> 
> ... a classic puzzle in economics. Imagine a small market town. A barrel
> of water costs almost nothing, while a diamond of similar size may cost
> thousands of dollars. Yet water is obviously far more necessary for human
> life than diamonds. Why, then, is the diamond more expensive? This puzzle
> is known as the diamond–water paradox, and it played an important role in
> the development of economic theory.
> 

Adam Smith introduced the example merely to bring out the distinction between 
exchange value and use value. He got right into the labor theory of value. The 
"paradox" was a mere footnote until capitalist ideologues scrambled to find an 
economic anti-theory with which to fight the labor theory of value, once Marx 
had made it rigorous.


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