In his work "The Wealth of Nations," Adam Smith emphasized the distinction between use value and exchange value to understand the value of goods. Goods that fulfill basic needs, such as water, have a high use value. However, due to their abundance and easy accessibility, these goods may have a low market value. According to Smith, use value represents the ability of a good to effectively meet human needs.
Karl Marx focused on the labor theory to understand economic value. According to Marx, the value of a good is determined by the amount of labor expended in its production. Basic goods like water often require a low amount of labor in production, resulting in a high use value but a low exchange value. On the other hand, rare and difficult-to-extract goods like diamonds may involve more labor in production, leading to a high market value despite a low use value. Marx's labor theory highlights the importance of labor in the theory of value.
In this context, the paradox of water and diamonds serves as a symbolic example in understanding the contradiction between use value and exchange value in economic theories. The perspectives of these two influential economists shed light on debates about how economic value is determined.
