Marginal Utility: The Missing Link in the Diamond-Water Paradox. American Heritage Dictionary describes a paradox as a seemingly contradictory statement that may nonetheless be true. I feel this definition applies to The Diamond-Water Paradox. Water is of immeasurable value to human survival, however it has virtually little or no monetary or trade value. While this seems to be a contradiction, it is in fact the absolute truth. On the other hand a diamond has no real value of use to mankind, however it is one of the most sought after and expensive items in the world. How is this? How can statements which seem so ludicrous be true? We must take certain factors into account when answering these and other questions. Economic status, supply and demand of a particular good, and tastes and preferences all must be considered when determining the value of a good to any particular individual. The fact is that what is of value to person A may be of little or no value to person B. Smith feels that the true value of water(1) based on its usefulness must be the most valuable substance in the world, for without it life as we know it would cease to exist. However, as we all know our opinions of the usefulness of any given good is in constant flux. What is of a high value and one point in time may be useless to us at another point in time. Because of this fact the usefulness of what we consider to be everyday goods (such as water) are often taken for granted.It is definitely possible for a good to command other commodities in exchange even if it has little or no value in use. A persons level of satisfaction received from a good is based on certain factors, two of which are economic status, and tasted and preferences. Referring back to The Diamond-Water Paradox, a person who is of higher economic status is more often than not going to be less concerned with the simpler things in life. Where his next meal might come from or whether he...
