Water is vital. Diamonds are not. Why do diamonds cost more? : The Indicator from Planet Money The Diamond-Water Paradox: If we need water to survive and we don't need diamonds, why are diamonds expensive and water cheap?
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Why Do Diamonds Cost More Than Water?

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Why Do Diamonds Cost More Than Water?

Why Do Diamonds Cost More Than Water?

Why Do Diamonds Cost More Than Water?

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  • <iframe src="https://www.npr.org/player/embed/904640920/904790337" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
Lionel Bonaventure/AFP via Getty Images
This picture taken on September 23, 2019, in Paris, shows lab-grown diamonds in the headquarters of the Diam-Concept company. (Photo by Lionel BONAVENTURE / AFP) (Photo by LIONEL BONAVENTURE/AFP via Getty Images)
Lionel Bonaventure/AFP via Getty Images

This episode first aired in July of 2018.

The coronavirus pandemic has turned up a bunch of apparent paradoxes in the economy lately. For example, when the economy is in such a slump, how is it that home prices are still rising? Or, when farmers are pouring out milk and destroying eggs, how is it that there are food shortages in stores?

These apparent paradoxes are explicable and - hopefully - short-lived. Unlike the most famous paradox of all: the diamond-water paradox. Adam Smith, the father of economics, believed that the free market would always settle on the best price for something: a price that would be a measure of how valuable that item was.

So how to explain the fact that diamonds, which are pretty but otherwise useless, are so much more expensive than water ... without which we literally cannot survive?

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