The paradox of values ​​ (also known as paradox water-diamonds ) is a real contradiction that, although water as a whole is more useful, in terms of survival, than diamonds, which is higher in the market. The philosopher Adam Smith is often regarded as a classical presenter of this paradox, though it has appeared as early as Plato's Euthydemus . Nicolaus Copernicus, John Locke, John Law and others have previously tried to explain this difference.
Video Paradox of value
Work value theory
In the passage from Adam Smith A Question to Nature and the Cause of the Wealth of Nations, he discusses the concept of value in use and value in exchange, and notices how they tend to differ:
- What rules do men experience in their exchange of goods for money or for each other, I will now proceed to check. These rules determine what can be called relative value or exchange of goods. The word VALUE, it must be observed, has two different meanings, and sometimes reveals the usefulness of some particular object, and sometimes the power of purchasing other items possessed by that object. What might be called "value in use;" the other, "value in exchange." The things that have the greatest value used have little or no exchange rates at all; on the contrary, those who have the greatest value in exchange often have little or no value at all. Nothing is more useful than water: but will not buy anything; almost nothing can be gained instead. A diamond, on the other hand, has almost no use; but a large number of other items can often be exchanged for it.
Furthermore, it describes the value in exchange defined by the workforce:
- The real price of everything, what is really worth the person who wants to get it, is hard work and difficulty getting it.
Therefore, Smith rejects the necessary relationship between price and utility. Price on this view is related to the factors of production (ie labor) and not to the consumer's point of view. The best practical example of this is the saffron (the most expensive spice), where much of its value comes from both (low yield) growth and the disproportionate amount of labor needed to extract it. Proponents of the value theory of work see that as a resolution of paradox.
Maps Paradox of value
Marginalism
Marginal utility theory, which is based on the theory of subjective values, says that the price at which an object is traded in the market is not determined by how much labor is given in its production, as in the theory of value of work, or how useful it is overall. Instead, the price is determined by its marginal utility. The marginal utility of an item derives from its most important use to a person. So, if someone has kindness, he will use it to satisfy some needs or desires. Which one? Of course, that takes the highest priority. Eugen von BÃÆ'¶hm-Bawerk illustrates this with the example of a farmer who has five sacks of wheat.
With the first, he will make bread to survive. With the second, he will make more bread, to be strong enough to work. With the next, he will feed his livestock. The next one is used to make whiskey, and the last one he feeds to the pigeon. If one of the bags is stolen, he will not reduce each of these activities to a fifth; instead he will stop feeding the pigeons.
Thus, the value of the fifth bag of grain is equal to the satisfaction it gets from feeding the pigeon. If he sells the bag and ignores the pigeon, his least productive use of the remaining grains is making whiskey, so the value of the fourth bag of grains is the value of his whiskey. Only if he loses four sacks of grain, he will start eating less; it is the most productive use of wheat. The last wheat pouch is valuable for his life.
In explaining the diamond-water paradox, the marginalists explain that it is not the total use of diamonds or water that determines the price, but the utility of each water unit or diamond. It is true that the total water use for humans is extraordinary, because they need it to survive. However, because water is in such a huge supply in the world, the marginal water usage is low. In other words, any additional water units available can be applied for less urgent use because more urgent use for water is met.
Therefore, any particular water unit becomes less valuable to humans as water supply increases. On the other hand, diamonds have a much lower supply. They have a very low inventory so that the use of an additional diamond is greater than the use of an additional glass of water, which is abundant. Thus, diamonds are more valuable to humans. Therefore, those who want diamonds are willing to pay a higher price for one diamond than a glass of water, and the diamond seller asks the price for one diamond higher than a glass of water.
Conversely, a man who dies of thirst in the desert will have a greater marginal use for water than for diamonds so will pay more for water, perhaps to the point where he is no longer dying.
See also
- The paradox of hedonism
References
Source of the article : Wikipedia
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