The Paradox of Diamonds and Water
Why are diamonds more valuable on the market when water is more useful for life?
There are two meanings to the word "value."
Adam Smith believed that exchange value is "determined by the effort required to obtain it" (labor value theory). Therefore, it has nothing to do with the utility (use value) of goods.
marginal utility
The value of an object to some people depends on how much they have of it.
The more you have, the less it's worth.
https://gyazo.com/cc725e1e3d63a12e7bc0db0f823ff1d3
Water is worth more (A>B), but if a lot of it is supplied, its value goes down (B>C).
People dying of thirst in the desert would offer diamonds to get water.
Leads to talk of rarity and [scarcity value The value of a good is not universally determined, but rather the less supply of the good a person wants, the more valuable the good becomes.
Rarity alone does not create universal value.
If I create a new programming language FooBar now, it is very rare because there is only one user of that language in the world, but it is worthless because no one wants a FooBar programmer.
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