Almost everything in the economy whose value is predicated on scarcity is now abundant.
I love markets. I also love diamonds. This helps explain why I am experiencing a kind of existential crisis: The popularity of lab-grown diamonds is making me question the beauty of markets, which is their ability to place a value on pretty much anything.
And it is not just diamonds. Everything in the economy whose value is predicated on scarcity is suddenly abundant: luxury handbags, music, even currency itself. Why is anything worth anything anymore?
Diamonds hold a special place in my heart, not just as fan of jewelry but also as an economist. When young economists first start to ponder the concept of value and why things cost what they do, we inevitably turn to the OG, Adam Smith. It is remarkable, he observed, that diamonds cost more than water. “Nothing is more useful than water; but it will purchase scarce any thing,” he wrote. “A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it.”
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
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