# Cost of Transport Relative to Value

## Definition

The principle that the economic viability of trading a good over distance depends on the ratio of its transport cost to its market value. Only goods whose price is "very considerable in proportion to their weight" can bear the expense of long-distance land-carriage. This ratio determines which goods enter long-distance trade and which remain locally consumed, thereby shaping the composition and volume of commerce between regions.

## Source Chapter

Book 1, Chapter 3: "That the Division of Labour is Limited by the Extent of the Market"

## Context

Smith introduces this principle in the London-Edinburgh comparison, noting that if only land-carriage existed, trade would be restricted to high-value-to-weight goods. He extends the argument to the hypothetical of land-carriage between London and Calcutta, where the expense would prohibit all but the most precious commodities — and even those could not be safely transported through "the territories of so many barbarous nations."

## Economic Domain

Exchange

## Smith's Original Wording

> "...as no goods could be transported from the one to the other, except such whose price was very considerable in proportion to their weight, they could carry on but a small part of that commerce which at present subsists between them."

## Modern Interpretation

This is a precursor to the modern concept of trade costs and the gravity model of trade, which predicts that trade volumes depend inversely on transport costs and directly on market size. The value-to-weight ratio remains a key determinant of which goods enter international trade.
