development of Western Europe:

“The carrying trade is the natural effect and symptom of great national wealth: but it does not seem to be the natural cause of it. Those statesmen who have been disposed to favour it with particular encouragements, seem to have mistaken the effect and symptom for the cause.”

([1] WN II.v.35).

Here, Smith’s critique is not only economic but grammatical in the precise sense of general grammar: the confusion between cause and effect reflects a deeper confusion of meanings. Mercantile writers systematically collapse different senses of the word trade, treating it exclusively as foreign commerce. Before examining the logical and historical sources of this confusion, it is necessary to recover the Smithian definition of the term. Following the method of his Critical Review of Johnson’s Dictionary, we can distinguish three basic meanings of the word trade in the Wealth of Nations.

1. In its most proper and original meaning, trade stands for an occupation or employment, that is, a determinate set of operations involved in a specific kind of work. Thus, the eighteen operations involved in pin-making can each be considered a distinct trade ([1] WN I.i.3); spinning is a separate trade from weaving ([1] WN I.i.4); husbandry is a trade ([1] WN I.x.c.23); and even insurance “can be transformed into a trade” ([1] WN I.x.b.28). In this sense, trade functions as a synonym of art, in the classical meaning of the term, and corresponds to the French métier. Smith therefore speaks of the “tools” or “instruments of a peculiar trade” ([1] WN I.viii.24; I.viii.35), and these instruments are classified as fixed capital ([1] WN II.i)

Smith seldom uses trade in the more general sense of productive activity. In such cases, he prefers the terms labour, employment, or industry, as in the expressions “natural balance of employments” ([1] WN IV.v.a.39) and “natural balance of industry, the natural division and distribution of labour” ([1] WN IV.iv.14). The extent of this division is limited by the extent of the market ([1] WN I.iii).

Finally, trade never designates an economic sector (such as agriculture or manufacturing), except when it refers to commerce (see item 3 below). Each peculiar trade involves a different degree of knowledge and experience: the liberal trades require the most, followed by the agricultural trades, whereas the mechanical trades demand little prior skill ([1] WN I.x.c.23). Hence, the origins of the apprenticeship system established by corporate privileges ([1] WN I.x.b).

2. In a second and broader sense, trade means business: it refers to the employment of a stock or capital in a particular economic activity, carried out with a view to profit ([1] WN I.vii.6; I.ix.2), or at least without loss ([1] WN I.vii.27). In this meaning, trade no longer designates a specific form of labour but an organized commercial undertaking. Its closest French equivalent is entreprise. As seen, in many contexts, Smith freely alternates between trade and business when describing a peculiar economic activity, treating them as functional synonyms.

This marks the first step in the abstraction of the term. Whereas in its original meaning trade was linked to a concrete occupation rooted in manual or technical operations (labour), in this second meaning it becomes detached from production and defined instead by the investment and movement of capital. The semantic centre of gravity shifts from work to profit, from craft to enterprise, and from place-bound activity to potential mobility.

This semantic transformation explains why trade can later be extended to commerce: once economic activity is defined by the employment of capital rather than by the performance of labour, the term becomes increasingly independent of concrete operations. It becomes available for a more abstract use.

3. Finally, trade can also mean commerce. This is the most general and abstract sense of the term, where trade no longer designates a specific occupation or business but an entire sector of economic activity ([1] WN IV.ix.48), opposed to agriculture and manufacture ([1] WN I.ix.6). In this meaning, trade can be associated with a geographical entity (city, region, country, continent)—“the great trade of Rouen and Bourdeaux […] There was little trade or industry in Edinburgh before the union” ([1] WN II.iii.12) –, refers either to inland or foreign commerce ([1] WN I.x.c.19; I.xi.g.27), and it admits further subdivisions, such as retail (or grocery) trade and wholesale trade ([1] WN I.x.b.37; II.v.24). Its French equivalent is commerce.

If, however, the term is applied to a specific commercial function—such as “the trade of the corn inland wholesale merchant” ([1] WN IV.v.b)—the word falls back into its first meaning, that of a peculiar occupation. The meaning of trade is therefore context-dependent and organised according to degrees of abstraction.

The semantic analysis of trade indicates that Smith’s economic vocabulary develops not through arbitrary stipulation but through gradual extensions of use. The term moves from concrete occupation (métier) to business (entreprise), and finally to commerce (commerce), reflecting increasing degrees of abstraction. This semantic progression is consistent with the procedures of General Grammar, which distinguish between proper and derivative meanings. Clarifying these distinctions is not incidental: it allows Smith to reason with terms whose meanings are anchored in ordinary language before they acquire technical economic significance.

5. The Critical Role of Grammar

The analysis of the meanings of trade in the previous section helps clarify the root of the mercantile confusion. By reducing trade to its most abstract sense, mercantilist authors overlook the semantic distinctions that separate occupation, business, and commercial activity. From a grammatical point of view, this reduction is not merely imprecise but indicative of a deeper conceptual instability. Smith makes this point throughout the entire first chapter of Book IV, which is methodically structured as a critique of the unexamined use of ordinary economic terms. The long passage quoted below closes that chapter and summarizes its central claim: mercantile reasoning rests on “popular notions” taken from common language without semantic clarification.

“Money in common language, as I have already observed, frequently signifies wealth; and this ambiguity of expression has rendered this popular notion so familiar to us, that even they, who are convinced of its absurdity, are very apt to forget their own principles, and in the course of their reasonings to take it for granted as a certain and undeniable truth. (…) The two principles being established, however, that wealth consisted in gold and silver, and that those metals could be brought into a country which had no mines only by the balance of trade, or by exporting to a greater value than it imported; it necessarily became the great object of political oeconomy to diminish as much as possible the importation of foreign goods for home-consumption, and to increase as much as possible the exportation of the produce of domestick industry. Its two great engines for enriching the country, therefore, were restraints upon importation, and encouragements to exportation.”

([1] WN IV.i.34–35)

For Smith, the problem with the doctrine of the balance of trade is not primarily the obvious economic errors on which it rests—“It would be too ridiculous to go about seriously to prove, that wealth does not consist in money, or in gold and silver; but in what money purchases, and is valuable only for purchasing” ([1] WN IV.i.17)—but rather the careless and unexamined use of the very terms on which the doctrine relies. The confusion is linguistic before it is theoretical: it arises from treating ordinary words such as wealth, money and trade as if their common meanings required no clarification.

The root of this confusion lies in a faulty use of abstraction. Mercantile writers detach terms such as wealth and trade from their ordinary meanings and use them as if their abstract forms had independent existence. This problem was well described by César Chesneau Dumarsais in his article “Abstraction” in the Encyclopédie:

“Abstraction is an operation of the mind [esprit], by which, through reflection, we form for ourselves a general idea, either from the sensible impressions of external objects or from some internal affection. […] Since speech [parole] is the only means we have of making our thoughts known to others, this necessity and the habit [usage] of giving names to real objects have led us to give names also to metaphysical ideas of which we speak; and this has greatly contributed to making us distinguish these ideas.”

([21] v.1, p. 45)

Smith’s critique operates precisely at this level: he exposes conceptual errors produced by the use of words detached from their original and concrete context. Abstract terms do not arise spontaneously; they must be stabilised by language before they can enter reasoning. Otherwise, as grammarians notice, without words, ideas would vanish in the next sensible impression. Once stabilised, however, abstraction acquires momentum: instead of analysing a particular white object, one can reflect on whiteness itself.

“The uniform sensation [sentiment] which all white objects produce in us has led us to give the same qualifying name to each of these objects. We say of each one in particular that it is white; and then, in order to mark the point according to which all these objects resemble one another, we invented the word whiteness. Now, there truly exist objects which we call white, but there is no whiteness outside of us. Whiteness, therefore, is nothing more than an abstract term: it is the product of our reflection on the uniformity of the particular impressions that many white objects have made upon us; it is the point to which we refer all these impressions—particular with respect to their cause, uniform with respect to their kind.”

([21] v.1, p. 45)

This example shows that abstraction begins in repeated concrete situations and only afterwards receives a name. This operation enables reasoning but also introduces a danger: words may be mistaken for things, as if abstract terms named independently existing entities. When this happens, one easily inverts the natural order of thought and considers that from humanity came man, from beauty the beautiful, or, in mercantile reasoning, from the carrying trade came national wealth. Such conceptual inversions are precisely what Smith seeks to correct, as Dumarsais illustrated with example of the colo white. When this linguistic origin is forgotten, abstract terms are treated as if they were real objects, a source of confusion in philosophy—and, as Smith argues, in political economy.

Smith was fully aware of this relation between abstraction and language. In his Considerations on the First Formation of Languages, he observes that even the simplest abstract terms presuppose prior acts of reflection: “The invention […] even of the simplest nouns adjective [such as white], must have required more metaphysics than we are apt to be aware of.” ([18] p. 207).

Adjectives are more abstract than nouns because they refer not to objects but to qualities derived from comparison. Yet, as Smith explains, all general terms originate this way, including the most ordinary ones:

“those words, which were originally the proper names of individuals, would each of them insensibly become the common name of a multitude. A child that is just learning to speak, calls every person who comes to the house its papa or its mama; and thus bestows upon the whole species those names which it had been taught to apply to two individuals.”20

([18] p. 205)

In other words, Smith shares with Dumarsais the view that abstraction operates through language and proceeds by generalisation from use rather than by arbitrary definition. Individual names, Smith argues, “insensibly” become general names, and eventually “the general name of the species” to which they belong. These general terms may then be organised into taxonomies ([18] p. 205; cf. [17] pp. 37–40). In the Wealth of Nations, for example, Smith distinguishes eighteen distinct “species of business” ([1] WN I.ii) or “species of trade” ([1] WN IV.viii.40) involved in the manufacture of pins. This linguistic process is the key to understanding the semantic structure of trade. Once the term is abstracted from its original connection with a particular occupation or form of labour, it becomes available for more general uses. However, when this abstraction is not controlled by attention to meaning, the original sense is effaced and only the most general one remains—trade as commerce, and more specifically, as foreign trade, as in mercantile discourse.

However, the mercantile reduction of the word trade to foreign commerce did not arise arbitrarily. It has a historical foundation in the economic experience of modern Europe. From the late Middle Ages onwards, and especially after the rise of Atlantic trade, long-distance commerce and the carrying trade assumed unprecedented economic and political importance. It is therefore understandable that the word trade came to be used increasingly to designate commerce abroad. The confusion is not purely conceptual; it has a concrete historical origin.

Yet precisely because it emerged from historical experience, this shift in meaning can only be clarified historically. As Smith remarks in Book III of the Wealth of Nations, the development of commerce in Europe inverted the “natural order of things,” in which foreign commerce is the last thing to arrive, after agriculture and manufacture have been stablished21 ([1] WN III.i.9).

The mercantile system therefore reflects an abstraction derived from a partial historical experience, elevated to a universal principle. To restore conceptual clarity, Smith reconstructs the history of European economic development—not merely to correct mistaken facts, but also to reorder meanings. The economic history of Europe after the fall of the Roman Empire, as presented in Book III of the Wealth of Nations, left its marks not only in politics, but in language as well.22

The grammatical perspective helps to clarify the structure of Smith’s critique of the doctrine of the balance of trade. To expose its conceptual error, Smith mobilizes three analytical levels that correspond to the progressive abstraction of the term trade in the Wealth of Nations. In Book I, trade assumes its original meaning as a concrete occupation grounded in labour and articulated by the division of labour. In Book II, the term acquires a second, more abstract meaning: business, defined by the employment of capital in its multiple branches (including commerce). In Book III, Smith reconstructs the historical rise of long-distance and carrying trade in modern Europe, which explains how the word trade came to be used predominantly in its most abstract sense, as foreign commerce, in mercantile discourse.

From this perspective, the mercantile error is not simply theoretical but grammatical: it consists in the mismanagement of the levels of abstraction needed for correct economic reasoning. By treating a derivative meaning (trade as foreign commerce) as if it were the primary and exclusive meaning of the term, mercantilist writers reverse the order of analysis. Smith’s critique restores that order by reconnecting abstract terms to their conceptual and historical origins. From this perspective, Smith’s critique of the balance of trade does more than correct a particular economic doctrine: it suggests a deeper commitment to the ordering of meanings in economic analysis.

6. Conclusions

This article contributes to a growing body of research that examines the role of language in Smith’s political economy, a theme recently revisited [12,13,14,15,16]. It aligns with this line of inquiry but distinguishes itself in two respects. First, unlike approaches that interpret Smith through anachronistic theoretical frameworks, this study grounds its analysis in the linguistic theories available to Smith himself. Second, it develops this historical orientation by showing that General (or Rational) Grammar, a framework Smith explicitly cited and engaged with, provides the appropriate conceptual lens for understanding the role of language in the Wealth of Nations.

From this standpoint, the article has argued that linguistic analysis in Smith is not a marginal concern nor a merely rhetorical feature, but plays a methodological function within his economic reasoning. Smith does not build his inquiry through technical definitions or axiomatic construction. Instead, he reorganizes ordinary language by clarifying the meanings of key economic terms and ordering them according to their conceptual priority. This procedure follows the semantic discipline characteristic of General Grammar: distinguishing proper from derivative meanings, tracing semantic shifts, and isolating ambiguities as a preliminary step in analysis.

The semantic reconstruction of the term trade illustrates how this method operates in practice. Far from employing the word loosely, Smith uses it in three ordered senses (occupation, business, and commerce) which move progressively from the concrete to the abstract. Mercantilist writers, by contrast, collapse these distinct meanings and treat trade exclusively as foreign commerce, a confusion that leads to conceptual error and misguided policy prescriptions. The problem, as seen from a grammatical perspective, is not abstraction itself but the mismanagement of the levels of abstraction. Mercantilist reasoning illegitimately elevates a derivative meaning to the status of a first principle.

Smith does not view this confusion as a purely intellectual error. He explains it historically. The rise of long-distance commerce and the carrying trade in post-feudal Europe gave foreign commerce disproportionate economic relevance and ideological visibility. As a result, the meaning of trade gradually shifted in common usage, a shift that economic writers absorbed uncritically. In the terms of General Grammar, this is precisely how conceptual illusion arises: through historical displacements of meaning that go unnoticed when language is taken at face value.

This reconstruction has limits. The analysis of a single term cannot determine the epistemological structure of Smith’s economic theory. However, it suggests that many of Smith’s central economic concepts (wealth, labour,23 value,24 capital, for instance) that also move between ordinary and technical meanings may require similar semantic clarification. Smith’s method is thus not to abandon common language but to discipline it, restoring clarity before analysis. This may explain why the Wealth of Nations does not begin with abstract definitions but with gradually refined distinctions drawn from usage.

If this reading is correct, it opens a context-sensitive path for further research. It invites systematic investigation into how semantic order supports argument structure in the Wealth of Nations, and how this feature distinguishes Smith both from contemporary Mercantile and Physiocrat systems and from later formalist economics or purely historicist interpretations. Finally, this perspective raises broader questions in the philosophy of economics: To what extent does economic reasoning depend on the clarification of meaning? Can there be economic analysis without linguistic analysis? And what is the methodological status of disciplines built upon ordinary language? These questions, already raised by General Grammar, remain central today.